Question

a-

Explain securitization structure and its disclosure requirement for mortgage banks and

b-

discuss the alternatives to securitizations.

(minimum 200 words - no handwriting or photo)

Answer 1

Explain securitization structure

Securitization is a process of turning the ILL- liquid assets in liquid assets.

Some of the assets are not liquid and some of the assets are highly liquid.

Those assets that are not that much liquid are targeted in securitization.

All of those assets that cannot be easily converted in money are clubbed together and the gross value of these asset is then used for the securitization.

Suppose if the sum of all assets is 2,000,000. Than what will be done in case of securitization is that the assets will be divided in small parts that is called a share and then this share is issue in money market and sold.’

This way the asset is converted into cash.

Disclosures that must be made are as below.

Underlying exposures are to be made, this means that a template needs to be filled regarding the types of assets that are used.

Report information

Details on the credit quality, relevance of the asset to investor.

Information about inside transactions and inside dealing.

alternatives to securitizations.

To convert the non liquid assets to liquid assets, there can be some of the alternatives.

This can be a factoring

This can be a loan on that asset

This can be a reselling of that asset