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CFA Level I · CFA Level I Exam · Asset-Backed Security (ABS) Instrument and Market Features

In a securitization, the servicer is most likely responsible for:

The servicer collects payments from the borrowers in the underlying pool, deals with delinquencies and defaults, and passes the cash on to the SPE or trustee. Structuring tranches and assigning ratings are done by other parties, and legal title to the assets is held by the SPE.

  1. Acollecting payments from borrowers and passing them to the SPE or trusteeCorrect
  2. Bstructuring the tranches and setting their credit ratings
  3. Cholding legal title to the assets on behalf of the originator's creditors

Explanation

The servicer handles day-to-day administration of the pool: collecting payments, pursuing delinquencies and remitting cash. Tranche design is done by the sponsor or underwriter and ratings by rating agencies. Legal title sits with the SPE, not for the originator's creditors.

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