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Overcollateralization
(redirected from Overcollateralizes)

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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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By pledging all loan repayments to debt service, the administration's program structure significantly overcollateralizes the SRF bonds.
By making loans to each borrower from bond proceeds (interest-bearing trust loans) and SRF federal capitalization moneys, including the SRF's required state matching funds (zero-interest fund loans), and pledging all loan repayments to debt service, NJEIT's master trust program structure significantly overcollateralizes the environmental infrastructure bonds.
By making loans to each borrower from bond proceeds (interest-bearing trust loans) and SRF federal capitalization moneys, including the SRF's required state matching funds (zero-interest fund loans), and pledging all loan repayments to debt service, NJEIT's master trust program structure significantly overcollateralizes the SRF bonds.
 
 
 
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