easy · Asset-Backed Securities asset-nuances
In the SBA 7(a) secondary market, a pool consists of the 'guaranteed portion' of small business loans.
Why does this pool carry essentially zero credit risk for the investor?
- The full faith and credit of the U.S. government guarantees timely principal and interest.
- The loans are collateralized at 100% by cash reserves held in a segregated account.
- Borrowers must have AAA-equivalent personal credit scores before origination.
- The originating banks are required to hold 50% risk retention on every loan sold to investors.
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