Auction call
Asset-Backed Securities glossary · Asset Backed Securities
Definition
A termination provision allowing the servicer to auction the remaining collateral and use proceeds to redeem bonds.
Auction call in plain English
Deals backed by loans get expensive to keep running once most of the loans are paid off and only a small stub remains. An "auction call" is an escape hatch: it lets the servicer sell off the leftover collateral to the highest bidder and use that cash to pay off the remaining bonds early and close the deal. It's like a store holding a final clearance sale to empty the shelves and shut down cleanly, rather than paying rent to sell the last few items one by one.
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