Cameron Financial Corporation provides auto dealerships in its region with a direct loan program to be made available to the purchasers of cars and trucks. In addition to normal consumer loan obligations, each loan also has a lien against the purchased vehicle which serves as collateral for the loan. The loans which Cameron provides are then packaged together and are sold to investors. What is the name for the sale of this type of investment package?

Question

Quizplus · Accepted Answer

The sale of this type of investment package is called securitization, which involves pooling and packaging loans or other financial assets into securities that can be sold to investors. The securities are backed by the cash flows from the underlying assets, such as the auto loans in this case, and are typically rated based on the credit quality of those assets. This process is used to increase liquidity and reduce risk for the originating institution, while providing investors with a diversified portfolio of assets.

Cameron Financial Corporation Provides Auto Dealerships in Its Region with a Direct