Securitization
a.k.a. Securitisation
Bundling loans or other income-producing assets together and turning them into bonds that can be sold to investors.
Securitization takes a pile of individual loans, like mortgages, car loans or credit-card debt, pools them, and slices the pool into bonds. Investors who buy those bonds get paid from the borrowers' monthly payments. The lender gets its cash back immediately and can lend again.
Done well, it spreads risk and makes credit cheaper. Done badly, it can hide rotten loans inside respectable-looking bonds. That is what happened with US mortgage-backed securities before the 2008 crisis.
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