This forum might not be the most apt for this topic, but feels like it's the closest. Got an interview with a securitisation firm (i.e. not a bank, a firm that specialises in acquiring loans and securitising them for institutional investors). Anyone here had experience with such interviews and have an idea of what to expect? I'm getting up to speed on the securitisation process, loan mortality rates, and prepayment risks, etc. Wondering what else I'd need to have a handle on.
If you're someone working in the field, please feel free to also share your experience working in securitisation. Cheers in advance.
In the industry at a BB
Do you know what are their main strategies? A few that come to mind 1) forward flow - they promise a lender they will buy X amount of loans/mortgages (most definitely in combination with a warehouse facility provided by a bank) then when it hits the limit they securitise to exit the position 2) they act as mezzanine lenders in a private warehouse facility - where lenders need to borrow money in order to have money to lend - typically lenders will get 80-90% advanced rate against the amount of loans they want to originate, then a senior lender like a BB will provide 65-75% and a mezz lender provides the rest up to a total of 80-90% 3) they buy platforms - for example large firms like Eilliot, KKR etc buy companies like FIG PE and then they grow the business PE style but also participate in the securitisation these portco do
The key thing about securitisation is that nobody expects you know anything really like it's so niche and technically complex it's a lot to wrap your head around without working in it - the key things are 1) why does securitisation exist (securitisation strictly means public securitisation where it's used to EXIT your position in a portfolio of loans/mortgage, by selling it ti other investors in bond format via capital markets (why some places lump securitisation with ECM and DCM under cap markets)) 2) how do you make money in a securitisation (you get carry from the loans when you hold them on your books + any surplus by selling these loans in bond format where you might be able to sell the bonds above par etc) 3) if it's a buy side shop you're gonna want to be good at your bond IRR maths (if I buy a bond at par with 10% coupon what is IRR? What if there's a bond with bullet maturity over 5 years paying 10% annually and I want to have 20% IRR what price do I buy it at?)
There's a pdf by Guggenheim called the ABCs of asset backed securities is a solid read but even for summer interns nobody reads it and know anywhere enough to talk technically about it
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