- This topic has 1 reply, 2 voices, and was last updated 5 years ago by .
Viewing 2 posts - 1 through 2 (of 2 total)
Viewing 2 posts - 1 through 2 (of 2 total)
- The topic ‘securitisation and tranching’ is closed to new replies.
OpenTuition recommends the new interactive BPP books for June 2024 exams, Get your discount code >>
Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › securitisation and tranching
John i have been wrecking my head trying to understand these lines(technical article).
Securitisation is achieved by transferring the lending to specifically created companies called ‘special purpose vehicles’ (SPVs). In the case of conventional mortgages, the SPV effectively purchases a bank’s mortgage book for cash, which is raised through the issue of bonds backed by the income stream flowing from the mortgage holder.
I dont understand who is transferring the lending?
Is it a company(or is it a bank?) that creates an SPV, then sells its lending to the SPV? And the SPV gives cash to the company as a return.In return SPV gets the company’s mortgage book from which it will receive mortgage payments. If it was the company that created SPV (then isn’t the SPV effectively a part of the company? So if that is the case, where does the SPV bring cash from? Isn’t it the company’s cash that is going back to the company. Or is SPV another, different entity?
See my reply to a previous question on this: