medium · Asset-Backed Securities waterfalls
A credit card ABS series has an early amortization trigger set at a three-month rolling average excess spread of 0%.
If the monthly excess spread for the last three months was +5.8%, -4.2%, and -2.2%, what occurs in the following month?
- The servicing fee is waived to restore the three-month average to positive.
- The series enters rapid amortization.
- The series continues in its revolving period as the current month was negative.
- The seller is required to add more receivables to the pool to cure the spread.
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