REVIEW
of
FINANCE -
Apr. 2018
25
been some securities issuance transactions with
mortgaged-backed properties started from 2007,
which treated as similar method to securitization,
such as DATC (Vietnam Debt Sale and Purchase
Company Limited) and VAMC (Vietnam asset
management company), which mainly focus
on dealing with non-performing loans in the
financial market. There are still many difficulties
in the development process at present. In
general, applying securitization in Vietnam in the
current context is difficult, but to create a good
environment for securitization development is
one of the necessary and feasible tasks.
Litterature reviews
Under the OECD definition of 1995, the
“securitization process” is: The issue of securities
which is not only guaranteed by the issuer’s
solvency, but also by the expected revenues from
these assets. The issuer is no longer a decisive
factor in the quality of the issued securities, but
rather assets’ profitability used as collateral to
determine the income and the risk of the securities.
As such, “securitization products” are assets
that separated from their own management and
are profitable (generating cash flow), and not
dependent on other assets, such as mortgages
(including property owned by individuals or
organizations used for mortgage such as houses,
land, production workshops, machinery...),
mortgage loans, commercial loans, portfolio of
credit card loans, non performing loans portfolio,
subprime loan portfolio, high-yield bonds, or
commercial real estate loans and receivables
(including receivables from consumer loans to
purchase vehicles, credit cards, copyright etc.),
receivables from loans for businesses, financial
leasing assets, investments in projects including
infrastructure development, income from
investment projects and other loans.
According to Jobst (2002), during the
securitization process, the loan owner will sell
the loan to a specialized financial institution
(SPV), which is often called a trust organization,
specialized in managing bankruptcy assets.
The SPV will buy back the loans by issuing
securities (bonds, bills, bills, commercial papers,
etc.). In addition, financial institutions (typically
investment banks) will often be involved in the
restructuring and marketing of these securities to
increase the demand of investors. It also provides
investors with a better understanding of these
securities through credit rating services.
Historically, the issue of securitization based
on the need of securing the wealth of assets that
had existed in the Middle Ages when the Genoa
Government of Northern Italy gathered some
wealthy people in the region to fund the trip to
exploit new lands. Modern securitization has
appeared more than 30 years ago, first from the
United States in 1970 and later expanded widely,
and then appeared strongly in other countries.
In particular, the “securitization” industry was
officially established in 1970with the first stockpile
of securities issued by the National Association of
Mortgages (GNMA, or “GinnieMae” ). In 1985, the
first ABS signed by Sperry Univac Corporation,
although the first mortgage agreement made
by the Bank of America in 1977. Since 1986, the
tax law of the United States for MBS and ABS
trading activities started to have effective. Then,
ABS began to dominate the US market in the
early years, and since 1987 it has been associated
with other credit card-related securities. The
securitization industry in the United States has
expanded to the Atlantic (England, 1985) and later
expanded to other European countries such as
Spain, Belgium, New Zealand, and Ha lan...).
In general, the term “securitization” derives
from the fact that securitization is a structured
financing process (issuing debt securities
for financing) on the basis of socialization of
investment. Securitization is the process of putting
collateral assets into the secondary market where
they exchanged. It also could turn poor assets into
Income from securization
produtcs
Investor
Deliver securization produtcs
Issuing securities
Payment of principal and
interest after deducting
expenses
Transfering asset
Sale loans, assets
Credit enhancing
Assurance
Trustee
SPV
Originator
Credit
Enhancer
Transfer profit to investors
FIGURE 1. SECURIZATION PROCESS
Source: Jobst (2002)
