Securitization is the transformation of financial assets into securities. Discuss in brief.

Securitization is the process of pooling and repackaging of homogenous illiquid financial assets into marketable securities that can be sold to investors. It is the transformation of financial assets into securities. The process leads to the creation of financial instruments that represent ownership interest in, or are secured by a segregated income producing asset or pool of assets. The pool of assets collateralizes securities. These assets are generally secured by personal or real property (e.g., automobiles, real estate, or equipment loans), but in some cases are unsecured (e.g., credit card debt, consumer loans). There are four steps in the process of securitization: Special Purpose Distinct Entity (SPDE) is created to hold title to assets underlying securities; the originator or holder of assets sells the assets (existing or future) to the SPDE; the SPDE with the help of an investment banker, issues securities which are distributed to investors, and the SPDE pays the originator for the assets with the proceeds from the sale of securities. Securitization is used by financial entities to raise funding other than what is available via the traditional methods of on-balance-sheet funding.