Treatment of Prepayments on the Loans Homework Help

Treatment of Prepayments on the Loans

Borrowers are permitted to prepay their loans in full or may be charged a prepayment for the same. Such prepayments in the receivables pool are passed on entirely to the two classes of PTC-holders. This has the accelerating the repayment of PTC-holders, thus, reducing the effective tenure of the PTCs. Historically, HDFC has experienced prepayment in its individual housing loans portfolio to extent of 7 per cent of outstanding principal annually. The prepayment on the securitised pool may, however, be higher or lower.

In the event of prepayment in a given month, the amount is passed on entirely to the Class A PTC-holders in proportion to their respective principal balances outstanding as of the that month. Further, any amount of prepayment penalty that is recovered from should also be passed on to, and shared by, them in the same proportion, In the event prepayments, the rating agency and the trustees reserve the right to change the contribution between Class and Class B PTC-holders, for protecting the Class A PTC-holders.

Finance-Assignments.com

  • Feel free to send us an inquiry, we reply back real quick. Or directly email us at order@finance-assignments.com
 

Verification

Posted by: andy

Share This