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. American Banker Glossary
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Creating a more or less standard investment instrument such as the mortgage pass-through security , by pooling assets to back the instrument. Also refers to the replacement of nonmarketable loans and/or cash flows provided by financial intermediaries with negotiable securities issued in the public capital markets. Bloomberg Financial Dictionary
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if a financial institution securitizes loans, it buys the loans from lenders such as banks and uses them as backing for bonds. The financial institution uses the repayments on these loans to make payments to investors who buy the bonds. Money that the lenders get from the financial institution when it sells the bonds is used to improve its financial situation, make more loans to customers etc:
• The company purchases and securitizes mortgages from all over the United States.
— securitization also securitisation noun [uncountable] :
• The government is counting on securitization to help resolve the mortgage problem.
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Creation of financial instruments by combining other financial assets and then selling them to investors in the new form. Mortgages can be securitized, as can future royalties from a pop star's song portfolio. The new instruments can then be traded.
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securitize UK US (UK also securitise) /sɪˈkjʊərətaɪz/ verb [T] FINANCE, STOCK MARKET
► to borrow money in the form of bonds which can then be traded on financial markets: »
David Bowie securitized his potential earnings by issuing bonds against the future royalties of his recording catalogues.
securitization (UK also securitisation) noun [U]
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National Westminster Bank announced the $5 billion securitization of its high-quality corporate loan.
Financial and business terms. 2012.