2 chotin asset management corporation overview ____________________ source: the chotin group...
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Chotin Asset Management CorporationOverview
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
Chotin Asset Management Corporation (“CAMCO") is an affiliate of The Chotin Group Corporation ("TCG") and encompasses all of the asset management functions of the firm.
TCG, a private company, has been in business for 20 years and has been actively involved in structured debt financings and asset securitization primarily for its own account. TCG has been a key player in the more credit sensitive subordinate and residual real estate security markets.
TCG and affiliated companies have extensive experience analyzing, acquiring, and managing significant portfolios of structured product assets including CMO, MBS, and various other credit-sensitive ABS in all market environments, generally with a "hold-to-maturity" strategy.
CAMCO’s investment process is a bottom-up team approach with a commitment to quantitative analysis, risk management and pre/post acquisition surveillance.
Through National Mortgage Corporation ("NMC") (an affiliated company) TCG originated over $1 billion of nonconforming mortgage loans from 1991 to 1999.
Through its FAIC and FAIC II shelves, TCG securitized and structured in excess of $3.95 billion of NMC-originated and third party loans.
CAMCO’s subsidiary Chotin Fund Management Corporation (“CFMC”) is the collateral manager of seven ABS CDOs.
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Chotin Asset Management CorporationHistory of The Chotin Group Corporation and Steven B. Chotin
1975-1978 President Solarcell, an affiliate of MDC Holdings
1978-1984 Senior Vice President MDC Holdings (NYSE “MDC”)
1979 While at MDC, Mr. Chotin founded American Southwest Financial Services, the first mortgage conduit comprised of eighty -eight homebuilders across the country.
Founded and became President of Home American Mortgage Corporation, a captive mortgage origination company which facilitated activities between MDC Holdings and American Southwest Financial Services.
Aided in the successful congressional approval of SMMEA (“Secondary Mortgage Market Enhancement Act”), which allowed the private sector to issue mortgage-backed securities using government guarantees.
1984 Founder The Chotin Group Corporation
With the formation of the Chotin Group, Mr. Chotin facilitated the securitization of a variety of structured finance products for clients such as savings and loans, homebuilders and pension funds.
1988 Mr. Chotin formed The Fund America Investor securitization shelves to issue CMO and MBS transactions.
1989 In the late 1980s, Mr. Chotin identified the need for new securitization structures to facilitate the placement of residual interests, which were previously held by savings and loans.
He created Fund America Ventures Corporation (FAVC) to purchase those residual interests. FAVC ultimately was expanded to include substantial holdings in all classes of RMBS with particular focus on subordinate securities.
1991 Mr. Chotin acquired National Mortgage Corporation (NMC), which was a prime residential mortgage servicer. He developed NMC into a nationwide sub-prime lending and servicing platform. NMC securitized a portion of the loans it originated through the Fund America Investor shelves. NMC also sold assets when economics warranted doing so. NMC was closed in 1999.
1996 FAVC issued its first re-securitization of subordinate securities.
2002 Mr. Chotin decided to focus the firm’s business activities on third party asset management through Chotin Asset Management Corporation (CAMCO).
2004 Chotin Fund Management Corporation (CFMC), a subsidiary of CAMCO closed its first CDO, Saturn Ventures 2004 – Fund America Investors III, Ltd.
2006 CFMC closed its seventh ABS CDO, bringing its assets under management up to $4.25 billion.
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
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Chotin Fund
Management
CorporationFormerly known as Fund America
Management Corporation is
the manager of the CDO issuance platform
Fund AmericaInvestors Corporation &
Fund AmericaInvestors Corporation II
Limited purpose finance companies established to issue public bonds
and other similar securities collateralized by mortgage loans, mortgage certificates and other
mortgage-related assets. As of August, 2006, TCG has
structured and issued over $3.95 billion in RMBS through its Fund America Investors securitization
platforms.
Fund America Ventures
Corporation Invested, for its own account, in excess of
$500 million in mortgage
related securities.In 1996, FAVC issued
a resecuritization of
$72 million in bonds.
