medium · Asset-Backed Securities
How does the 'Shifting Interest' mechanism in a Home Equity ABS structure typically impact the WAL of the Senior (Class A) bonds?
- It extends the Senior WAL by allowing subordinates to receive principal first.
- It extends the WAL because it only applies to scheduled principal.
- It shortens the Senior WAL by allocating 100% of prepayments to the Senior class for the first few years.
- It has no effect on WAL but increases the coupon rate.
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