In order to report zero up-front gain, the securitization must therefore be structured as a financing rather than a sale in virtually every case. Moreover, FAS 125 does not give guidance on the subsequent accounting, leaving any number of unresolved questions. Adherence to this accounting will usually result in a loss on sale. Perhaps, it is time to reconsider that approach. This could perhaps be mitigated by setting the exercise price for the call at a premium, which should not affect the financing vs. sale determination under FAS 125.
Nothing has to last forever.
Transferring non-financial assets to the issuing SPE in addition to financial assets. Imposing restrictions on the investors' right to pledge or exchange their securities. Back to calls, then. The first decision that must be made is whether the call option is on the transferred assets or on the issued bonds. But perhaps there is a difference in the balance sheet classification of the assets and the subsequent income effects.