Interest Only Strip

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Interest Only Strip

A derivative security whose cash flow derives exclusively from interest payments on various debt securities. That is, the underlying asset of an interest-only strip is interest paid on debt securities, rather than the debt securities themselves. Many interest only strips are backed by mortgage interest, but some are also backed by Treasury securities and other debt securities. Interest-only strips are derived from bonds whose coupons are legally separated, or "stripped", from the bonds themselves.
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4 million of Agency MBS Inverse Interest-Only strips, $2.
The guidance addresses the risk-based capital treatment for (1) split or partially rated instruments, (2) nonqualification of corporate bonds or other securities for the ratings-based approach, (3) spread accounts that function as credit-enhancing interest-only strips, (4) audits of internal credit risk rating systems, and (5) cleanup calls.
1 million payment due to an unnamed lender, which PacificAmerica says at this point is requiring only payments on the interest-only strips receivable securing the financing.
Some of these REITs also are investors in interest-only strips, which plummet in value in high prepayment situations.
Realized loss on Agency Interest-Only Strips -- accounted for as derivatives
The guidance addresses risk-based capital treatment pertaining to (1) split or partially rated instruments, (2) nonqualification of corporate bonds or other securities for the ratings-based approach, (3) spread accounts that function as credit-enhancing interest-only strips, (4) audits of internal credit-risk rating systems, and (5) cleanup calls.
Key to the plan is the transfer of more than $40 million in interest-only strips receivables from the thrift to the parent company, which is not regulated by FDIC.
Innovative financial instruments and transactions--such as interest rate swaps and caps, foreign currency options, interest-only strips, asset securitizations and many more--have become commonplace and are changing the role of traditional instruments such as loans, bonds and stocks.
On January 19, 2005, the company reported fourth quarter earnings and for the first time warned of potential trouble with its hedging strategy against interest rate changes through its use of a derivative portfolio of interest-only strips ("IO Strips").
New standards are added for the treatment of residual interests, including a concentration limit for credit-enhancing interest-only strips.
For the quarter ended December 31, 2014, average amortized cost of MBS, other securities and whole-loans held, including Agency and Non-Agency Interest-Only Strips accounted for as derivatives and linked transactions, was $4.
The final rule also imposes a "dollar-for-dollar" capital charge on residual interests and a concentration limit on credit-enhancing, interest-only strips, a subset of residual interests.