About Lesson
When financial assets or bonds are pooled together and offered to investors for receiving the inflow of funds from these underlying assets, they are termed asset-backed securities. These comprise mostly receivables such as credit card receivables, auto loans, car loans, housing loans, etc. These asset-backed securities do not include mortgage loans. These are more creditworthy than the bonds as the paying capacity of the underlying assets is better than the bonds. Usually, financial institutions in the area of credit card, auto finance, home finance, consumer loan finance companies including banks issue asset-backed securities. Through securitization, these companies pool together these loans and offer them to the investors.