Securisation is a type of financial practice. It refers to the pooling together of a number of types of contractual debt that may include residential mortagages, credit card debt obligations and auto loans. This consolidated debt is then attempted to be sold to various investors in the shape of bonds or collaterised mortgage obligations (CMOs). The investors are paid back the principle and interest on the consolidated debt at regular intervals. The broad components of securitization include mortgage-backed securities (MBS) and asset-backed securities (ABS). Some special categories of securitization include master trust, issuance trust, grantor trust and owner trust. The process of securitisation enables reduced funding costs for the issuer. At the same time, it provides investors with a chance to earn a higher than usual rate of return. Hide this