medium · Asset-Backed Securities collateral
In the context of the 'Shifting Interest' structure used in some Home Equity ABS, what is the impact of the senior lockout period on the WAL of the subordinate tranches?
- It shortens the subordinate WAL by directing early principal cash to the subordinate class.
- It extends the subordinate WAL because they are prevented from receiving principal for a set period.
- It has no impact on WAL because interest is still paid monthly regardless of any lockout terms.
- It makes the subordinate WAL exactly equal to the senior class WAL for the entire life of the transaction.
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