Collection period
Asset-Backed Securities glossary · Cash Flow Waterfalls & Triggers
Definition
The monthly period during which receivable collections are gathered before being applied to the transaction waterfall.
Collection period in plain English
Money from borrowers doesn't get passed to investors the instant it arrives — it's gathered up over a set stretch of time, usually one month, called the collection period. During that window all the payments coming in from the loan pool are simply collected into one bucket. Then, once the period ends, that bucket of cash gets poured into the payment waterfall and distributed to everyone in their proper order. It's like a class collecting everyone's field-trip money all week, then handing the full envelope to the teacher on Friday to divide up.
Related Asset-Backed Securities terms
Asset-Backed Securities practice questions · Asset-Backed Securities flashcards · Asset-Backed Securities study guide