A special purpose vehicle (SPV) with securitization payments in the form of different tranches. Financial institutions back this security with receivables from loans.Banks throughout the world are increasingly utilizing a new asset securitization structure known as a "collateralized loan obligation", or "CLO", to meet their financial objectives. CLOs enable banks to sell … [Read more...]
Collateralized Bond Obligation – CBO
Collateralized debt obligations (CDOs) are a type of structured asset-backed security (ABS) whose value and payments are derived from a portfolio of fixed-income underlying assets. CDOs securities are split into different risk classes, or tranches, whereby "senior" tranches are considered the safest securities. Interest and principal payments are made in order of seniority, so … [Read more...]
Weighted Average Rating Factor – WARF [Explained]
A measure that is used by credit rating companies to determine the credit quality of a portfolio. This measure allows rating companies to look at a portfolio as a single security, and assign it a single rating.WARFs are most often calculated by rating companies for collateralized debt obligations (CDOs). To calculate the WARF on a CDO the rating agencies must first calculate … [Read more...]
What is a synthetic CDO?
A synthetic CDO is a complex financial security used to speculate or manage the risk that an obligation will not be paid (i.e., credit risk). It is a derivative, meaning its value is derived from events related to a defined set of reference securities that may or may not be owned by the parties involved. A synthetic CDO is typically negotiated between two or more counterparties … [Read more...]
Understanding Mortgage Fraud
What is Mortgage Fraud? Mortgage fraud is a term used to describe a broad variety of criminal actions where the intent is to materially misrepresent or omit information on a mortgage loan application to obtain a loan or to obtain a larger loan than would have been obtained had the lender known the truth. In federal courts, mortgage fraud is prosecuted as wire fraud, bank … [Read more...]