In auto loan aBS, the form of credit enhancement that most likely serves as the first line of loss protection is the:
A) excess spread account.
B) sequential pay structure.
C) proceeds from repossession sales.

Question

Quizplus · Accepted Answer

Excess spread, which is the difference between the interest received from the loan assets and the interest paid to the ABS investors, often serves as the first line of loss protection in auto loan ABS. This is because it can absorb initial losses before any other credit enhancement mechanisms are tapped.

In Auto Loan ABS, the Form of Credit Enhancement That