easy · Asset-Backed Securities

Why is 'Bankruptcy Remoteness' a core requirement for an ABS Special Purpose Entity (SPE)?

1. To allow the originator to reclaim the pool's assets if its own credit rating later improves.
2. To guarantee that none of the underlying pool's borrowers will ever default on their loans.
3. To prevent the SPE from ever having to pay bondholders any interest at all during a severe market downturn.
4. To ensure that the insolvency of the originator does not allow creditors to seize the pool's assets.

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