In March, the Third Circuit upheld the Consumer Financial Protection Bureau’s power to sue securitization trusts that issue asset-backed securities if debt collection companies or their hired service providers violate the law.
Aside from the legal risks that this decision poses to asset-backed securities, it also indicates potential headwinds for the securitization process—and for securitization special purpose entities (SPEs) in particular—that cannot be ignored.
To fully appreciate these potential challenges to SPEs, let’s take a crash course on how the securitization process works.
Securitization 101
In simple terms, securitization involves the process by which a company (usually called the ...
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