Title perfection refers to the process of ensuring that the title to the underlying assets is legally valid and enforceable. In Australian English, title perfection is sometimes referred to as "title registration" or "title assurance".
Title perfection is important in securitisation because it ensures that the investors in the securitisation have a valid claim to the cash flows from the underlying assets. If the title to the underlying assets is not perfected, the investors in the securitisation may not be able to enforce their rights to the cash flows.
There are a number of different ways to perfect title to the underlying assets in a securitisation. The most common way is to register the transfer of title to the SPV on the relevant land title register or other registry. In some cases, it may also be necessary to obtain a court order to perfect title.
The perfection of title can be a complex process, and it is important to seek the advice of a lawyer who is experienced in securitisation.
Here are some of the applications of title perfection in securitisation:
- To protect investors: Title perfection protects investors in a securitisation from the risk that their claims to the cash flows from the underlying assets will be challenged.
- To manage credit risk: Title perfection can be used to manage credit risk. For example, an issuer may require that the underlying assets be registered in the name of the SPV before the securitisation is issued. This will help to protect the securitisation from losses if the underlying assets are sold or transferred to another party without the consent of the investors.
- To create new products: Title perfection can be used to create new securitization products that meet the needs of different investors. For example, an issuer may issue a securitization with a different type of underlying asset, such as receivables or intellectual property. The perfection of title will need to be adapted to the specific type of underlying asset.
It is important to note that title perfection is not without its risks. For example, if the title to the underlying assets is not perfected correctly, the investors in the securitisation may not be able to enforce their rights to the cash flows from the assets.
Title perfection is sometimes referred to as "title registration" or "title assurance".