China
Africa
Explore chapters and articles related to this topic
Aircraft Securitisation
Published in Peter S. Morrell, Airline Finance, 2019
Securitisation involves the re-packaging of cash flows or receivables into securities which are then sold to investors. This is often done in diiferent tranches, each tranche having different rights and risks attached. Higher credit ratings, and thus lower borrowing costs, can be achieved than would be possible for the separate parties involved in each lease or mortgage. Ratings are given to each of the securities by agencies such as Standard & Poor’s or Moody, thereby making them more saleable to institutions. The cash flows could be short-term, for example with the sale of accounts receivables from travel agents, or on credit cards. They could be medium-term, with the sale of five- to ten-year aircraft operating lease or vehicle loan receivables. Or they could be long-term, with the sale of home mortgage receivables of loan principal and interest.
Theoretical Underpinnings to the Research
Published in Terry A. Sheridan, Malevolent Managers, 2017
For example, the collapse of the US sub-prime mortgage market, circa 2008 threatened global economic stability. The accounting and management professions (and many other interested parties including governments and national banks) failed to notice warning signs and act upon the incredible risks being taken. In the period of 2005–2007, investment banks were accessing a ready supply of new assets for securitisation, that is, sub-prime mortgages. Securitising meant turning these high-risk loans into assets and the investment banks were able to pass the credit risk along to investors and in turn earn fees from arranging the securitisation transactions.73 This dangerous new business practice raised two red flags of business fraud notably: (1) unethical management taking advantage of gullible investors and (2) excessive trust in key executives who convinced an otherwise conservative industry to take such a enormous risk with disastrous consequences.74 As would be expected by not playing by the rules, there is an increase of 31 per cent in mortgage fraud in the first half of the fiscal year of 2008, with a concomitant increase in corporations committing fraud as linked to the sub-prime crisis reported by the FBI.75 Such reckless corporate behaviour led to a recession, for which many people suffered job loss, poverty and family break-up.
1
Published in Michael I. C. Nwogugu, Earnings Management, Fintech-Driven Incentives and Sustainable Growth, 2019
This hypothesis was introduced in Nwogugu (2008a;b). Asset Securitization and Structured Products transactions can result in increases in banks’ and financial companies’ propensity to take risks because securitization provides a channel for disposing of mediocre and or marginally profitable assets/loans; and the components of true-sale securitization processes can be performed simultaneously in order to avoid the application of capital-reserve requirements.
Close entanglements: aligning the construction and finance industries
Published in Construction Management and Economics, 2019
As collateral is needed to originate loans and to issue securities, predatory lending is a dysfunctional practice enables by of securitization. Predatory lending is defined as a business operation to “coerce or trick homeowners into obtaining loans with interest rates or fees higher than the borrowers' credit profiles and the market would justify”, or to originate loans “larger than or different from what the borrowers need, want or can afford” (Eggert 2002, p. 507). Engel and McCoy (2007, p. 2043) said, “Predatory lending is a syndrome of loan abuses that benefit mortgage brokers, lenders, and securitizers to the serious detriment of borrowers”. The role of securitization is disputed in scholarly communities, policymaking, and regulatory circles, but there is substantial evidence that indicates that less prudent mortgage lenders could take advantage of the largely unmonitored and leniently regulated securitization process, which in turn expanded the home mortgage loan market to include sub-prime borrowers to provide collateral for securities issuances (Mian and Sufi 2014). For instance, Ken Thompson, Wachovia's former chairman and chief executive officer, advocates this explanation:
Domain modelling of the financial system
Published in Enterprise Information Systems, 2022
When we talk about securitised loans, one word should not be ignored, that is securitisation. Securitisation refers to the process of converting loans or other financial assets which are not tradable into securities. Until about 40 years ago, banks made loans and made profits by collecting interests on loans until loans were paid off. It was impossible to sell loans in the financial market. Therefore, loans were just financial assets but not securities. Then, the federal government and some financial institutions created markets for loans. Through the securitisation process, loans sold by banks on the financial market became securities.