medium · Asset-Backed Securities
An Auto ABS waterfall has two priorities for principal: 'First-Priority' and 'Second-Priority'.
What is the typical purpose of 'First-Priority' principal in a senior-sub structure?
- To fund the residual holder's monthly dividend before any bond principal is paid.
- To pay principal to the senior tranches to the extent that the bond balance exceeds the pool balance (i.e., protecting against an under-collateralized state).
- To pay the servicer for any unreimbursed advances made in prior periods.
- To pay principal to the most junior tranche to ensure it remains outstanding for the duration of the deal.
Sign up free to see the explanation and track your rank →
More Asset-Backed Securities practice
- Which vehicle was specifically created by the Tax Reform Act of 1986 for this asset class?
- What is the most likely tax structure?
- Given the real estate collateral, which tax vehicle is standard for this multi-class trans
- An originator transfers auto loans to a bankruptcy-remote in… — What is the economic purpo
- Under ASC 860, which condition must be met for a transfer of receivables from an originato
- Why does it covenant NOT to incur additional debt?
- A CLO manager is actively buying and selling senior secured… — Which phase of the transact
- An analyst observes that a Non-agency Senior RMBS bond with… — How should the credit decom