A true sale securitisation is a securitization in which the originator legally sells a pool of loans or receivables to a special purpose vehicle, which pays for them by issuing securities to investors. Ownership of the assets, and the cash they generate, passes to the vehicle. It is contrasted with a synthetic securitisation, where the assets stay with the originator and only their credit risk is transferred.
The point of the true sale is that the assets are beyond the reach of the originator's creditors: if the originator becomes insolvent, investors still receive the collections. Lawyers give a formal opinion that a court would treat the transfer as a sale and not as a secured loan. The structure gives the originator funding and, if enough risk is passed on, capital relief, though rules require it to keep part of the risk. The notes are divided by tranching.