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FRM Part II · FRM Exam Part II · An Introduction to Securitisation

In a typical securitisation, the entity that collects borrower payments, manages delinquencies and passes cash to the SPV or trustee is the:

The servicer is the participant that collects borrower payments, handles delinquent accounts and remits the cash flows to the SPV or trustee. The arranger structures the deal, rating agencies rate the notes, and credit enhancers provide support, so none of them perform routine collections.

  1. AArranger
  2. BServicerCorrect
  3. CRating agency
  4. DCredit enhancer

Explanation

The servicer handles day-to-day administration of the pool: collecting payments, pursuing arrears and remitting cash. The arranger structures and places the deal, rating agencies assess the notes, and credit enhancers provide support such as guarantees. Only the servicer performs collection duties.

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