medium · Asset-Backed Securities waterfalls
How does the 'Step-down' date in a Home Equity ABS affect the credit support of the senior tranche in a successful performance scenario?
- It forces a mandatory redemption of the entire senior tranche at par once the collateral pool balance fully amortizes downward.
- It allows the subordinate classes to receive principal, which prevents the senior tranche's relative credit support from growing indefinitely.
- It triggers an immediate release of all remaining cash held in the reserve account, sending it back directly to the deal's originator sponsor.
- It reduces the senior bond's stated coupon rate so that it precisely tracks the ongoing decline in the pool's weighted average coupon, or WAC, over time.
Sign up free to see the explanation and track your rank →
More Asset-Backed Securities waterfalls practice
- Under the stated deal mechanics, how does the ARA affect monthly interest distributions?
- Which consequence follows from that provision?
- Before liquidation, what is the direct cash-flow effect?
- Does the series enter early amortization?
- If the original pool was $1,200 million and the current balance is $115 million, can the s
- If the pool generates $6.46 million in interest and all bond tranches require $4.258 milli
- If the original balance was $1,250,000,000 and the current balance is $145,000,000, how mu
- If prepayments for the month are $6M, and Class M has a $50M balance while Class B has a