Lockbox
Asset-Backed Securities glossary · Asset Backed Securities
Definition
A bank account for collections that is owned by or controlled for the benefit of the trust, providing operational separation from the seller.
Lockbox in plain English
When you make a loan payment, that cash has to land somewhere, and you don't want it landing in the loan company's regular checking account where it could get mixed up with their own money or grabbed by their creditors if the company goes bust. A lockbox is a dedicated bank account, controlled for the investors' benefit, that catches those payments the moment they come in, keeping the money walled off and safe from the company that services the loans. Think of a tip jar that's actually locked and emptied straight into the workers' account, so the owner can never dip into it, even if the restaurant itself goes under.
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