A security trust deed (STD) is a legal document that is used to create a security interest in assets. In the context of securitisation, the assets that are typically securitised are pools of loans.
The STD is created by the issuer of the securities, and it is used to transfer the security interest in the assets to the trustee. The trustee is then responsible for managing the assets and enforcing the security interest in the event of a default by the borrowers.
The STD typically includes the following provisions:
- The description of the assets that are being securitised.
- The terms of the security interest, such as the priority of the security interest and the remedies available to the trustee in the event of a default.
- The duties and responsibilities of the trustee.
The STD is an important part of the securitisation process, as it provides investors with a legal framework for their investment. The STD also helps to protect the interests of the investors in the event of a default by the borrowers.
Here are some applications of a security trust deed in securitisation:
- To provide security to investors: The STD provides security to investors by giving them a legal claim on the assets that are being securitised. This means that if the borrowers default on their loans, the investors will be able to recover their investment from the assets.
- To manage the assets: The trustee is responsible for managing the assets that are being securitised. This includes collecting payments from the borrowers, monitoring the performance of the assets, and enforcing the security interest in the event of a default.
- To enforce the security interest: If the borrowers default on their loans, the trustee can enforce the security interest by selling the assets. The proceeds from the sale of the assets will then be used to repay the investors.