Business and Personal Finance Dictionary

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• RESERVE ACCOUNT
  
  A type of credit enhancement used in some asset backed securities. The reserve account may be created by an initial deposit from the seller and may be augmented over time by the application of funds from excess servicing income. Credit is enhanced because withdrawals from the reserve account are made to reimburse investors when excess servicing is insufficient to cover charge -offs. Until needed, funds in a reserve account are invested.
  
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