All principal repayments from the collateral are distributed as received to the security holders for amortising assets, but only after the lockout period for non-amoirtising assets, thanks
for amortizing securities, the collateral repayments are “usually” reinvested depending on the type of ABS (i.e. credit card A/R need to be replensihed refequently to keep the collateral pool a certain size)… oddly worded question if you ask me
I guess the trick is to know that the collateral structure for amortizing ABS does NOT change structure but non amortizing (credit card) does change (during the lockout period)…think of your credit card statement…it’s always changing
Northeastern Student Wrote: ------------------------------------------------------- > for non-amortizing securities, the collateral > repayments are “usually” reinvested depending on > the type of ABS (i.e. credit card A/R need to be > replensihed refequently to keep the collateral > pool a certain size)… > > oddly worded question if you ask me
So can principal payments be paid out to investors prior to the lockout period? That’s what it says in the answer but my notes say the contrary. Also is this statement correct: “Ammortising assets require period payments of principal and interest, while non-ammortising assets periodic payment consists solely of interest due”
mambovipi Wrote: ------------------------------------------------------- > All principal repayments from the collateral are > distributed as received to the security holders > for amortising assets, but only after the lockout > period for non-amoirtising assets, > > thanks If I am not mistaken the only place the statement is incorrect is about the “non-amortizing assets”. The principal payments can be made prior to lockout if certain conditions occur like insurer call,specific date is reached, collateral value falls below certain amount, latter of call or date etc (there was another related to spreads mentioned in the section related to credit card backed loans).
kh.asif Wrote: ------------------------------------------------------- > If I am not mistaken the only place the statement > is incorrect is about the “non-amortizing assets”. > The principal payments can be made prior to > lockout if certain conditions occur like > insurer call,specific date is reached, collateral > value falls below certain amount, latter of call > or date etc (there was another related to spreads > mentioned in the section related to credit card > backed loans). Bingo. Under special circumstances, the lockout period can end early and principal repayment beings. So it is incorrect to say it only happens after the lockout period.