when banks and brokers use hypothecated collateral as collateral to back their own transactions and trades with their client s agreement in order to secure a lower cost of borrowing or a rebate on fees this is called rehypothecation for example the lender may use an apartment building offered as collateral for a commercial real estate loan as collateral for a new loan this newly created debt is now a derivative 
rehypothecation is regulated by the securities and exchange commission banks and lenders must have permission from the owner of the property or assets to do this rehypothecation by banks and financial institutions is a less common practice today due to the adverse impact this practice had during the financial crisis of 2008 