easy · Asset-Backed Securities
Which of the following describes the 'ratcheting' effect of sequential pay in a stressed deal?
- The servicer is required to increase their collection efforts every month
- The interest rate on the bonds increases as the pool amortizes
- More subordinate classes are added to the deal as it seasons
- Triggers prevent a step-down to pro-rata, locking the deal into sequential mode to maximize senior safety
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