National MortgageCorporatio
nNationwide sub-prime Originator,
Servicer and Mortgage
Banker1991-1999
Chotin Asset Management Corporation
Relevant Affiliated CompaniesChotin Asset Management Corporation
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
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Chotin Asset Management CorporationCDO Platform
In 2003, TCG through FAMC extended its core competencies of credit analysis and financial structuring to establish itself as a value added investor and asset manager of multi-sector CDOs of ABS
Issuer Type Notional $(mm)
Closing Date
Saturn Ventures 2004-Fund America Investors III Mezzanine ABS CDO 400.0 April 2004
Mercury CDO 2004-1 High Grade ABS CDO 750.0 November 2004
Neptune CDO 2004-1 Mezzanine ABS CDO 400.0 J anuary 2005
Neptune CDO II Mezzanine ABS CDO 300.0 J uly 2005
Mercury CDO II High Grade ABS CDO 1,000.0 December 2005
Neptune CDO III Mezzanine ABS CDO 400.0 March 2006
Mercury CDO III High Grade ABS CDO 1,000.0 May 2006
TOTAL 4,250.0
CFMC cash-flow CDOs under managementCFMC cash-flow CDOs under management
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
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Chotin Asset Management CorporationOrganizational Chart
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
Jennifer M. LandExecutive Assistant/
HR Diresctor
TBDExecutive Assistant
to the President
Doug A. SandersSystems
AdministratorJulie E. Backer
Staff Accountant
Andy P. WolfInvestment/
Surveillance Analyst
Peter O. ReynoldsTrading Operations
Ross S. ChotinAssociate
Chris R. MedemaInvestment/
Surveillance Analyst
TBDSystems Developer
Steven B. ChotinChairman/CEO
Helen M. DickensPresident/COO
Zachary H PashelExecutive Vice
President
Eric WesterhausenOriginator/Servicer
Surveillance Analyst
Jim K. PeasleeVice President/
Portfolio Manager
Jeff W. StemmermannVice President/
Portfolio Manager
Richard J. ReismanVice President/
General Counsel
Paris A. McIntoshSenior Accountant
Payroll/Benefits
David D. FrederickChief Financial Officer
Michael PielSenior Software
Engineer
Hilary U. SnyderInvestment/
Surveillance Analyst
Matthew R. KrumpInvestment/
Surveillance Analyst
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Chotin Asset Management CorporationInvestment Philosophy
CAMCO’s Investment Objectives:
Create products backed by a well-diversified pool of quality assets, with the assets selected for their long-term potential to generate superior risk-adjusted returns
Focus on real estate ABS, primarily residential MBS and ABS CDOs
Bottom-up approach to asset selection
– Rigorous analytical approach applied by team
– Collateral and deal structure paramount
– Macro economic overview helps identify troubled sectors
– Investment Committee approves all purchases
Modified Static Structure
– Limited trading reinforces proper asset selection up front, while allowing proactive loss mitigation
– Avoids incentives that encourage aggressive portfolio postures
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
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Asset Selection
– Bottom-up credit focus
– Pool and loan level data used to estimate default and loss probabilities
Indices database monitored for relative performance comparison
– Cash flow modeling under multiple interest rate and prepayment scenarios
– Mortgage originator and servicer due diligence and review
– Constant monitoring of performance against initial expectations Surveillance & Monitoring
– Assets are monitored for collateral performance, structural features performance and relative performance against appropriate cohorts:
OC growth, stagnation or deterioration
Losses exceeding excess interest
“DPIPE”, a classic delinquency analysis
Step-Down trigger analysis
Assets ranked monthly based on relative performance versus proprietary indices
Rating agency action monitored
– Monthly and quarterly trustee reports are reconciled against asset-level cash flows and performance levels.
Chotin Asset Management CorporationStructured Finance Process
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
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Chotin Asset Management CorporationStructured Finance Process
CollateralCharacteristic
s
DealStructure
Originator, Servicer, Manager
Cash flow structure Performance stress runs
Defaults Loss Severity Prepayments Interest rates
Evaluate underwriting guidelines Historical performance Diligence call and/or visit Ratings
Macro Economic Outlook Loan level analysis Pool level analysis
FICO LTV FRM % vs. ARM % 2nd Lien % Industry Trends
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
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Chotin Asset Management CorporationStructured Finance Process (cont’d)
CollateralCharacteristic
s
DealStructure
Originator, Servicer, Manager
Asset & Collateral
Review Delinquency
Performance Ratings Migration Pricing
Surveillance
Analytics
Purchase
CDOPortfoli
o
CDO Surveillance &
Monitoring Ratings Tests Compliance Tests Quality Tests
Information used to enhance analytics
Proactive Loss Mitigation
Structure and collateral complexion drives asset selection from the bottom-up.
