CUSIP: derives from the Committee on Uniform Security Identification Procedures it is a 9-character alphanumeric code which identifies a North American financial security for the purposes of facilitating clearing and settlement of trades.
Tranche: is one of a number of related securities offered as part of the same transaction.
Constant Default Rate (CDR): is expressed as an annualized percentage of mortgage loans that default in a pool of loans within a mortgage-backed security (MBS). A point to note is that when a mortgage loan goes into default, it takes several months for the servicer to actually foreclose on the property and liquidate the mortgage. For analytical purposes, it is generally assumed that the time to liquidation is 12 months for residential mortgages. During the recovery period for such loans, it is often assumed that the servicer will advance the scheduled principal and interest payments on the defaulted loans.
Constant Prepayment Rate (CPR): a percentage of the outstanding collateral principal that is expected to prepay in one year. A CPR represents an assumed constant rate of prepayment each month (expressed as an annual rate), rather than a variable rate of prepayment. Typically, CPR is expressed as a percentage. For example, a pool of mortgages with a CPR of 8% would indicate that for each period, 8% of the pool's remaining principal outstanding will be paid.
Loss Severity: is the percentage of lost principal when a loan is liquidated. For example if a loan had an outstanding of $100,000 and the property was in foreclosure and sold for $65,000 the calculated loss severity % for this loan would be 35%.
Breach: is a violation of a mortgage loan originators’ its contractual representations and warranties concerning the underlying mortgage compliance with underwriting guidelines, the absence of errors or fraud in the origination process, the loans’ compliance with federal, state, and local laws, the accuracy of loan-level data provided to rating agencies, and other loan-related characteristics.
Success: is defined as the completed repurchase of a mortgage by an originator/counterparty due to findings of fraudulent or faulty origination documents in which the creditworthiness of the mortgagor or appraised value of the property are misrepresented.
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