%0 Journal Article %A David Wells %T The Role of Triggers in Net Interest Margin (NIM) Securitization Structures %D 2007 %R 10.3905/jsf.2007.684870 %J The Journal of Structured Finance %P 62-64 %V 13 %N 1 %X One of the keys to understand how net interest margin securities, or NIMs, are structured is to understand how the “triggers” from the underlying asset-backed transaction work. The purpose of this article is to explain those triggers and their impact on the residual cash flows to a NIM. Triggers have an impact on the reallocation of cash flows in a securitization structure, which in turn can impact the amount of excess spread allocated to the residual holder. Triggers could require an increase in the target overcollateralization (O/C), known as a “step-up” event or they could prevent a release of O/C, or “step down” event. The two primary cash flow triggers are a delinquency trigger and a cumulative loss trigger. “NIM friendly” triggers are triggers where there is no step-up in O/C above the initial O/C and the trigger does not come into effect until the step-down date. Depending on where an investor participates in the capital structure, whether it is in senior, mezzanine, subordinate or first-loss positions, the view on a particular trigger can be very different.TOPICS: Credit risk management, credit default swaps %U https://jsf.pm-research.com/content/iijstrfin/13/1/62.full.pdf