Asset Pools, quality, and diversification;.
In principal any asset representing a claim to future cash flows can be securitized including non-performing. Asset securitized pools are typically "Mortgage-Backed Securities" containing assets of residential mortgages. Another type is combined "Asset-Backed Securities" containing assets such as credit card receivables, auto loans, or consumer installment loans. Pools containing a large number of securities tend to make the rate at which the principal is repaid more stable. "Asset-Backed Securities" shows little sensitivity to interest rate changes, as compared to "Mortgage-Backed Securities" which are highly sensitive. Mortgage loan backed deals frequently will require a range of $50 to $60 million in order to achieve adequate diversification. The quality of assets which will assemble the pool will determine the amount of credit enhancement. The issuer will need to have adequate financial capacity to support the representations and warranties that are necessary for securitization, so poorly capitalized companies generally are not good candidates for securitization. Small private placements can be executed for as little as $200,000 in out-of-pocket expenses. Larger or more complex deals can exceed 1 million dollars. .
Benefits of the seller when considering Asset securitization,.
The seller of the assets benefits by liquidating assets while still being able to continue to focus on core competencies rather then trying to compete in areas where they do not hold sterngths. The most important benefit to the seller is that it reduces capital and liquidity requirements, as assets are moved off balance sheets. Asset securitization provides access to a larger base of capital markets and institutional investors to fund assets. It also gives the seller the opportunity to retain the customer relationship and service. This is important since institutions will not have to turn customers away from continuing business.