LECTURE 11 NOTES

LECTURE 11 NOTES - Lecture 11 Notes MANAGING RISK WITH LOAN...

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Lecture 11 Notes MANAGING RISK WITH LOAN SALES AND SECURITIZATION --What are the purposes of loan sales and securitizations? --What characteristics describe the bank loan sale market? --What factors encourage and deter loan sales growth? --What are the major forms of asset securitization? --Can all assets be securitized? Loan Sales and Securitization: The packaging and selling of loans and other assets backed by loans issued by the FI. Loan sales involve splitting up larger loans, whereas loan securitization involves the grouping of smaller loans into larger pools. --Are one of the mechanisms that FIs have used to hedge their risk. Loan sale: A FI originates a loan and subsequently sells it. Pass-Through Securities: Mortgages or other assets originated by an FI are pooled and investors are offered an interest in the pool in the form of pass-through certificates or securities. Exmps: Government National Mortgage Association (GNMA) or Federal National Mortgage Association (FNMA) securities. Collateralized Mortgage Obligations (CMOs): Similar to pass-throughs, CMOs are securities backed by pools of mortgages or other assets originated by an FI. Pass-throughs give investors common rights in terms of risks and returns, but CMOs assign varying combinations of risk and return to different groups of investors in the CMO by
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This note was uploaded on 11/18/2011 for the course FIN 353 taught by Professor Cobus during the Fall '08 term at S.F. State.

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LECTURE 11 NOTES - Lecture 11 Notes MANAGING RISK WITH LOAN...

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