Beyond Auto Leasing: The Use of Titling Trusts in Structured Finance Transactions

Abstract

A primary feature of most structured finance transactions is the initial transfer of the assets being financed. The time, effort, and expenses of an asset transfer may be an impediment to the execution of a successful transaction. For decades, auto lease transactions have mitigated this impediment through the use of titling trusts, which allow for the transfer of the beneficial and economic ownership of an asset without the necessity of transferring legal title. Auto lease titling trusts have gained broad acceptance in the structured finance markets, including supporting securitizations receiving the highest structured finance credit ratings. Recently, structured finance transactions involving real estate have begun to adopt the use of the titling trust to achieve the same viability, scalability, and efficiency found in auto lease transactions.

Key Findings

• • The time, effort and expense associated with transferring real estate can be a barrier to including real estate in structured finance transactions.

• • Real estate titling trusts can streamline the transfer process required to include real estate in structured finance transactions.

• • Although there are some challenges associated with real estate titling trusts, they are gaining acceptance in the market and at some point soon will be as widely accepted as auto lease titling trusts in structured finance transactions.