For Asset Backed Securities (ABS) paydowns that have proceeds and principal loss factors in the same coupon cycle, the system applies principal loss factors are applied first followed by the paydown cash received. Apply The system also applies loss factor quantity as a straight par reduction to the extent that there is sufficient unamortized discount to absorb the quantity without reducing any deferred market discount or original cost.
...
If the loss quantity is greater than the unamortized discount then the system apply the remaining quantity to the accumulated deferred market discount. This amount is stored on the open lot (Prior Deferred Amort Reduction Local/Base).
...