Company: CPSS
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0001683168-25-001548
Chunk: 919

Company: CONSUMER PORTFOLIO SERVICES, INC.
Filing Date: 2025-03-12
Form: 10-K
Item: Item 5
Chunk 919
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 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. Such accelerated principal payment is said to create overcollateralization of the asset-backed notes.

If the amount of cash required
for payment of fees, expenses, interest and principal on the senior asset-backed notes exceeds the amount collected during the collection
period, the shortfall is withdrawn from the spread account, if any. If the cash collected during the period exceeds the amount necessary
for the above allocations plus required principal payments on the subordinated asset-backed notes, and there is no shortfall in the related
spread account or the required overcollateralization level, the excess is released to us. If the spread account and overcollateralization
is not at the required level, then the excess cash collected is retained in the trust until the specified level is achieved. Although
spread account balances are held by the trusts on behalf of our special-purpose subsidiaries as the owner of the residual interests (in
the case of securitization transactions structured as sales for financial accounting purposes) or the trusts (in the case of securitization
transactions structured as secured financings for financial accounting purposes), we are restricted in use of the cash in the spread accounts.
Cash held in the various spread accounts is invested in high quality, liquid investment securities,