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
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A Tale of Two Mortgage Pools, Same Dealer Shelf• Bond #1 - Issued July 2004• New Century originated collateral• Avg. FICO 616• Baa3/BBB-• Initial Total Support: 3.40%
Positive Attributes
Note: The information above is historical and represents the attributes of a particular investment we made. It should not be considered to be indicative of our possible future investments, nor should it be extrapolated to be indicative of our possible future performance, each of which could differ significantly.
FICO < 550: 16.6% Avg. LTV: 79% 98% 1st Lien 10% IOs 6.5% Investor Loans Avg. Loan Size: $167k 3% IL; 3% MI; <2% OH; <2% IN
Negative Attributes 64% Cash Out Refinance 42% Reduced Documentation Small Servicer (Saxon)
• Bond #2 - Issued June 2004• Argent collateral, Ameriquest wholesale • Avg. FICO 620• Baa3/No S&P Rating• Initial Total Support: 3.55%
Positive Attributes Avg. FICO: 620 (FICO < 550: 11%) 100% 1st Lien 63% Full Documentation No IOs
Negative Attributes Avg. LTV: 87% (LTVs > 90%: 30%) 27% Investor Loans 8% IL; 7% MI; 7% OH; 6% IN Avg. Loan Size: $78k (55% < $100k)
Chotin Asset Management Corporation
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
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Chotin Asset Management CorporationCAMCO invested in Bond #1 and rejected Bond #2
Bond #1
Scenario Name BASE FAST CASE SLOW CASE STRESS STRESS STRESS STRESS
Forward Rate Shock (bps)
0 0 0 -50 50 -100 100
Prepay Rate Pricing 125% Pricing 75% Pricing Pricing Pricing Pricing Pricing
Default Severity 50% 50% 50% 50% 50% 50% 50%
Breakeven Loss 8.75 5.46 10.42 9.17 7.02 9.56 6.83
Expected Loss (%) 4.50 4.50 4.50 4.50 4.50 4.50 4.50
Coverage Ratio 1.94 1.21 2.32 2.04 1.56 2.12 1.52
Bond #2
Scenario Name BASE FAST CASE SLOW CASE STRESS STRESS STRESS STRESS
Forward Rate Shock (bps)
0 0 0 -50 50 -100 100
Prepay Rate Pricing 125% Pricing 75% Pricing Pricing Pricing Pricing Pricing
Default Severity 80% 80% 80% 80% 80% 80% 80%
Breakeven Loss 11.27 8.73 13.58 11.68 10.86 12.09 10.4
Expected Loss (%) 9.00 9.00 9.00 9.00 9.00 9.00 9.00
Coverage Ratio 1.25 0.97 1.51 1.30 1.21 1.34 1.16
Note: The information above is historical and represents the attributes of a particular investment we made. It should not be considered to be indicative of our possible future investments, nor should it be extrapolated to be indicative of our possible future performance, each of which could differ significantly.
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
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Was CAMCO right?
Bond #1
Cumulative losses: .36%
REO: 1.56%
60+ Delinquency: 1.69%
No Change in Ratings (Baa3/BBB-)
Bond #2
Cumulative losses: 3.80%
REO: 5.37%
60+ Delinquency: 6.18%
Moody’s Downgrade from Baa3 to B3
Performance to date1:
Through both a quantitative and qualitative analysis, we steered clear of the sub-performing asset.
1Performance data as of July 31, 2006 and based on original collateral balances.
Note: The information above is historical and represents the attributes of a particular investment we made. It should not be considered to be indicative of our possible future investments, nor should it be extrapolated to be indicative of our possible future performance, each of which could differ significantly.
Chotin Asset Management Corporation
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
Biographies
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Chotin Asset Management CorporationBiographies
Ms. Dickens is responsible for strategic planning and implementation of all structured finance and operational activities. She joined Chotin in 1989 as manager of accounting and was promoted to Chief Operating Officer in 1995, and to President in 2002. She has managed all phases of the asset securitization process as well as securities trading and operations. Prior to joining Chotin, Ms. Dickens was Corporate Secretary of Uniwest Financial Corporation, a savings and loan holding company with 13 branches. She was responsible for accounting, human resources and shareholder relations. Ms. Dickens holds a Bachelor of Science degree in Accounting from Metropolitan State College.
