Banks, intermediaries and other financial institutions are not in a position to cope with the situation. So there is a window of opportunity in mortgage funding (Comptroller, 1997, p 02). In order to attract investors, bankers initially develop the investment vehicle that isolated defined mortgage pools, segmented the credit risk, and structured the cash flows from the underlying loans. Although it took several years to develop an efficient mortgage structure. In the early 1980s, the current shape of securitization was introduced into capital markets in which payments were pooled and used as collateral for securities issues. U.S government played a very pivotal role by creating agencies whose work is to ensure the securities, payment and interest (Comptroller, 1997, p 02). In the late 1980s, companies such as Citibank, General Motors Acceptance Corporation, Marine Midland Bank, Chrysler Corporation, and Ford Motor Company entered into the securitization market and raise billions of dollars through off-balance-sheet financing and in years to come, new issuance of consumer asset-backed securities averaged about $50 billion annually.
Securitization works in manner that seller provides goods or services to its valued customer in manner that payment is to be received in later days so he/she creates an asset then this pool of asset is sold to SPV (issuer) in order to acquire the particular asset and issuing a debt instrument to investor. Now this debt instrument is traded in secondary market in order to attract different rating agencies (Comptroller, 1997, p 06). This approach is quite fruitful for the seller because highly-rated debt instruments attract the finest prices. In addition, the credit rating of the debt instrument is very much dependent on the quality of assets that are securitized with in the pool. Investment banker provides protection, if there