Serviceability refers to the ability of borrowers to make their loan payments. The serviceability of a securitisation is important because it determines the risk of default for the investors.
Here are some applications of serviceability in securitisation:
- To assess the risk of default: The serviceability of a securitisation is used to assess the risk of default for the investors. This is because borrowers who are unable to make their loan payments are more likely to default on their loans.
- To determine the interest rates: The serviceability of a securitisation is also used to determine the interest rates on the securities. This is because investors will require a higher interest rate if the risk of default is higher.
- To set credit limits: The serviceability of a securitisation can also be used to set credit limits for borrowers. This is because borrowers who are unable to afford their loan payments are more likely to default on their loans.
Overall, serviceability is an important factor to consider when investing in a securitisation. It is important to understand the serviceability of the securitisation before you invest, as this will help you to assess the risk of default.