Let's start this posting
with a definition. "Securitization" is the practice of bundling
various types of debt including mortgages, consumer loans or auto loans and
selling their cash flows to third party investors as securities. Prior to
the Great Recession, the brilliant minds of Wall Street got the idea that they
could make billions of dollars by bundling residential mortgages into
mortgage-backed securities (MBS) which were secured by what turned out to be a
significant percentage of subprime loans that were granted to
less-than-creditworthy borrowers and selling them to anyone who wanted what
appeared to be a risk-free, bond-like investment.
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