Companies that sell bonds backed by consumer loans are structuring the securities in more diverse ways, creating bonds with a range of risks and returns from a single pool of underlying assets.

These companies pool together consumer debt -- from home-equity loans, credit cards, auto loans and other sources -- and use the cash flow from the pool to pay interest on the bonds. Among other strategies, the issuers are using guarantees from bond insurance companies, selling more lower-rated bonds and keeping some of the assets in their own accounts.

In some cases, issuers of asset-backed securities are creating higher-risk bonds that act as cushions to absorb loan losses and protect higher-rated bonds backed by the same pool of consumer debt. Investors are flocking to this market, taking an interest in the lower-rated securities, or so-called subordinated classes, because they offer higher investment returns.

"The market has matured,'' said Anand Bhattacharya, head of fixed-income debt at Prudential Securities Inc. "Issuers that are well capitalised and who share information with investors are able to issue subordinated structures.'' Bhattacharya made his comments at a conference on asset-backed securities that began in Bermuda on Sunday. He noted that investors are hungry for information about the risks of the loans backing these higher-risk bonds.

"The question is, what is the likelihood that you'll see a high degree of default, and what is the severity, or how long will it take to recover from them?'' Bhattacharya told Bloomberg News.

While credit rating companies have done a good job explaining the risk related to corporate bonds, they haven't developed as clear a picture of the asset-backed market, he said. There's a lack of information on some of the newer type of loans.

"You're beginning to see increased (variety) in credit and maturity within asset-backed structures,'' he said.

Further, consumers behave differently in paying various types of loans. For instance, some consumers may refinance home-equity loans if interest rates drop. On the other hand, they seldom refinance car loans.