easy · Asset-Backed Securities abs-core
An originator transfers a pool of 50,000 subprime auto loans to a properly structured bankruptcy-remote SPE.
Why can that legal isolation support cheaper funding than the originator's unsecured debt?
- It guarantees that every borrower credit score improves as the loans season
- It permits the servicer to suspend borrower collections during any recession
- It requires every tranche issued by the SPE to receive an identical AAA rating
- It isolates transferred pool assets from the originator's general creditors
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