The income-generating assets of a company are pooled separately from its balance sheet into a special-purpose vehicle (SPV), and the SPV issues a security backed by the cash flow to be generated by such assets and sells the security to investors. This method is called "securitization." And the security issed through such a proces is generally called a "securitized product." Business enterprises use their assets- such as auto loans, mortgage loans, lease receivables, business loans, and commerical real astate- as collateral to back up their securitized products.
There is a choice of books on securitization, collateralized debt obligations
(CDOs), and structured credit products. In fact, both of
us have written other books on the subject. This book, however, was
conceived as a short, handy and easy-to-comprehend guide to securitization,
minus technical details. The idea originated while both of
us were working on a comprehensive article on securitization: One
which says it all in a limited space and serves as a curtain-raiser
on the subject.
The money market is traditionally defined as the market for financial
assets that have original maturities of one year or less. In essence, it is
the market for short-term debt instruments. Financial assets traded in
this market include such instruments as U.S. Treasury bills, commercial
paper, some medium-term notes, bankers acceptances, federal agency
discount paper, most certificates of deposit, repurchase agreements,
floating-rate agreements, and federal funds.
Uninsured low-income childless adults are a diverse group that includes men and women living in all
parts of Wisconsin. About half of these adults are working full time or are self-employed, working full
time. Over half have not had a checkup during the past two years. Twenty-two percent of low-income
uninsured childless adults have a chronic condition; that is, have been diagnosed as having arthritis, heart
disease, diabetes, cancer, or a stroke.
However, instead of appropriately distributing risks, this process often concentrated risk
in opaque and complex ways. Innovations occurred too rapidly for many financial
institutions’ risk management systems; for the market infrastructure, which consists of
payment, clearing and settlement systems; and for the nation’s financial supervisors.
Securitization, by breaking down the traditional relationship between borrowers and
lenders, created conflicts of interest that market discipline failed to correct.
Only loans that meet the definition of a security are in the scope of ASC 320. Although certain loans can
be readily converted into securities (e.g., loans insured by the Federal Housing Administration or
conforming mortgage loans), a loan is not within the scope of ASC 320 until it has been securitized. The
accounting by creditors for impairment of certain loans is addressed by ASC 310-10, and is applicable to
all creditors and to all loans except (i) large groups of smaller-balance homogeneous loans that are
collectively evaluated for impairment (i.e.
Securitized instruments are rapidly growing, albeit from a very low base. The most active
instrument is the FIDC (Asset Backed Securities), used to securitize a variety of assets
including trade receivables and loans, as well as expected revenues in infrastructure projects.
CRIs (Mortgage Backed Securities) are used to securitize mainly loans related to sale of real
estate. This product has been one of the fastest growing instruments in Brazil.