Asset backed sector: HELs

CFA Level II Fixed Income
#1

Hi all,

Could someone please explain the flowing:

  1. “Typically HELs are securitised by both closed end fixed rates and adjustable rate HELs”

  2. " unlike a typical floater which has a fixed cap, the available fund cap for a floating HEL depends on the amount of funds generated by the net coupon less any fees.

it would be good to start with an explain too. Of what the funds cap is actually trying to achieve within the structure.

thanks

#2

Anyone…?

S2000magician…?

#3

  1. Underlying collateral is both fixed interest rate bearing loans as well as floating interest rate loans. The variable rate loans do however have a cap (maximum interest rate) at loan level.

  2. Presumably the cap on the ABS which has variable rate loans as underlying collateral is lower due to fund fees??