securitized mortgage

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A mortgage that has been converted into a marketable security, which can be sold to an investor. One advantage of selling on mortgages and other loans in this way is that it enables banks to move assets from their balance sheets, thus boosting their capital adequacy ratios. This practice is strictly controlled by the regulating authorities; nevertheless, the widespread securitization of mortgages with a high credit risk, many of which subsequently defaulted, precipitated a banking and financial crisis in 2007 (see subprime lending).

Subjects: Financial Institutions and Services.

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