Reading 58: Asset-Backed Sector of the Bond Market-LOS a 习题 2011, statements, following, regarding

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Session 15: Fixed Income: Structured Securities
Reading 58: Asset-Backed Sector of the Bond Market

LOS a: Illustrate the basic structural features of and parties to a securitization transaction.

 

 

Which of the following statements regarding the basic structure of an asset-backed security (ABS) is least accurate?

A) Corporate bonds and emerging market bonds can be collateralized to create an ABS.

B) The flow of funds from the underlying loan, through the servicer and issuer and finally to the investor, is called the waterfall.

C) The seller and the servicer of the ABS are always the same entity.

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The two separate functions of seller and servicer of an ABS can be performed by either two different entities or the same entity.

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Carco Motor Company is an automobile manufacturer that is in the process of creating asset-backed securities (ABS) by utilizing a pool of loans from cars the company had financed for its customers and selling them to a separate legal entity. The issuer of the ABS is also referred to as:

A) the seller/servicer.

B) a bankruptcy-remote entity.

C) a special purpose vehicle.

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A special purpose vehicle (SPV) is established for each securitization of loans. The loans are sold to the SPV, which in turn is the entity which issues the ABS.

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Within an asset-backed security structure, the entity which collects the principal and interest payments from the borrower and, when necessary, sends out delinquency notices is the:

A) issuer.

B) seller.

C) servicer.

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The servicer is responsible for processing the payments received on the underlying loan collateral, and remitting the resulting cash flows to the investors in the ABS.

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Which of the following types of assets are least likely to be securitized as asset-backed securities (ABS)?

A) Auto loans.

B) Home equity lines of credit.

C) Insurance policies.

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Insurance policies are not assets securitized in ABS structures. Home equity lines of credit and auto loans are often securitized.