Asset-Backed Securities

Definition

• A financial security whose value and income are backed by an asset or pool of assets. Asset-backed securities (ABS) are similar to mortgage-backed securities, but instead of using mortgages as backing, asset-backed securities use moderately sized illiquid assets such as home equity loans, auto loans and leases, credit card receivables, and student loans as backing.

Notes
Financial security made up of a bundle of assets.

Synonyms
asset collateralized security, asset-backed security

Acronyms
ABS

Alternate Spellings
Asset Back Security, Asset-Backed Security

Related Terms and Acronyms

• Equity — Definition,
  • Ownership in an asset.
  • The value of a property minus outstanding mortgage debt and other liens.
• Fixed-Return Investments — Definition,
  • Investments that provide a stable return.
• Issuer — Definition,
  • A legal entity that develops, registers, and sells securities including stocks, bonds and derivatives.
• Mortgage (mtg) — Abbreviation, Important,
  • A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.
• Mortgage-Backed Securities — Definition, Important,
  • Securities backed by mortgage debt.
• Mortgage-Backed Security (MBS) — Acronym, Very Important,
  • Securities backed by mortgage debt.
• Portfolio Lender — Definition,
  • A company that underwrites mortgage loans and keeps them on the books instead of selling them on the secondary market.
• Secondary Market — Definition,
  • A market where financial instruments such as stocks, bonds, options and futures are bought and sold to investors.
• Secondary Mortgage Market — Definition, Important,
  • The trade in home loans that are bundled together and sold as securities to investors. It frees money so more people can get mortgages.
• Security — Definition,
  • Property designated as collateral.
  • A document stating ownership of a stock or bond.
  • A tradable financial implement that represents ownership, the rights to ownership or debt.
• Syndicated Loans — Definition,
  • Loans given to a company that are backed by a group of banks who share the risk of a large transaction. There is usually a lead bank and several participating banks.