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Who are the key parties to a securitization?

The securitization process involves numerous parties in specialized roles for the creation and issuance of asset-backed securities.  Besides the ABS buyers – investors, for securit...


When is a leased asset impaired? How is lease impairment recognized?

An impairment is a permanent reduction in the carrying value of an asset below its fair value (US GAAP) or recoverable amount (IFRS), which occurs when it is deemed improbable that...


What ratios are used in lease underwriting?

Lease underwriting credit analysis includes financial ratios to assess the transaction collateral credit quality.  Whereas equipment lease credit criteria are commonly limited to l...


What leases qualify as leveraged leases under US GAAP?

Leveraged leases have a separate accounting classification under US GAAP; IFRS does not have the concept of leveraged leases.  Under US GAAP, a leveraged lease qualifies as an oper...


What leases are structured as nontax leases?

Operating leases for accounting purposes can be structured as nontax leases to allow the lessee to take advantage of the tax benefits of asset ownership while having off-balance sh...


What leases are structure as true leases?

Leases in the upper middle-ticket segment and big-ticket leases are also generally structure as true leases.  The ability of lessors to claim the tax benefits of ownership is a key...


What kind of equipment is leased?

The BEA lists the following types of equipment in its publication “Relation of Private Fixed Investment in Equipment in the Fixed Assets Accounts to the Corresponding Items in the...


What is vendor leasing?

Vendor leasing is equipment lease financing offered by vendors through bank, captive and independent lessors to the end-user of assets in conjunction with the sale of their product...


What is the true sale of a lease?

A true sale is the outright, irrevocable nonrecourse sale of assets to a third party, whereby the assets and all their rights are irrevocably (absolutely) transferred from the sell...


What is the ticket size of retail equipment leasing?

Micro-ticket equipment is a classification used by the ELFA of equipment costing up to $25,000, involving the leasing of such high-volume relatively low-price assets as office equi...


What is the residual value of a lease? What is the salvage value of a lease?

The commercial value of a leased asset under a finance lease at lease termination as set at lease inception equal to the estimated net proceeds from the asset’s sale, its remarketi...


What is the present value of a lease?

US GAAP and IFRS accounting for leases and lease pricing are based on the fair value of the leased assets and the expected cash flows.  The current value of one or a series of disc...


What is the lease rate?

The lease rate is the periodic payment made by the lessee to the lessor for the use of an asset in a lease transaction expressed either as the annual percentage rate (APR) or a lea...


What is the expected loss on leases?

Expected loss (EL) is the amount of a credit exposure that a creditor (lender, lessor) can expect to lose in the event of default on a credit exposure equal to the exposure less th...


What is the effective interest-rate method to amortize leases?

A technique for calculating and amortizing the cost of a financial instrument by allocating the interest revenue or expense at a constant periodic rate over its life is the effecti...


What is retail leasing?

Retail leasing encompasses micro- and small-ticket leasing.  Micro-ticket leasing involves the leasing of high-volume relatively low-price assets, such as office equipment, shop ma...


What is residual value risk?

When a finance lease is terminated and the residual value is unguaranteed, the lessor will repossess the asset and may be unable to re-lease or sell it at its residual value.  Resi...


What is residential real estate? What is commercial real estate?

The two major types of real estate are residential and commercial.  There is no industry standard for classifying property and sub-property types.  The two leading organizations in...


What is repossession?

The act of taking possession of property by the owner of the asset or a creditor with a security interest in that asset upon termination of or debtor default on the agreement that...


What is recourse and nonrecourse lease assignment?

The right of an assignee or buyer in a financial transaction to demand performance from the transaction assignor or seller in the event of default on the underlying debt is recours...


What is real property security?

Real property is permanent, nonmovable property, such as buildings, land and permanent improvements to land, including the interests, benefits and rights inherent in ownership of r...


What is personal property security?

Personal property is any tangible or intangible property other than real property (real estate) that is movable and separable from realty, such as fixtures, tools, vehicles and inv...


What is operational risk?

The risk of loss due to inadequate or failed internal processes, people and systems or from external events is operational risk.  Errors in data, books and records; omissions in th...


What is mid-ticket leasing?

Mid-ticket leasing encompasses the leasing of low-volume, relatively high-price assets, such as industrial equipment and machinery, fleets of cars and commercial vehicles, computer...


What is mid-ticket equipment leasing? What is big-ticket equipment leasing?

Mid-ticket equipment includes low-volume, relatively high-price equipment with an original cost of $100,000-$500,000 according to DBRS and Fitch and $250,000-$5mn according to the...


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