Test 19 – MBS & CMBS Features

A negative covenant requires the issuer to provide periodic financial reports, while an affirmative covenant restricts additional borrowing.

A negative covenant restricts actions such as additional borrowing or asset sales, while an affirmative covenant requires actions such as compliance with laws or timely payment.

A negative covenant gives bondholders a direct claim on collateral, while an affirmative covenant gives only a general claim on issuer assets.

A negative covenant applies only to secured bonds, while an affirmative covenant applies only to unsecured bonds.