SECURITISATION IS A PROCESS OF FINANCE

SECURITISATION

INTRODUCTION:

                                Securitization is a process by which various financial assets such as loan receivables, mortgage backed receivables, credit card balances, hire purchase debtors, trade debtors etc. are transfer into securities.

                                In the process of securitization there are number of parties are involved. The parties are divided into two category one of them is primary and another is others.

             There are three primary parties to a securitization deal, namely

                  =>  Originators.

                  =>  Special Purpose Vechiles (SPV)

                  =>  Investors.

              

   The other parties involved are

                 =>  Obligors.

                 =>  Rating agency.

                 =>  Administrators/servicer.

                 =>  Agent & trustee.

                 =>  Structured.

ORIGINATOR:

                              Originator is the prime mover of the deal. Originator gives various loans to different borrower. It sells the assets and receives the funds generated from such sale. The originator transfers both the legal and beneficial interest in the assets to the SPV.

SPECIAL PURPOSE VECHILES:

                                                         Special purpose vechicle is an entity which buys the assets from originator against which consideration will be paid to originator.

INVESTORS:

                      Investor means individual investor or institutional investor. They purchase a participating interest in the total poll of receivables and receive their payments in the from of interest or principal as per agreed pattern.

OBLIGOR(S):

                        Obligor(s) are actual borrower of the original loan. The amount outstanding from an obligor is the assets that is transferred to an SPV.

RATING AGENCY:

                                 Since the investor takes more risks than originator, an external credit rating agency plays an important role. The rating process would asses the strength of the cash flow and the mechanisim designed to ensure full and timely payment by the process of selection of loan of appropriate credit quality, the extent of credit and liquidity support provided and the strength of the legal framework.

ADMINISTRATOIR/SERVICER:

                                                    Administrator or servicer is one who collects the payments due from the obligors and passes it to the special purpose vechile.

AGENT AND TRUSTEE:

                                             Agent and trustee acts as a supervisory in the process of securitization. It takes the responsibility of overseeing that all the party in securitization process perform their respective function in accordance with the terms and conditions.

STRUCTURER:

                           Normally they are the investment banker who acts as intermediatorry  in the process of securitization. They helps to come together originator, the credit enhancer, investors and other partners.