University of Tennessee College of Law
I'm Mark Fagan, and I co-teach a course on securitization with Tamar Frankel at Boston University School of Law. We have come together to teach several interdisciplinary courses that combine law, business and public policy. Our course on securitization is a wonderful exemplar because it touches so many aspects of law as well as business and public policy.
We spent quite a bit of time wrestling with how to teach it. Do you teach it in a process fashion? Do you teach it by legal topic? Do you take examples and examine them? After much debate and discussion, we actually went with the linear, process path. We begin with the borrower and show the students how the originator of the loan fits in, how they take and create a Special Purpose Vehicle ("SPV"), and the SPV in turn takes the assets and turns them into securities. We walk through this process and explain how the assets can move in one direction, and the cash in the other, and then the repayment.
On the surface, this seems quite straightforward. Basically, we're taking the illiquid assets and turning them into tradable securities. But, when you unbundle it, you find a level of complexity, because in addition to our primarily players, many of whom they've already had some exposure to, we get our additional players: the rating agencies, the appraisers, the security brokers, and the servicers, which layer on a very interesting dynamic into this process, because they're actually not part of the core process yet have a significant impact on the outcome of the securitization process.
Mark Fagan, Tamar Frankel, Eric J. Gouvin & Kathy Z. Heller,
Upper-Level Courses: Three Examplars
Transactions: The Tennessee Journal of Business Law
Available at: https://scholarship.law.bu.edu/faculty_scholarship/3201