2.Successful Asset Securitization Instances [Modern Writings]
House securitization try a method away from converting illiquid possessions to the marketable bonds which may be offered so you can traders. In that way, new originator of property can raise loans, broaden risk, and you will boost liquidity. Resource securitization could have been widely used in different groups, particularly banking, a home, individual financing, and business funds. Within this section, we’ll see specific profitable examples of advantage securitization out-of other views, such as the sort of possessions, the dwelling of deal https://paydayloanalabama.com/stewartville/, the pros and you will demands, as well as the affect the market industry. Here are a few case degree:
1. Credit card receivables: One of the most common types of assets that are securitized is credit card receivables, which are the payments owed by the cardholders to the issuers. Credit card receivables are usually securitized through a special purpose vehicle (SPV) that issues asset-backed securities (ABS) to investors. The issuer of the credit card receivables transfers the ownership and risk of the assets to the SPV, and receives an upfront payment and a servicing fee. An example of credit card receivables securitization is the Chase Credit Card Master Trust, which was established by JPMorgan Chase in 2000. The trust has issued multiple series of ABS backed by the receivables generated by the Chase-branded credit cards. The trust has a revolving structure, which means that the receivables are continuously replenished as the cardholders make payments and new purchases. The trust also has a credit enhancement mechanism, which provides protection to the investors in case of defaults or delinquencies. The credit enhancement consists of overcollateralization, subordination, excess spread, and reserve account. The securitization of credit card receivables has enabled JPMorgan Chase to access a large and diversified source of funding, reduce its capital requirements, and improve its balance piece efficiency. Continue reading
