1. The Principles of Banking Moorad Choudhry
Chapter 4:
A Primer on Securitization
Reference: Hull RMFI – Ch. 6
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Robert R. Reitano

2. The Creation of Asset-Backed Securities (ABS)
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Robert R. Reitano

3. Single Purpose Vehicle/Entity SPV/SPE
Separate Legal Entity (Legal Trust)
Buys assets from Issuer/Originator
Sells ABS to Investors
Services payments, recoveries, etc.
Bankruptcy Remote (from Originator)
Investors’ risk is to asset collateral
Incorporated “Offshore” for tax treatment
Example: Cayman Islands, Ireland
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Robert R. Reitano

4. Motivations for Securitization
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Robert R. Reitano

5. A Securitization Structure
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Robert R. Reitano

6. Credit Rating Considerations
True Sale and Ownership of Assets
Asset Quality and Loss Rate
Asset Servicing
Cash Flow Modelling
Loan-to-Value Ratio
Payment-to-Income Ratio
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Robert R. Reitano

7. Cash Flow “Waterfall”
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Robert R. Reitano

8. Subprime ABS Compounding
Are all BBBs Equal?
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Robert R. Reitano

9. ABS Pre-Crisis
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Robert R. Reitano

10. ABS Post-Crisis
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Robert R. Reitano