Market conditions and demand, legislative reform, and innovation allowed the securitization industry to evolve from its infancy into a mainstay of the financial markets in less than three decades. As investor acceptance increased, the markets continued to grow and innovate. However, at times innovation came at the cost of decreased transparency, perceived declines in quality, and increased risk. The combined effects of weakening credit assessments and a downturn in the housing market and global economy led to a dramatic decrease in new securitization transactions. Although securitization is expected to maintain its key role in global capital markets, the market continues to face challenges as it recovers.
Restoring confidence in the securitization market requires a focus on several core principles:
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