While various arrangements are used, typically, principal and interest cash flows are paid directly to investors. In this way, the investors incur the prepayment risk of the underlying assets.
Most deals entail some sort of credit enhancement .
This may include over-collateralisation, a third party guarantee, or other enhancements. For this reason, the securities tend to have excellent credit ratings. They subtract a fee for doing so. For loan originators securitization is a means of removing risky assets from their balance sheet, freeing up capital to support further loan writing. For investors, the securities offer yields that exceed those on comparable corporate bonds.