What is the purpose of the step-down provisions in a securitization?
Answer to relevant QuestionsWhat is meant by the prospectus prepayment curve? Suppose that the loans in the collateral pool for a nonagency RMBS deal have a floating rate. What is the risk associated with issued fixed-rate bond classes? How can excess spread be a form of credit enhancement? Answer the below questions. a. With respect to the mitigation of balloon risk, what is meant by an internal tail? b. With respect to the mitigation of balloon risk, what is meant by an external tail? What types of prepayment protection provisions result in a prepayment premium being paid if a borrower prepays?
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