Excess spread

In securitization or structured finance the excess of the income inherent in the portfolio of receivables or an asset-backed security, over and above the SPV´s discounting rate and the expenses of the transaction. These expenses can include contracted payments to tranched liabilities issued against the portolio and mostly also servicing fees . It represents the profit of the originator in the securitisation transaction. Excess spread can be a source of credit enhancement for securitized assets, provided that it is available to absorb losses on the assets.