In the context of securitisation, consolidated loans refer to a group of loans that are pooled together and securitised as a single security. This is done to reduce the risk of the securitisation by spreading it across a wider pool of assets.
Consolidated loans are typically used in securitisations of commercial mortgages, where the underlying loans are often from different borrowers and have different terms. By consolidating the loans, the securitisation can offer investors a more diversified investment that is less sensitive to the performance of any individual borrower.
Here are some examples of consolidated loans in securitisation:
- A bank might pool together a group of commercial mortgages and securitise them as a single security.
- A financial institution might pool together a group of car loans and securitise them as a single security.
Consolidated loans can be a good way to reduce the risk of a securitisation, but they also come with some challenges. For example, it can be difficult to manage a large pool of loans, and there is always the risk that one or more of the underlying loans will default.