CMA Final · Strategic Financial Management · Securitization
A bank pools 1,000 housing loans with a total outstanding principal of Rs 200 crore into a trust that issues pass-through certificates (PTCs). In this structure, who is the 'originator'?
The originator is the bank that granted the housing loans and sold them to the trust. The trust is the special purpose vehicle issuing certificates, investors buy those certificates, and the rating agency only rates them. So the selling bank is the originator.
- AThe bank that sold the loans to the trustCorrect
- BThe trust that issues the certificates
- CThe investors who buy the certificates
- DThe rating agency that rates the certificates
Explanation
The originator is the entity that originally lent the money and then transfers the receivables to the special purpose vehicle. The trust is the SPV (issuer), investors hold the PTCs, and the rating agency only assesses credit quality.
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