Glossary

The following list provides a brief description of the common terms used in connection with the Corporate System Resolution Costs.

30 Days Delinquent
The percentage of loans underlying a security that are 30 to 59 days behind on their scheduled payments.

60 Days Delinquent
The percentage of loans underlying a security that are 60 to 89 days behind on their scheduled payments.

90 Days Delinquent
The percentage of loans underlying a security that are 90 to 180 days behind on their scheduled payments.

Agency Mortgage-backed Security (MBS)
A type of mortgage-backed security backed by government guaranteed mortgage loans.

Alt-A Loans
Loans extended to borrowers who have a high credit quality but whose characteristics fall outside the margins of conforming loan guidelines, such as higher loan-to-value (LTV) ratios or inadequate documentation.

Asset-backed Security (ABS)
A security whose value and payments are derived from and collateralized (or backed) by the expected cash flows of pools of income-generating assets.  The asset pools may include credit card payments and auto loans, or esoteric cash flows such as aircraft leases, royalty payments and movie revenues.

Asset Management Estate (AME)
Estate that holds the assets of a failed institution. Commonly administered by the NCUA's Asset Management and Assistance Center, to which the NCUA Board has delegated statutory authorities providing broad supervisory and management powers over the credit union's assets and operations. These powers include the ability to facilitate funding and disposition of assets. Also known as a liquidation estate.

Collateral
Properties or assets that are offered to secure a loan and become subject to seizure upon default.

Commercial Mortgage-backed Securities (CMBS)
A type of mortgage-backed security backed by commercial mortgage loans.

Coupon Rate
The scheduled interest earned on a security, expressed as a percentage of the outstanding balance.

Credit Enhancement
A form of guarantee, insurance, or other characteristic (e.g. overcollateralization) of a security that improves its credit quality.

Conforming Loans
Mortgage loans that satisfy agency (i.e. Fannie Mae, Freddie Mac, and Ginnie Mae) underwriting criteria, in terms of maximum loan balance, loan-to-value (LTV) ratio, debt-to-income requirements, etc.

Cumulative Loss
Total realized losses as of a measurement date. This does not include implied writedowns, which are not recognized as losses.

Default
Default occurs when a debtor is unable to meet the legal obligation of debt repayment, one form of which is the failure to promptly pay interest or principal when due.

Default Rate
The annualized rate at which the loans underlying a security have defaulted. Also known as the conditional default rate, or CDR.

Excess Spread
The extent to which the weighted average coupon on the assets underlying an asset-backed security exceeds the coupon rate of that security plus any relevant fees (i.e. servicing, administration, trustee, etc...). Since multiple securities can be issued from the same trust, this measure is security specific.

Foreclosure
The legal proceedings initiated by a creditor to repossess the collateral for a loan that is in default, usually with the intent to liquidate the seized assets in an auction.

Home Price Appreciation
The rate by which house prices increase (or decrease) for a specified area, usually quoted on an annual basis.

Implied Writedown
Calculated based on the under-collateralization of a security, or any shortfall between a security's collateral pool balance and the aggregate unpaid balance of all pari passu obligations and senior securities backed by the same collateral pool.

Investment Grade
A security with a rating of BBB- or above.

Legacy Assets
The legacy assets are a portfolio of debt securities held by the asset management estates (AMEs) of failed corporate credit unions.  Legacy assets include those assets that were securitized through the NCUA Guaranteed Note (NGN) Program in late 2010 and early 2011, assets that were retained by the AMEs, and assets that were sold outright in late 2010 and early 2011.

Legacy Assets primarily consists of:

  • Private label, residential mortgage-backed securities (Non-agency RMBS);
  • Agency mortgage-backed securities (Agency MBS);
  • Commercial mortgage-backed securities (CMBS);
  • Student loan asset-backed securities;
  • Other asset-backed securities (ABS); and
  • Corporate bonds.