Lesson 3 of 5 · 13 min
The parties and the flow of funds
A securitization has three main parties (seller, SPE and servicer), supporting third parties and two key documents, and money moves around them in a fixed sequence.
In short
- Seller of the collateral (also depositor): originated the loans and sells them to the SPE.
- SPE: buys the loans and issues the ABS; the prospectus calls it the issuer.
- Servicer: administers the loans: collects payments, chases late payers, recovers and sells collateral. It may be the originator or another firm.
- Third parties: accountants, lawyers, trustees, underwriters, rating agencies and sometimes financial guarantors.
- Key documents beyond the indenture: the purchase agreement (seller's representations and warranties) and the prospectus (structure, payment priority, credit enhancements).
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