Dictionary of Banking Terms: segmentation
segmentation
- division of a pool of mortgages into groups with similar rate and prepayment characteristics, such as a Collateralized Mortgage Obligation, in securitizing bank loans, or converting bank assets into marketable securities for sale on the secondary market. This enhances the value of the securities to investors, as securities offered for sale offer the investor more options than conventional mortgage-backed pass-through certificates. These options include fast-pay or slow-pay mortgage-backed bonds and residual interests in the excess cash flow from mortgage bonds.
- in market research, process of dividing the population into groups of households for preparation of mailing lists and direct mail advertising. Market segmentation, known as Geodemographic Marketing in the direct mail industry, allows a financial institution to identify the best prospects for new products and services, based on income, life-style, and other characteristics.
