The Process of Securitization

The Process of Securitization - Caroline Herring: The...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Caroline Herring: “The Process of Securitization” Caroline Herring BUS 515- Financial Management Dr. Gordon Smith August 14, 2011 “The Process of Securitization” Many economists call the Global Economic Crisis in the late 2000's one of the worst financial crises in the United States since the Great Depression in the 1930s. It resulted in the collapse of several big financial institutions, bank bailouts, and a roller-coaster stock market that the world is still trying to recover from. One of the major culprits to the cause of this crisis was mortgage securitization. In this paper, I will explain the process of securitization step by step. To start looking at securitization, we must first look at the housing market in simple terms. First, the seller sells the house and turns over ownership to a buyer. Next, to get enough cash to purchase the house, the buyer will usually sign a mortgage loan agreement and gives it to an “originator”. Previously, an “originator” would be an S&L or a bank, but in recent years, originators are specialized mortgage brokers. The brokers examine the buyers credit information, gives the home an appraisal, and handles paperwork. In exchange for cash, the originator sells the mortgage to a securitizing firm. Then the firm bundles large numbers of mortgages into pools and create new securities that had claims on the
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/30/2011 for the course BUS 451 taught by Professor Bilbrey during the Spring '11 term at Anderson University SC.

Page1 / 3

The Process of Securitization - Caroline Herring: The...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online