medium · Asset-Backed Securities
A credit card master trust series has a 'Yield Supplement' or 'Discount Option' feature.
If this feature is activated, how does it typically affect the overcollateralization or excess spread calculation?
- It reclassifies a portion of principal collections as finance charge collections to boost portfolio yield and excess spread.
- It allows the servicer to stop paying losses out of the interest waterfall.
- It reduces the interest rate on the senior bonds to zero.
- It requires the trustee to sell the most delinquent loans back to the originator at par.
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