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Interest shortfall
A situation in which an asset-backed security misses one or more interest payments as a result of insufficient funds. This is permitted under the terms of most mezzanine asset-backed securities, and does not usually lead to a credit event in asset-backed credit default swaps. Instead, the protection seller must make payments to the protection buyer to make up the interest shortfall while it occurs. Missed interest payments may be reimbursed at a later date, and this will require the buyer of protection to make additional payments to the protection seller.
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