A type of debenture in which the whole value of the debenture must be converted into equity by a specified time. The compulsory convertible debenture's ratio of conversion is decided by the issuer when the debenture is issued. Upon conversion, the investors become shareholders of the company. |||The main difference between convertible debentures and other convertible securities is that owners of the debentures must convert their debentures into equity, whereas in other types of convertible securities, the owner of the debenture has an option. Some CCDs, which are usually considered equity, are structured in a manner that makes them more like debt. Often, the investor has a put option which requires the issuing companies to buy back shares at a fixed price.
Used by the Federal Reserve Board to quote the yields on various treasury securities, adjusted to an equivalent maturity. |||By providing the constant maturity yields, the Fed allows investors to compare against securities with the same maturity date (such as corporate bonds). Constant maturity yields are often used by lenders to determine mortgage rates. For example, the 1 year constant maturity rate might be 4%, while the lender charges 5% to borrowers for a 1 year loan. The 1% difference is the lender's profit margin.
An annualized rate of default on a group of mortgages, typically within a collateralized product such as a mortgage-backed security (MBS). The constant default rate represents the percentage of outstanding principal balances in the pool that are in default, which typically equates to the home being past 60-day and 90-day notices and in the foreclosure process. The constant default rate analysis assumes that if a home is in foreclosure (a process that can take 12 months or more to complete), the interest and principal payments are being advanced into the MBS by the mortgage servicing company. |||The CDR method for evaluating losses is one of several methods used by analysts and company controllers to determine the current market value or asset value of a mortgage-backed security. The CDR method can account for both fixed-rate and adjustable-rate mortgages. Another method is the Standard Default Assumption (SDA) model created by the Bond Market Association, but this is more suited to standard 30-year fixed mortgages. In the mortgage crisis of 2007-2008, the SDA model proved to have vastly underestimated the true rate of default; foreclosure rates hit multi-decade highs during that period.
A bond that consolidates the issues of multiple properties. If the properties covered by the consolidated mortgage bond are already mortgaged, the bond acts as a new mortgage. If the properties do not have outstanding mortgages then the bond is considered the first lien. It can be used as a way to refinance the mortgages on the individual properties. The bond is backed by real estate or physical capital. |||Consolidated mortgage bonds are used by large companies with many properties, such as railroads, looking to refinance them into one bond to market to investors. It allows companies to set a single coupon rate instead of dealing with several, and makes investors happy because they can purchase a singular bond that covers physical assets of a similar type.
A solicitation by one party to the stakeholders of a particular security for the consent of a material change. |||Should the majority of stakeholders provide valid consent prior to the consent expiry date, the issuer may then follow through with the proposed amendments. This is commonly used to change various provisions within an indenture. Bondholders who have consented to the amendments may also receive a consent payment.
A formerly government-sponsored enterprise created by the Higher Education Amendments of 1986. The sole purpose of this organization was to insure and reinsure debt instruments that were issued by universities, colleges and other educational institutions to help fund building initiatives.This organization's acronym has the same naming scheme as other government organizations like Fannie Mae, Ginnie Mae and Freddie Mac. |||Although the Department of Education originally provided Connie Lee with some start up equity capital, this amount was eventually paid back when Connie Lee was privatized back in 1997. Connie Lee is now a considered a private, for-profit organization.
A mortgage that is equal to or less than the dollar amount established by the conforming loan limit set by Fannie Mae and Freddie Mac's Federal regulator, The Office of Federal Housing Enterprise Oversight (OFHEO) and meets the funding criteria of Freddie Mac and Fannie Mae. |||The term "conforming" is most often used when speaking specifically about a mortgage amount; however, the terms "conforming" and "conventional" are frequently used interchangeably. Mortgages that exceed the conforming loan limit are classified as non-conforming or jumbo mortgages.OFHEO, which sets the conforming loan limit on an annual basis, has regulatory oversight to ensure that Fannie Mae and Freddie Mac fulfill their charters and missions of promoting homeownership for lower income and middle class Americans. OFHEO uses the October to October percentage increase/decrease in average housing prices in the Monthly Interest Rate Survey of the Federal Housing Finance Board (FHFB) to adjust the conforming loan limits for the subsequent year.
A type of synthetic collateralized debt instrument that is backed by a debt security index, such as an iTraxx index. CPDOs were first created by ABN AMRO in 2006, which sought to create a high interest bearing instrument that also contained the highest debt ratings against default. |||Periodically, the debt security index in which the CPDO is backed, is rolled over by buying derivatives on the old index, and selling derivatives on a new index. By continually buying and selling derivatives on the underlying index, the administrator of the CPDO will be able to customize the amount of leverage it employs in an attempt to make additional returns off of the index price spreads at any given time. It is important to note, that many debt rating agencies have claimed that CPDOs' sensitivity to credit spread volatility should result lower credit ratings.
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