medium · Asset-Backed Securities waterfalls
A 'Rapid Amortization' event is triggered in a Credit Card Master Trust series due to a negative three-month rolling average excess spread.
Which of the following is an immediate consequence for the sponsor?
- All principal collections are diverted to pay bondholders instead of buying new receivables.
- Rapid amortization aids bondholders; paydown accelerates as pool quality worsens.
- The trust cannot alter cardholder APRs; account pricing is the card issuer's own decision.
- Liquidation is a last resort; rapid amortization lets the trust wind down using high payment rates.
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