However, in the asymmetric information context, holding a subordinate claim gives the bank the stake that can motivate it to screen the loans carefully before it securitizes
them and to continue monitoring the loans after it securitizes
Saxon also purchases, originates and securitizes
non-prime residential mortgages; its mortgage loan portfolio totaled $6.5 billion at March 31, 2006.
The offshore company securitizes
the risk, thereby pushing the risk to investors and retaining none for itself.
A mortgage banking enterprise that acquires mortgage servicing rights through either the purchase or origination of mortgage loans and sells or securitizes
those loans with servicing rights retained should allocate the total cost of the mortgage loans to the mortgage servicing rights and the loans (without the mortgage servicing rights) based on their relative fair values if it is practicable to estimate those fair values.
By creating a process, or "pipeline," that continually originates and securitizes
assets, thereby removing them from the balance sheet, a banking organization can use its systems and loan expertise to originate loans that otherwise might not be made.
Freddie Mac is the nickname for the Federal Home Loan Mortgage Corporation that purchases residential mortgages, securitizes
them, and sells them to investors to provide lenders with funds for new homebuyers.