Reforms Affecting Securitization

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securitisation is the process of converting an asset or group of assets into a marketable security oftentimes the securitized assets are divided into different layers or tranches tailored to the investment risk tolerance of different types of investors the process of securitization creates liquidity in the marketplace for the assets being securitized any type of asset can be securitized but usually it's an asset with periodic cash flow the most common form of securitization is what rom equity mortgages in the example of home equity mortgages a financial institution creates the mortgage which is backed by claims against the underlying property the originator then groups multiple mortgages into mortgage pools that are held in trust as collateral the newly created mortgage-backed security is then sold in a secondary market to participants sometimes the mortgage-backed security is broken up into separate pieces and those individual pieces which have different levels of risk are sold separa