The main difference between loan sales and securitization is
A)loan sales involve a transfer of ownership while securitization merely alters the cash flow patterns of an asset
B)loan sales are always made with explicit recourse to the seller while securitization is made with or without recourse
C)loan sales are usually transferred from one bank to another while securitization involves selling the securitized assets to capital market participants.
D)all of the above
E)a and c only

Question

Quizplus · Accepted Answer

Loan sales involve a transfer of ownership from one bank to another, while securitization involves selling the securitized assets to capital market participants. Also, loan sales are usually made with explicit recourse to the seller, while securitization can be made with or without recourse. Therefore, both option A and C are correct, making option E the best choice. Option B is incorrect because not all loan sales are made with recourse to the seller.

The Main Difference Between Loan Sales and Securitization Is