The SPV plays a critical role in a securitization because it legally separates the loans and receivables sold to the SPV from the originator and therefore reduces funding costs because investors look to the credit risk of the collateral rather than the credit risk of the originator.

Question

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This statement is true. The use of an SPV in securitization transactions helps to legally isolate the loans and receivables sold to the SPV, thereby reducing funding costs for the originator. Investors focus on the creditworthiness of the collateral backing the securities, rather than the credit risk of the originator.

The SPV Plays a Critical Role in a Securitization Because