CC ABS Flashcards
When did Asset backed securities rapidly start growing?
These securities started to grow rapidly in the late 1980s
When was the issuance of ABS especially high?
2000 - 2007
How high?
Between 2002 and 2007, annual issuance was consistently high, in the range
of $230 billion to $275 billion
How is the underlying collateral of a credit card ABS constructed?
The underlying collateral of a credit card ABS consists of account receivables
that are generated as a result of consumption expenditures of many
thousands of consumers.
What happens if each time the consumer buys sth?
It can be viewed
that each time a consumer charges a purchase on a credit card, the issuer of
the credit card in effect grants the consumer a short-term unsecured loan.
What are the receivables to the credit card issuer?
any charged amount (receivable principal or finance charge) is its receivable
What are the key differences between those and CMBS and RMBS?
(1) the receivable is created for the purpose of purchasing
goods and services, not a house or a commercial property; (2) the amount
of the receivable is significantly smaller than that of a residential or commercial
mortgage; (3) the receivable is a short-term, revolving loan and is
not to be repaid through amortization; and (4) the credit of the receivable is
not backed by collateral. When the receivable is in default, there is very little
recovery (the industry experience has been that the recovery eventually
amounts to about 10 percent to 20 percent of the defaulted receivable principal
balance).
What are the three types of credit card ABS?
bank card, private label card, and charge card
What is a bank card?
As its name implies,
a bank card is issued by a commercial bank with the cash-flow receivables
generated from consumer purchases of goods and services using a
revolving co-branded credit card, such as MasterCard and Visa
What is a private label card?
A private
label card is issued by a retailer, such as Sears or Macy’s, with the receivables
generated by a consumer’s charges on only the goods and services provided
by the retailer.
What is a charge card?
A charge card can be issued by a bank or a financial firm, such as Discover and American Express, to facilitate consumer spending
on purchases, travel, entertainment, or business purposes. Typically,
charge cards are due in full each month.
What is a recourse mortgage loan?
the bank takes charge of the property and go after other assets of the people who borrowed. in a non-recourse in only gets the house.
What is the investor interest?
The investor interest is the
amount of investment of the investors (certificate holders) in a transaction
What is the sellers interest?
The seller interest is the amount of receivable balance in which the issuer
participates in the transaction.
