Business and Personal Finance Dictionary

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• SECURITIZATION
  
  The process and the result of pooling financial assets together and issuing liability and equity obligations backed by the resulting pool of assets to convert those assets into marketable securities. The underlying assets are usually, but always, non-marketable by themselves. Any type of financial asset can be securitized. Securitized mortgage obligations may be called mortgage backed securities or collateralized mortgage obligations. Securitized non-mortgage assets are typically called asset backed securities however the term collateralized debt obligation is increasingly used to refer to securitized corporate debts. A single loan or groups of similar loans may be securitized. Loans to be securitized must usually be underwritten with terms and documents that conform to wholesale market standards. For some securitizations, additional credit support, called credit enhancement, may be obtained through insurance, a letter of credit, over collateralization or other means. Many securitizations use multi-tranche structures that allocate the principal and interest cash flows from the underlying assets in patterns that create higher and lower risk securities. See "collateralized debt obligation", collateralized mortgage obligation", mortgage backed security", "special purpose vehicle" and "waterfall".
  
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