What Is a Mortgage Pool?

The asset pool refers to the asset pool in asset securitization. In fact, it is a large-scale asset portfolio with certain characteristics.

Asset pool

There are three main steps in the formation of a securitized asset pool:

First, determine the overall target characteristics of the asset pool;

Second, set screening criteria and select alternative assets;

Third, select a combination from alternative assets to form an asset pool.

The so-called general target characteristics of the asset pool refers to characteristics such as the expected duration, amount of money, asset class, risk level, industry composition, and regional distribution of the asset pool. Needs to decide.

According to the overall target characteristics of the asset pool, specific asset screening criteria can be determined. Generally, projects that have been issued with loans and have entered a stable repayment period are selected. The remaining period of the selected assets should not exceed the predetermined period of the overall asset pool. Considering the decentralization of the asset pool and management costs, there is an upper and lower limit on the amount of each asset.

For the selected candidate assets, a scientific combination is required to achieve the purpose of spreading the specific risks of individual assets. In other words, assets with negative risk correlation are combined to achieve internal hedging risks, thereby reducing the risk level of the entire asset portfolio.

Customer relationship is also a factor that must be considered, because after securitization, the right to adjust the contract is transferred from the sponsor to the investor, which reduces the convenience of the original potential contract adjustment and increases the possibility of some information disclosure. Therefore, when choosing assets to enter the pool, it is necessary to consider the impact on the customer relationship and try to gain the understanding of the borrower.

ABS, MBS and CDO asset pool differences:

(1) MBS's asset pool is real estate mortgage loan claims

(2) ABS (narrow sense) asset pools are claims other than real estate mortgage loans, such as:

• Credit card receivables

• Lease rent

• Auto loan claims

(3) CDO's asset pool is mainly debt instruments, such as:

• High Yield Bonds

• Emerging Market Corporate Debt

• National Debt

• Bank Loans