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Interest-Only Strip

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Interest-only strip (IO)
A security based solely on the interest payments from a pool of mortgages, Treasury bonds, or other bonds. Once the principal on the mortgages or bonds has been repaid, interest payments stop, and the value of the IO falls to zero.
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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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.
Release of minutes of discount rate meetings. (Announcements) by Federal Reserve Bulletin
Previously recognized servicing receivables that exceed contractually specified servicing fees should be reclassified as interest-only strips receivable.
Accounting for transfers and servicing of financial assets and ... by Thompson, James H. / The National Public Accountant
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.
MORTGAGE LENDER WILL SLIM DEBTS by Daily News (Los Angeles, CA)
 
 
 
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