By Leon T. Kendall, Michael J. Fishman
Collecting fourteen lectures by means of the pioneers of securitization and by means of present practitioners—from Freddie Mac, Paine Webber, JP Morgan, Chrysler, McKinsey & Co, and different significant players—A Primer on Securitization introduces readers to America's most recent method of elevating capital: what it's, the way it operates, and what distinction securitization makes. The securitization approach bypasses monetary intermediaries that experience traditionally gathered deposits and loaned them to these looking money, and hyperlinks debtors on to cash and capital markets. even if little has been written approximately what's possibly essentially the most very important ideas to emerge in monetary markets because the Thirties, securitization has revolutionized the best way that the borrowing wishes of customers and companies are met. at the present time, for instance, over two-thirds of all domestic loans are being securitized, in addition to mammoth probabilities of vehicle loans and bank card receivables, and the method maintains to extend into new fields together with artificial securities. Authoritative and sensible, those lectures convey how securitization used to be built to fill a spot in monetary markets. They talk about the character and explanations of the marketplace imperfections that made securitization a helpful resource of money, and describe how securitization has associated neighborhood loan markets with foreign capital markets. Readers will achieve a huge standpoint of the several parties—the borrower, the mortgage originator, the servicer, the ranking organisation, the particular goal car, the credits enhancer, the underwriter, and the investor—as good as an in depth research of ways those events relate to each other. From the inception of the secondary loan industry throughout the cave in of the Granite money, readers will study not just concerning the good fortune but in addition in regards to the excesses and screw ups that usually accompany the improvement of any product within the genuine or monetary quarter.
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Additional info for A Primer on securitization
The ability to bifurcate interest rate and credit risk and to reengineer risk profiles has led to the growth of a multibillion dollar mortgage-backed securities market. 5. Mortgage pass-through strips, in which the investment bankers and others strip out the interest componentinterest-only strips (IO)from the principal component, principal-only strips (PO), and sell each payment stream separately to different bond-class investors, have very special cash flow characteristics. Their values can react strongly to changes in interest rates and prepayment speeds.
Kendall, Leon T. II. 15dc20 95-53328 CIP page v Contents Preface vii Contributors ix 1 Securitization: A New Era in American Finance Leon T. Kendall 1 2 Securitization's Role in Housing Finance: The Special Contributions of the Government-Sponsored Enterprises Leland C. Brendsel 17 3 The Origins of Securitization, Sources of Its Growth, and Its Future Potential Lewis S. Ranieri 31 4 The Securitization of Commercial Property Debt Steven P. Baum 45 5 How Public Corporations Use Securitization in Meeting Financial Needs: The Case of Chrysler Financial Corporation Dennis M.
Funds available consistently Benefits to originators 1. Ability to sell assets readily 2. Profits on sales 3. Increased servicing income 4. More efficient use of capital Benefits to investors 1. High yields on rated securities 2. Liquidity 3. Enhanced diversification 4. Potential trading profits Benefits to Wall Street (investment bankers) 1. New product line 2. Continuous flow of originations and fees 3. Trading volume and profits 4. Potential for innovation and market expansion Page 14 have become the interpreters and protectors of the quality of credit in the securitized securities market.