Securitization: Additional Source Of Financing

The objectives of this article are to define a securitization and describe its major features; to highlight some of the benefits of a securitization, as well as the critical factors for completing a successful securitization for consideration from originators; and to identify who the actors are.

Since the mid-1970s, the financial world has been the recipient of several innovations. One of them was securitization, which began to take shape in the 1980s. This financial practice began with the support of the United States government in 1970, and private sector organizations implemented it in 1977. Since then, securitization has become a significant finance tool. By the second quarter of 2008, it had generated $10.2 trillion in the United States and $2.3 trillion in Europe. By 2005, Asset Based Securities (ABS) issuance was measured at $1.9 trillion, and the amount of issued equity is $18.2 trillion in the U.S. ABS issuances are 11 percent of equity issuances.