Overcollateralization

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Overcollateralization

The practice or process of placing an asset as collateral on a loan where the value of the asset exceeds the value of the loan. For example, a person could pledge a farm (worth $10 million) on a loan for $5 million. Usually, however, the value of the asset only exceeds the value of the loan by 10-20%. Overcollateralization reduces the risk for the lender and improves the borrower's creditworthiness. It is used most commonly when a bond issuer wishes to improve its credit rating.
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The Notes are collateralized by the right to receive payments and other recoveries attributable to the non-guaranteed portions of SBA 7(a) Loans made by Newtek Small Business Finance, LLC ("NSBF") and overcollateralized by NSBF's participation interest in the non-guaranteed interests.
This difference, which is normally expressed as a percentage, is called the "margin" and measures the extent to which the implicit cash loan is overcollateralized.
because: (a) overcollateralized loans are unproblematically the norm in
She fought an uphill battle to convince her carrier that the car rental company's risk was overcollateralized.
In addition, other supporters of a covered bond market have pointed to the fact that legislation would require that the cover pool be overcollateralized.
However, the risks and potential costs can be made very small, by requiring covered bond pools to be overcollateralized, and by creating them using only uninsured, low loan-to-value ratio mortgages--making their credit ratings very high and the likelihood of their failing to repay very low.
As a result, most extant insurance securitizations have been heavily overcollateralized and also have required the purchase of third-party guarantees.
For advances, which are overcollateralized, capital requirements vary according to term: four years or less (7 basis points), four to seven years (20 basis points), seven to ten years (30 basis points), and over ten years (35 basis points).
Section 311 of the draft bill would allow a member bank to extend credit to the bank's executive officers (1) in the form of a home equity credit line of up to $100,000, so long as the credit line is secured by the officer's primary residence, and (2) in an unlimited amount, so long as the loan is overcollateralized by readily marketable assets.
Intermediate- and long-term loans by CCB to the provinces and municipalities are secured in turn by these revenue flows in a lock-box structure and are overcollateralized by many multiples.
The assets are overcollateralized and cross-collateralized.
The Fed's loans to banks and primary dealers through the various facilities are overcollateralized and made with recourse to the borrowing firm.