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)..
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,
Northeastern Student Wrote:
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> 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
mambovipi Wrote:
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> 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).
> 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.