Asset-backed Securities
Asset securitization refers to a process of issuing Asset-backed Securities that has future cash flow generated by basic assets as its reimbursement support, it is a process based on the credit enhancement achieved through structured design.
It is a way of financing featured by issuing marketable securities, which are supported by specific asset portfolio or cash flow. Asset securitization only refers to the securitization in a narrow sense. Since American Government National Mortgage Association launched the mortgage-backed securities for the first time in 1970: the Mortgage Pass Through, which had mortgage loan portfolio as basic asset and marked the first asset securitization transaction, securitization transaction has been gradually becoming a widely adopted financial innovation means and witnessing rapid advancement, based on that, products like risky securitization products are derived.
In a broad sense, asset securitization means an asset or asset portfolio is operated in the value form of security assets, it consists of four operation modes:
1. Physical asset securitization: transferring physical assets into security assets, it refers to a process of issuing securities and go public, backed by physical assets and intangible assets.
2. Credit assets securitization: it refers to a process of restructuring a bunch of credit assets with poor fluidity, such as bank loan, account receivable, into an asset pool in order to generate steady cash flow income, which is expected to keep steady in future, by combination with corresponding credit assurance, transferring the future cash flow income generated by this bunch of assets into high-credibility, bond-type securities that can fluid on the financial market and issue these securities.
3. ecurities asset securitization: it refers to a process of resecuritization, which means using securities or security portfolio as basic assets, issuing new securities on the basis of the cash flow or other relevant variable value generated by these basic assets.
4. Cash asset securitization: it refers to a process that cash owners transfer their cash into securities by investing.
In a narrow sense, cash asset securitization means credit assets securitization. According to different asset types, credit assets securitization consists of House Mortgage-Backed Securitization and Asset-Backed Securitization.
In general, the basic procedures of a complete securitization financing are: the starter sells securitization assets to a Special Purpose Vehicle, or the SPV takes the initiative to buy assets that can be securitized, and collecting the assets into an asset pool, backed by the cash flow generated by this asset pool, the SPV issues negotiable securities financing on the financial market, and utilize the cash flow generated by this asset pool to pay off all issued negotiable securities.