Chapter 25 ASSET-BACKED SECURITIES MARKET. Asset-Backed Securities zCredit Card Receivables...
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Transcript of Chapter 25 ASSET-BACKED SECURITIES MARKET. Asset-Backed Securities zCredit Card Receivables...
Chapter 25
ASSET-BACKED SECURITIES MARKET
Asset-Backed Securities
Credit Card ReceivablesAutomobile LoansHome Equity LoansManufactured-Housing LoansStudent LoanSmall Business Administration LoansBond Obligations
Motivation
Asset-backed securities alternative means of raising funds lower funding cost collateralized security separation of pool of assets pledged as
collateral from issuer
Features of Asset-Backed Securities
Collateral amortizing asset nonamortizing
assetInterest rate
fixed rate floating rate
Structure pass-through pay-through
Credit enhancements external, incl.
corporate guarantee, letter of credit, bond insurance
internal, incl. reserve funds, senior/subordinate structures
Home Equity Loans
Collateral residential property
Types closed end open end
Interest rate fixed rate floating rate
Home equity loan-backed securities closed-end fixed-rate closed-end
adjustable-rate
Cash Flows net interest regularly scheduled
principal repayments prepayments
Manufactured Housing-Backed Securities
Collateral loans for
manufactured homes
mortgage loan consumer retail
installment loan
Issuers Ginnie Mae Private entities
Guarantors FHA VA
Maturity 15-20 years
Cash Flows net interest regularly scheduled
principal prepayments
Auto Loan-Backed Securities
Issuers financial
subsidiaries of auto manufacturers
commercial banks independent
finance companies
Maturity 3-6 years
Cash Flows regularly scheduled
monthly loan payments
prepayments
Structures pass-through pay-through
Student Loan-Backed Securities
Collateral Government
guarantee program Alternative loans
Cash Flow deferment period grace period loan repayment
period
Reference Rate
PrepaymentsIssuers
Student Loan Marketing Association (Sallie Mae)
Traditional corporate entities
Non-profit organizations
SBA Loan-Backed Securities
SBA Loans guaranteed by full
faith and credit of U.S. government
Variable rate loan Coupon Maturity
SBA Loan-Backed Securities coupon interest scheduled principal
repayment prepayments
Credit Card Receivable-Backed Securities
Collateral credit card receivables
Issuers banks retailers travel and
entertainment companies
Interest Rate Fixed Floating
Cash Flow collected finance
charges fees principal
Structure senior tranche subordinate/junior
debt tranches equity tranche
Collateralized Bond Obligation
Collateral non-investment grade corporate bonds emerging market bonds bank loans
Structure senior tranche receiving floating rate subordinate/junior debt tranche receiving
fixed coupon rate equity tranche
Evaluating Credit Risk of Asset-Backed Securities
Cash Flows Corporate bond Asset-Backed security
Role of ServicerRating Agencies