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In finance, a security interest is a legal right granted by a debtor to a creditor over the debtor's property (usually referred to as the collateral [1]) which enables the creditor to have recourse to the property if the debtor defaults in making payment or otherwise performing the secured obligations. [2]
Collateral is legally watertight, valuable liquid property [4] that is pledged by the recipient as security on the value of the loan. The main reason of taking collateral is credit risk reduction, especially during the time of the debt defaults , the currency crisis and the failure of major hedge funds .
Marketable collateral is the exchange of financial assets, such as stocks and bonds, for a loan between a financial institution and borrower.To be deemed marketable, assets must be capable of being sold under normal market conditions with reasonable promptness at current fair market value.
The security agreement must be authenticated by the debtor, meaning that it must either bear the debtor's signature, or it must be electronically marked. It must contain a reasonable description of the collateral, and must use words showing an intent to create a security interest (the right to seek repayment of the loan by foreclosing on the ...
The underwriter typically will hire an accounting firm to perform due diligence on the CDO's portfolio of debt securities. This entails verifying certain attributes, such as credit rating and coupon/spread, of each collateral security. Source documents or public sources will typically be used to tie-out the collateral pool information.
A secured transaction includes several forms of collateral. The definition of collateral in the U.C.C. is: the property subject to a security interest or agricultural lien. The term includes: (A) proceeds to which a security interest attaches; (B) accounts, chattel paper, payment intangibles, and promissory notes that have been sold; and
In finance, securities lending or stock lending refers to the lending of securities by one party to another.. The terms of the loan will be governed by a "Securities Lending Agreement", [1] which requires that the borrower provides the lender with collateral, in the form of cash or non-cash securities, of value equal to or greater than the loaned securities plus an agreed-upon margin.
A mortgage loan is a secured loan in which the collateral is property, such as a home.; A nonrecourse loan is a secured loan where the collateral is the only security or claim the creditor has against the borrower, and the creditor has no further recourse against the borrower for any deficiency remaining after foreclosure against the property.