Company: CPSS
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0001683168-25-001548
Chunk: 686

Company: CONSUMER PORTFOLIO SERVICES, INC.
Filing Date: 2025-03-12
Form: 10-K
Item: Item 3
Chunk 686
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 where the principal balance of the senior asset-backed securities issued is less than the principal
balance of the automobile contracts, (iii) in the form of subordinated asset-backed securities, or (iv) some combination of such internal
credit enhancements. The agreements governing the securitization transactions require that the initial level of internal credit enhancement
be supplemented by a portion of collections from the automobile contracts until the level of internal credit enhancement reaches specified
levels, which are then maintained. The specified levels are generally computed as a percentage of the principal amount remaining unpaid
under the related automobile contracts. The specified levels at which the internal credit enhancement is to be maintained will vary depending
on the performance of the portfolios of automobile contracts held by the trusts and on other conditions, and may also be varied by agreement
among us, our special purpose subsidiary, the insurance company, if any, and the trustee. Such levels have increased and decreased from
time to time based on performance of the various portfolios, and have also varied from one transaction to another. The agreements governing
the securitizations generally grant us the option to repurchase the sold automobile contracts from the trust when the aggregate outstanding
balance of the automobile contracts has amortized to a specified percentage of the initial aggregate balance.

Upon each transfer of automobile
contracts in a transaction structured as a secured financing for financial accounting purposes, we retain on our consolidated balance
sheet the related automobile contracts as assets and record the asset-backed notes or loans issued in the transaction as indebtedness.

We receive periodic base servicing
fees for the servicing and collection of the automobile contracts. Under our securitization structures treated as secured financings for
financial accounting purposes, such servicing fees are included in interest income from the automobile contracts. In addition, we are
entitled to the cash flows from the trusts that represent collections on the automobile contracts in excess of the amounts required to
pay principal and interest on the asset-backed securities, base servicing fees, and certain other fees and expenses (such as trustee and
custodial fees). Required principal payments on the asset-backed notes are generally defined as the payments sufficient to keep the principal
balance of such notes equal to the aggregate principal balance of the related automobile contracts (excluding those automobile contracts
that have been charged off), or a pre-determined percentage of such balance. Where that percentage is less than 100%, the related securitization
agreements require accelerated payment of principal until the principal balance of the asset-backed securities is reduced to the specified
percentage.