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Subject 7. Credit Analysis for Securitized Debt PDF Download
Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, receivables, auto loans or credit card debt obligations, and selling their related cash flows to third party investors as securities.

A credit analyst should first consider the underlying asset types and characteristics.

  • Homogeneity: Are the underlying assets homogeneous or heterogeneous?
  • Granularity: What is the number of obligations/creditors?
  • Asset type and tenor.

Secondly, the analyst should evaluate the creditworthiness of the the originator and servicer.

Finally, the structure of the securitized debt should be considered. What is the relationship of the issuer to the originator? Any additional credit enhancements in place?

Learning Outcome Statements

compare the credit analysis required for securitized debt to the credit analysis of corporate debt.

CFA® 2023 Level II Curriculum, Volume 4, Module 31

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