The Credit Events applicable to CDS Agreement Transactions for which the underlying Reference Obligations are either RMBS Securities or CMBS Securities are: Failure to Pay Principal, Writedown and Distressed Ratings Downgrade.
The increased levels of delinquencies and defaults, as well as a deterioration in general real estate market conditions may have adverse impacts on the performance of RMBS Securities owned by the Issuer, which, if sufficiently severe, could impact returns on the Notes and the Preference Shares.
In addition, structural and legal risks of RMBS Securities include the possibility that, in a bankruptcy or similar proceeding involving the originator or the servicer (often the same entity or Affiliates), the assets of the issuer could be treated as never having been truly sold by the originator to the issuer and could be substantively consolidated with those of the originator, or the transfer of such assets to the issuer could be voided as a fraudulent transfer.
It is expected that the RMBS Securities directly or synthetically owned by the Issuer will be subordinated to one or more other senior classes of securities of the same series for purposes of, among other things, offsetting losses and other shortfalls with respect to the related underlying mortgage loans.
In addition, the Issuer will have the ability to enter into CDS Agreement Transactions for which the underlying Reference Obligations are RMBS Securities, CMBS Securities, CDO Securities, REIT Debt Securities, other Asset-Backed Securities, an ABX Index or Tranched ABX Index and will be documented on appropriate forms that are approved by the Rating Agencies (each such form, a “Form-Approved Synthetic Security”).
More definitions of RMBS Securities
RMBS Securities or “RMBS” means Residential A Mortgage Securities, Residential B/C Mortgage Securities and Home Equity Loan Securities.