easy · Asset-Backed Securities regulatory
A sponsor chooses to satisfy the U.S. credit-risk-retention requirement solely with an eligible horizontal residual interest.
Which choice correctly describes both the position and its minimum regulatory sizing?
- The sponsor keeps loans with face amount equal to 5% of pool face value outside the issuing entity.
- The sponsor retains 5% of the face amount of every issued ABS class, from senior through subordinate.
- The sponsor retains a first-loss interest with fair value at least 5% of all issued ABS interests' fair value.
- A third-party bank supplies a letter of credit with face amount equal to 5% of the transaction's face amount.
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