Sequential pay
Asset-Backed Securities glossary · Cash Flow Waterfalls & Triggers
Definition
Principal allocation in which tranches amortize in a specified order (first tranche until fully retired, then second, etc.).
Sequential pay in plain English
'Amortize' just means getting paid back gradually as borrowers make their payments. In a sequential-pay deal, the principal coming in (the money borrowers repay) goes out in a strict order: the first tranche gets ALL of it until it's completely retired, then the second tranche starts getting paid, and so on. It's like friends who lent you money agreeing you'll fully repay the first person before the second sees a dollar. This makes the earliest tranches short and predictable, which certain investors prefer.
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