Early Amortization

Early Amortization

Early repayment of an asset-backed security, usually occurring when something goes wrong. Most commonly, if there are more than a certain number of defaults on the assets (such as mortgages) underlying the security, early amortization occurs. It is intended to reduce the risk to the investor and therefore to entice buyers.
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Additionally, structural features such as early amortization triggers mitigate risks of dealer defaults or manufacturer bankruptcies.
assessing a risk-based capital charge to reflect the risks in securitizations with early amortization provisions that are backed by revolving retail exposures.
Stable Performance Metrics: Monthly payment rates (MPRs) have been stable since 2010 and well above trigger levels, which dictate incremental increases in credit enhancement (CE) and early amortization upon breach.
Covenants in asset-securitization contracts that are linked to supervisory thresholds or adverse supervisory actions that are triggers for early amortization events or the transfer of servicing.
An interagency advisory issued May 23, 2002, on covenants in asset-securitization contracts that are linked to supervisory thresholds or adverse supervisory actions as triggers for early amortization events or the transfer of servicing.
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