Shorting Home Equity Mezzanine Tranches

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Footnote Exhibits - Page 0958 Strictly private & confidential Loans in recent vintage home equity deals are more risky with higher silent seconds, CLTV and 10, lower full doc and bigger payment shocks Loan characteristics for subprime ARMs issued in2004 through 2006 2004 2006 2006 __Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 WA FICO 611 617 618 616 618 622 623 625 627 624 620 WA LTV 82 82 82 81 81 79 81 81 81 81 84 .WA CLTV 84 85 86 86 86 86 88 86 86 86 89 Silent seconds 12% 15% 24% 25% 27% 30% 34% 32% 24% 27% 27% Interest-only 8%. 11% 17% 19% 24% 29% 30% 30% 25% 16% 8% 40-year mortgage 0% 0% 0% 0% 0% 0% 4% 7% 17% 29% 36% Full Doc 60% 61% 61% 58% 57% 57% 57% 55% 53% 55% 53% Average loan size 172,791 178,595 182,621 188,126 193,661 194,398 203,971 209,096 212,335 214,478 217,741 CA % 33.4% 34.4% 34.5% 34.6% 34.3% 31.9% 32.1% 30.6% 31.4% 27.7% 26.6% Initial WAC . 7.31% 7.00% 7.11% 7.23% 7.12% 7.16% 7.14% 7.25% 7.69% 8.13% 8.34% WA Margin 6.08% 5.82% 5.87% 5.90% 6.01% 5.88% 5.82% 5.84% 5.83% 6.04% 5.87% 6-Month LIBOR at 1.18% 1.54% 1.97% 2.48% 2.45% 3.05% 3.50% 3.97% 4.39% 4.91% 5.40% issuance Fully indexed rate at 7.26% 7.36% 7.84% 8.38% 8.46% 8.93% 9.32% 9.81% 10.21% 10.93% 11.26% issuance Difference between start -0.05% 0.36% 0.73% 1.15% 1.34% 1.77% 2.18% 2.56% 2.52% 2.80% 2.92% rate and fully indexed rate at issuance Source: Moody's, LoanPerformance, Deutsche Bank Deutsche Bank All numbers shown in this presentation are indicative and are based on a sample portfolio. Actual numbers will be different and will depend on the actual portfolios selected. 34
Footnote Exhibits - Page 0959 Strictly private & confidential Example: Borrower's debt-to-income ratio may grow dramatically after resets in a typical subprime loan Mortgage maturity Loan size Teaser rate Teaser period 10 period Reset frequency Initial DTI Mortgage DTI Current LIBOR Initial periodic cap Subsequent periodic cap Margin Assumed annual income growth Growth rate of other debts 360 months $200,000 7.50% 24 months 60 months 6 months 40% 35% 5.59% 3% 1.5% 6% 4% 20% At origination After first reset After the second reset Mortgage coupon 7.50% 10.50% 11.59% Monthly Payment $1,250.00 $1,750.00 $1,932.33 Payment shock N/A $500.00 $182.33 Mortgage DTI 35.0% 45.3% 49.1% Total DTI 40.0% 52.0% 56.2% Annual Income $42,857.14 $46,354.29 $47,272.28 Monthly payment for non-mortgage debts $178.57 $257.14 $281.69 After expiration of 10 11.59% $2,046.70 $114.37 47.1% 57.3% $52,142.27 $444.34 Deutsche Bank All numbers shown in this presentation are indicative and are based on a sample portfolio. Actual numbers will be different and will depend on the actual portfolios selected. 35
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Shorting Home Equity Mezzanine Tranches

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