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.
References in periodicals archive ?
By pledging all loan repayments to debt service, the program's structure significantly overcollateralizes the SRF bonds.
By making loans to each borrower from bond proceeds and SRF federal capitalization moneys, including the SRF's required state matching funds, and pledging all loan repayments to debt service, the authority's program structure overcollateralizes the SRF bonds.
By making loans to each borrower from bond proceeds, recycled dollars and SRF federal capitalization moneys, including the SRF's required state matching funds, and pledging all loan repayments to debt service, the authority's program structure overcollateralizes the SRF bonds.
CREDIT PROFILE: 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 for clean water state revolving fund (CWSRF) projects to pool participants from bond proceeds, SRF federal capitalization moneys and recycled funds, and pledging loan repayments and interest earnings to debt service, TWDB's program structure significantly overcollateralizes the SRF bonds.
By pledging all loan repayments to debt service, the administration's program structure significantly overcollateralizes the SRF bonds.
The class is backed by high investment grade collateral, which materially overcollateralizes these notes.
By making loans to each pool borrower from bond proceeds and SRF federal capitalization moneys, and pledging all loan repayments and interest earnings to debt service, WIFA's program structure significantly overcollateralizes the SRF bonds.