What are Asset Backed Securities (ABS)?
Similar to the way mortgage backed securities are structured, asset backed securities are also collateralized by assets and have been structured as pass through securities which can have multiple classes, or tranches. The key difference is probably obvious; MBS are backed by mortgages while ABS are backed by other forms of collateral, such as credit card receivables, manufactured homes, auto loans, or HELOC’s (home equity line of credit).
