Securitization

Securitization is a financial process that entails combining assets, often contractual debts like mortgages, car loans, and credit card debt, to form a security. These consolidated assets are subsequently purchased, securitized, and offered to potential investors. Investors receive repayment through principal and interest cash flows derived from the underlying debt, which is incorporated into the new financing terms. Mortgage-backed securities (MBS) and asset-backed securities (ABS) are among the prevalent forms of securitization.