Mr. Chotin founded The Chotin Group Corporation in 1984 as a firm specializing in asset securitization and structured financings. In subsequent years Mr. Chotin created a group of affiliates to invest in a variety of asset classes and to provide securitization services to the investment banking community. He served as Senior Vice President of MDC Corporation (NYSE: "MDC"), where he played a primary role in the formation of American Southwest Financial Corporation, one of the first mortgage banking conduits serving participants nationwide. Mr. Chotin also created Home American Mortgage Corporation, a full-service mortgage banking operation for MDC.
Steven B. Chotin Founder & Chairman Steven B. Chotin Founder & Chairman
Helen M. Dickens President and Chief Operating Officer
Helen M. Dickens President and Chief Operating Officer
Mr. Pashel is responsible for structuring and implementation of structured finance and new business products. Mr. Pashel has been involved in all aspects of Chotin’s CDO platform from asset acquisition, structuring, marketing and ongoing asset surveillance. Prior to joining Chotin in 2004, Mr. Pashel’s employment included Deson Ventures and Greyrock Capital Partners, both groups specializing in middle market private equity and M&A advisory services. Mr. Pashel also owned and operated numerous companies in the real estate and aviation industries. Mr. Pashel was educated at Brandeis University.
Zachary H Pashel Executive Vice President and Head of Structured Finance
Zachary H Pashel Executive Vice President and Head of Structured Finance
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
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Chotin Asset Management CorporationBiographies (cont’d)
Mr. Peaslee is responsible for fixed income trading and portfolio management. He joined Chotin in 2005 after twelve years in structured finance at Great-West Life & Annuity Insurance Co. where he managed portfolios consisting of Home Equity ABS, Franchise Loans and Affordable Housing Tax Credits. From 1988-1991, Mr. Peaslee was a Staff Auditor with Ernst & Young. Mr. Peaslee holds a Bachelor of Arts from the University of Oregon and a Master of Business Administration and a Master of Public Health from the A.B. Freeman School of Business, Tulane University. In addition, he has earned the right to use the Chartered Financial Analyst designation.
Mr. Stemmermann is responsible for fixed income trading and portfolio management. His primary responsibilities include credit analysis and the acquisition of assets for our CDOs. Prior to joining Chotin, Mr. Stemmermann worked at ING Investment Management as an analyst and junior portfolio manager from 2001 through 2004. The Georgia Institute of Technology awarded Mr. Stemmermann both a Bachelor of Science degree in Industrial and Systems Engineering and a Master of Science degree in Quantitative and Computational Finance. In addition, he has earned the right to use the Chartered Financial Analyst designation.
Jeffrey Stemmermann, CFA Vice President/Portfolio Manager
Jeffrey Stemmermann, CFA Vice President/Portfolio Manager
Jim Peaslee, CFA Vice President/Portfolio Manager
Jim Peaslee, CFA Vice President/Portfolio Manager
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
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Chotin Asset Management CorporationBiographies (cont’d)
Mr. Medema is a member of the fixed income trading and analytics team. He supports the portfolio managers with credit analysis across all asset classes with an emphasis in residential mortgage backed securities. His duties extend to surveillance and loss modeling. Prior to joining TCG, Mr. Medema spent two years working as an analyst for a Colorado based hedge fund group and asset management firm. He holds Bachelor of Arts degrees in both Mathematics and Economics from the University of Colorado, Boulder.
Ms. Snyder is a member of the fixed income trading and analytics team. She is responsible for maintaining our transaction database and supervises the surveillance and monitoring process. Ms. Snyder holds a Bachelor of Science degree in Applied Mathematics with an emphasis in Computer Science from the University of Colorado at Boulder.
Hilary U. Snyder Investment/Surveillance Analyst
Hilary U. Snyder Investment/Surveillance Analyst
Chris Medema Investment/Surveillance Analyst
Chris Medema Investment/Surveillance Analyst
Matthew R. Krump is a member of the fixed income trading and analytics team. He assists with the trading and analysis of asset-backed securities with a focus on residential mortgage ABS. Prior to joining Chotin Group, he worked in the ABS/CDO group at Smith Breeden Associates and the portfolio analytics group at BlackRock, he was also previously an investment banking analyst in the leveraged finance group at Lehman Brothers. Mr. Krump earned a Master of Science in Accounting and Bachelor of Science in Business from the Leeds School of Business at the University of Colorado and is currently a Level 3 Chartered Financial Analyst candidate.
