Examples of Subordinated Certificates in a sentence
In the case of a Series of Certificates having one or more Classes of Subordinated Certificates, the related Prospectus Supplement may provide that all or a portion of amounts otherwise allocable to such Subordinated Certificates may be paid to the holders of the Senior Certificates to make up any Investor Default Amount allocable to such holders of Senior Certificates.
For unmodified Mortgage Loans, a shortfall in interest paid by the borrower is treated as a Realized Loss reducing the principal balance of junior certificates, starting with the Subordinated Certificates and only after that followed by the Senior Certificates.
This outcome is particularly nonsensical when contrasted with the PSAs’ treatment of interest shortfalls on unmodified Mortgage Loans, which both parties agree are allocated first to the Subordinated Certificates, and only then to Senior Certificates.
By reducing the Notional Amount, however, a Realized Loss does not reduce the Pass- Through Rate or require the IO senior certificates to bear the consequences of interest shortfalls ahead of the Subordinated Certificates or other Senior Certificates.
The Trustee’s approach is irreconcilable with this intended structure, and furthermore would conflict with the rating agencies having issued AAA-ratings for the IO senior certificates while issuing lower ratings for the Subordinated Certificates (reflecting their intended lower creditworthiness).