The collateral in a securitization can be classified as either amortizing or nonamortizing assets.

Question

Quizplus · Accepted Answer

This statement is true. Amortizing assets are those that generate regular cash flows (such as mortgage payments) that gradually pay down the principal amount, while nonamortizing assets do not have regular cash flows but may generate a one-time lump sum payment (such as a lottery win or legal settlement). The classification of collateral as amortizing or nonamortizing can affect the structure and pricing of a securitization.

The Collateral in a Securitization Can Be Classified as Either