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Securitization Benefits Americans by Reducing Risk and Interest Rates

Published on April 26, 2024

By Michael Bright

There’s safety in numbers as the saying goes. That’s especially true in finance. When loans are bundled together into a bond – a process called securitization – the combination produces lower interest rates and a reduced risk of default.

A safer financial system – and savings for consumers and small businesses – result. Homes, office buildings, credit card debt, and cars are more affordable because of securitization.

Indeed, thanks to years of experience and market reforms, securitization benefits lenders and borrowers alike and helps global capital flow in the U.S.

The Structured Finance Association represents every aspect of the securitization industry, which funds more than half of U.S. household borrowing and has raised over $13 trillion. Our mission is to finance responsible and safe lending to help grow the U.S. economy.

The industry funds 60 percent of borrowing for housing, a quarter of borrowing for commercial real estate, 15 percent of auto loans, and seven percent of credit card and student-loan debt. Because of securitization, more families, individuals, and businesses have access to credit and at a lower price.

Securitization helps make credit more affordable and available to people who need it to finance their biggest goals — education, car purchases, starting a business, buying a home — and to reduce their debt through loan consolidation.

The industry might not be the best-known part of the financial sector. But it is one of the most important to the daily lives of Americans.