Mr. Wolf is a member of the fixed income trading and analytics team. He supports the portfolio managers with credit analysis across all asset types and is actively involved in the surveillance and monitoring process. Prior to joining TCG, Mr. Wolf was an investment analyst concentrating on commercial loans at Merchants Mortgage and Trust and was a field coordinator for the Joe Lieberman for President Campaign. He holds a Bachelor of Science degree in Business Management from the University of Colorado, Boulder.
Andy Wolf Investment/Surveillance Analyst
Andy Wolf Investment/Surveillance Analyst
Matthew R. Krump Investment/Surveillance Analyst
Matthew R. Krump Investment/Surveillance Analyst
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
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Chotin Asset Management CorporationBiographies (cont’d)
Mr. Reynolds manages operations for the fixed income trading team, including all settlement and transaction oriented duties. Before joining The Chotin Group, Mr. Reynolds was a senior analyst at Clayton Fixed Income Services, an information and analytics company that provides loan-level credit risk management for investors, servicers and lenders. Mr. Reynolds was also involved in the mortgage industry as a mortgage banker for numerous yerars. He holds a Bachelor of Arts degree in from Vanderbilt University.
Peter Reynolds Trading Assistant Peter Reynolds Trading Assistant
Mr. Piel is the Senior Software Engineer responsible for the management of The Chotin Group’s information technology. Prior to joining Chotin, Mr. Piel was a Senior Developer for Great-West Life & Annuity Insurance Company, where he developed internet trading and reporting systems for the Bank Owned Life Insurance (BOLI) and Corporate Owned Life Insurance (COLI) variable products. Mr. Piel also has experience in wealth management consulting and corporate accounting. Mr. Piel holds a Master of Science degree in Information Systems from the University of Colorado and a Bachelor of Science degree in Business Administration from the University of Wyoming.
Michael B. Piel Senior Software Engineer Michael B. Piel Senior Software Engineer
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
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Chotin Asset Management CorporationBiographies (cont’d)
Mr. Reisman is responsible for managing all of the legal aspects of the work of Chotin and its affiliates. Prior to joining Chotin, Mr. Reisman was a senior associate with Skadden, Arps, Slate, Meagher & Flom in London, England. Mr. Reisman’s work there was of a general corporate nature. Before joining Skadden, Mr. Reisman was an associate with Cahill Gordon & Reindel in New York, specializing in corporate finance. Mr. Reisman received his J.D. from the University of Chicago Law School and his B.A. from Dartmouth College.
Richard J. Reisman Vice President and General Counsel
Richard J. Reisman Vice President and General Counsel
Mr. Frederick is responsible for managing all accounting functions at The Chotin Group. Prior to joining Chotin in 2005, David served as SVP and CFO of Duke Energy Field Services, the nations largest natural gas processor headquartered in Denver, CO. David moved to Denver in 1998 from Houston, Texas, where he held various positions with Duke Energy and its predecessor company, Pan Energy Corp. David started his career with Deloitte and Touche where he spent seven years in the audit. David graduated from the University of Houston in 1981 with a BBA in accounting and is a Certified Public Accountant.
David Frederick Chief Financial Officer David Frederick Chief Financial Officer
____________________Source: The Chotin Group Corporation. As of November 15, 2006.
Mr. Westerhausen joined Chotin in 2005 and is responsible for the firm's servicer and originator oversight. He brings more than 18 years of mortgage banking and financial services experience to Chotin, having previously held the position of Vice President, Correspondent Operations at National Mortgage Corporation, a former Chotin subsidiary where he managed whole loan purchasing, warehousing, custodial relationships and pool certification activities. Other past experience includes production management positions with Wells Fargo Home Mortgage and Huntington Mortgage Company. He is a past member of the Document Custody Committee and E-commerce Sub-committee of the Mortgage Bankers Association. He holds a Bachelor of Arts degree in Economics from Ohio State University.
Eric Westerhausen Originator/Servicer Surveillance Analyst
Eric Westerhausen Originator/Servicer Surveillance Analyst