Explain briefly the role of a Special Purpose Vehicle (SPV) in securitization?

SPV is created for the purpose of executing the deal. Since issuer originator transfers all rights in assets to SPV, it holds the legal title of these assets. It is created especially for the purpose of securitization only and normally could be in form of a company, a firm, a society or a trust. The main objective of creating SPV is to remove and ring fence the asset from the Balance Sheet of Originator. Since, SPV makes an upfront payment to the originator, it holds the key position in the overall process of securitization. Further, it also issues the securities [called Asset Based Securities (ABS) or Mortgage Based Securities (MBS)] to the investors.