In securitization, a pool of loans is assembled (such as mortgages, car loans, and student loans) and shares of that pool (known as securities) are sold to investors. This process allows for the risks and returns of the loans to be spread among multiple investors, rather than being held by one lender.

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In Securitization

Question 247

Multiple Choice

In securitization:

A) securities are sold to investment bankers.
B) loans are secured by special government insurance.
C) a pool of loans is assembled and shares of that pool are sold to investors.
D) individuals use assets to back their loans.

Correct Answer: