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Advantages of Securitizing

The principal advantages of securitization include:

• Non-liquid long-term assets are converted to fresh funds that allow continued origination of new assets (mortgages).

• It is an ongoing source of financing.

• The cost of financing can be lower through securitization than through other sources of financing, which may favor competition among brokers for the benefit of the consumer, by stimulating a substantial reduction of the brokerage margins and interest rates borrowers are charged.

• It frees up regulatory capital that can be used in generation of new assets (mortgages).

• Credit risks are transferred to the investing public.

• Seeking to be attractive to investors promotes standardization in the origination of assets (mortgages), as well as the participation of financial brokers that offer alternative services to securitization (portfolio managers, financial insurers, etc.) that promote liquidity in the housing market.

Last review: 07/02/2013 4:42
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