SECURITIES DEFINITION. A security is generally a fundable , negotiable financial instrument representing financial value. Securities are broadly categorized into:. Debt securities (such as banknotes , bonds and debentures ), Equity securities, e.g., common stocks ; and,
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A security is generally a fundable, negotiable financial instrument representing financial value.
Securities are broadly categorized into:
Debt securities (such as banknotes, bonds and debentures),
Equity securities, e.g., common stocks; and,
Derivative contracts, such as forwards, futures, options and swaps
Types of securities include:
Notes, stocks, treasury stocks, bonds, debentures, certificates of interest or participation in profit-sharing agreements, collateral-trust certificates, etc
Process, by which loans and other receivables are packaged, underwritten, and sold in the form of securities (instruments commonly known, as Asset Backed Securities).
Involves pooling and repackaging of loans into securities that are then sold to investors.
Securitization provides an additional funding source and may eliminate assets from a loan originator’s balance sheet.
Often used to market small loans that would be difficult to sell on a stand-alone basis.
Real Estate Mortgage Investment Conduits
Investment vehicles that hold commercial and
residential mortgages in trust and issue
securities representing an undivided interest in
A trust into which pools of promissory notes
(debt instruments – like an IOU) and mortgages
or trust deeds (the security instruments which
permit foreclosure if the notes are not paid).
Mortgages into pools and issues pass-through
certificates, multiclass bonds similar to a
collateralized mortgage obligation (CMO), or
other securities to investors in the secondary
Consists of a fixed pool of mortgages broken
apart and marketed to investors as individual
The rules for the operation of a REMIC are
contained in a voluminous document called a
Pooling and Servicing Agreement, or “PSA.”
REMICS AND IRS RULES
Sec. 860D. REMIC defined
TITLE 26, Subtitle A, CHAPTER 1, Subchapter M, PART IV, Sec. 860D.
(B) information necessary for the application of section 860E(e) will be made available by the entity. In the case of a qualified liquidation (as defined in section 860F(a)(4)(A)), paragraph (4) shall not apply during the liquidation period (as defined in section 860F(a)(4)(B)).
(A) FMV of the real property securing the obligation was at least equal to 80% of the issue price of the obligation at the time is contributed to the REMIC.
(B) Substantially all of the proceeds of the obligation were used to acquire or to improve or protect an interest in real property.