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CA Final · Advanced Financial Management · Securitization

Which statement best describes the role of the 'obligor' in a securitization transaction?

The obligor is the borrower whose loan repayments make up the cash flows of the securitized pool. The originator sells the loans, the SPV holds them, and the rating agency and trustee perform separate roles, so only the borrower is the obligor.

  1. AThe borrower whose loan repayments form the cash flows of the underlying asset poolCorrect
  2. BThe entity that sells the receivables to the SPV
  3. CThe agency that rates the securities issued
  4. DThe trustee who protects the interests of investors

Explanation

The obligor is the original debtor, such as a car loan borrower, whose instalments generate the cash flows. The seller is the originator, rating is done by a credit rating agency, and the trustee safeguards investors.

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