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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The orders arise out of the previously disclosed restatement of Doral Financial's financial statements to correct the accounting for certain mortgage loan sale transactions and the valuation of the Company's interest only strips.
Then on April 19, 2005, the Company announced that it had determined that "it is appropriate to correct the methodology used to calculate the fair value of its portfolio of floating rate interest only strips ("IOs").
We currently estimate that the change in our valuation model will result in a reduction in the recorded fair value of our floating rate interest only strips (IOs) of approximately $600 million.
Specifically, defendants orchestrated a massive accounting fraud through which they improperly valued Doral's Interest Only Strips ("IOs") and mislead investors as to the Company's vulnerability to interest rate increases.
Then on April 19, 2005, the Company announced that "after consulting with various financial institutions and other firms with experience in valuation issues, the Company has determined that it is appropriate to correct the methodology used to calculate the fair value of its portfolio of floating rate interest only strips ("IOs").
The Complaint alleges that Defendants orchestrated a massive accounting fraud through which they improperly valued the Company's Interest Only Strips ("IOs") and misled investors as to the Company's vulnerability to interest rate increases.
Salomon Levis, Chairman of the Board and Chief Executive Officer of Doral Financial Corporation (NYSE:DRL), today announced that after consulting with various financial institutions and other firms with experience in valuation issues, the Company has determined that it is appropriate to correct the methodology used to calculate the fair value of its portfolio of floating rate interest only strips ("IOs").
The rating action is in response to Doral's announcement that they have changed the methodology used to value its portfolio of floating rate interest only strips (IOs).
Also, the 2002 non-interest expenses include a $1,788,000 writedown for impairment of SBA interest only strips and servicing assets and a $1,381,000 lower of cost or market provision on loans held for sale.
The primary improvement reasons are basically the same as those detailed above for the quarterly comparison, and the 2002 non-interest expenses also include a $1,788,000 writedown for impairment of SBA interest only strips and servicing assets and a $1,340,000 lower of cost or market provision on loans held for sale.
These upward adjustments in earnings are solely the result of increases in the carrying value of its Interest Only Strips ("I/O Strips") generated in the December 1997 and March 1998 quarters.
The increase in revenue compared with the December 1997 quarter is the result of increases in all lending and servicing related revenue streams, including increases in interest income earned on loans held-for- sale and interest only strips ("I/O Strips"), along with a significant increase in origination income.