The process of reducing credit risk by requiring collateral, insurance, or other...
Financial guarantees or other types of assistance that improve the credit of underlying debt obligations. Credit enhancement has the effect of lowering interest costs and improving the marketability of bond issues.
It seems as though more and more lenders today require additional collateral, especially for new construction. A standby letter of credit, certificate of deposit, or bank guarantee is the most common. Careful, there has been a considerable degree of fraud involved with this type of financing.
The use of the credit of an entity other than the issuer or obligor to provide additional security in a bond or note financing. This term typically is used in the context of bond insurance, bank letters of credit and other facilities, state school guarantees and credit programs of federal or state governments or federal agencies, but also may refer more broadly to the use of any form of guaranty, secondary source of payment or similar additional credit-improving instruments. See: BOND INSURANCE; CREDIT FACILITY; LETTER OF CREDIT; SECONDARY INSURANCE; SURETY BOND.
May be through a pledge to take the top loss or a payment guarantee on loans of a certain type and underwriting standard.
The inclusion of the credit strength of an insurance company, bank letter of credit or governmental guaranty in order to further enhance or strengthen the credit profile of an issuer.
A credit support purchased by the issuer to raise the credit rating on a debt issue. The most common credit enhancements consist of municipal bond insurance policies, direct or standby letters of credit, Lines of credit and guaranteed investment contracts (GICs).
The availability of additional outside support designed to improve an issuer's own credit standing. Examples include bank lines of credit or collateralized funds. Under Fannie Mae's bond credit enhancement activities, the timely payment of principal and interest on outstanding bonds backed by multifamily mortgages.
A method to reduce credit risk by requiring collateral, letters of credit, mortgage insurance, corporate guarantees, or other agreements to provide an entity with some assurance that it will be recompensed to some degree in the event of a financial loss.
used when obtaining a bond issuance to finance affordable housing; security for repayment; typically provided by federal, state, or private mortgage insurance, bond insurance, bank letters of credit, or insurance company guarantees.
substituting the creditworthiness of the guarantor for the borrower's creditworthiness by use of an indemnity bond or letter of credit for a debt issue
Any methodology that reduces the credit exposure of a transaction (e.g., bond insurance, a letter of credit or credit default swap).
A vehicle to improve the hospital’s underlying credit risk to the bondholder, such as Bond Insurance or an irrevocable letter of credit from a bank.
Purchase of the financial guarantee of a large insurance company to raise funds.
A technique to lower the interest payments on a bond by raising the issue's credit rating, often through insurance in the form of a financial guarantee or with standby letters of credit issued by a bank.
Provisions provided by issuers to reduce default risk in CMBS. e.g., reserve accounts, cross-collateralization, cross-default, advance payment agreements, loan replacement, etc.
The credit support needed in addition to the mortgage collateral to achieve a desired credit rating on mortgage-backed securities. The forms of credit enhancement most often employed are subordination, over-collateralization, reserve funds, corporate guarantees and letters of credit.
One or more initiatives taken by the originator in a securitisation structure to enhance the security, credit or the rating of the securitised instrument. Credit enhancement can be internal (subordination, overcollateralisation, yield spread, excess spread, reserve fund), or external (surety bonds, third party guarantee, letter of credit, cash collateral account, collateral invested account).
A process to reduce credit risk, and provide the lender with reassurance that they will be compensated if the borrower defaults, by requiring collateral, insurance, or other agreements.
Confirmed Letter of Credit Confirming Bank
Credit enhancement is a key part of a Asset-backed security Securitization transaction, and important for the Credit rating agency when rating a securitization.