Chotin Asset Management Corporation
Overview
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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Source: The Chotin Group Corporation. As of August 28, 2006.
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Chotin Asset Management Corporation
History 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.
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Source: The Chotin Group Corporation. As of August 28, 2006.
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Chotin Asset Management Corporation
Relevant Affiliated Companies
Chotin Asset
Management Corporation
Fund America
Fund America
Investors Corporation &
Ventures
Chotin Fund Fund America National
Corporation
Management Investors Corporation II Mortgage
Invested, for its own
Corporation Limited purpose finance companies Corporation
account, in excess of
Formerly known established to issue public bonds and Nationwide
$500 million in
as Fund America other similar securities collateralized sub-prime
mortgage
Management by mortgage loans, mortgage Originator,
related securities.
Corporation is the certificates and other mortgage- Servicer and
In 1996, FAVC issued a
manager of the related assets. Mortgage
resecuritization of $72
CDO issuance As of August, 2006, TCG has structured Banker
million in bonds.
platform and issued over $3.95 billion in RMBS 1991-1999
through its Fund America Investors
securitization platforms.
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Source: The Chotin Group Corporation. As of August 28, 2005.
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Chotin Asset Management Corporation
CDO 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
CFMC cash-flow CDOs under management
Notional
Issuer Type $(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 January 2005
Neptune CDO II Mezzanine ABS CDO 300.0 July 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
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Source: The Chotin Group Corporation. As of August 28, 2006
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Chotin Asset Management Corporation
Organizational Chart
Steven B. Chotin
Chairman/CEO
Jennifer M. Land
Executive Assistant/
HR Diresctor
Helen M. Dickens
President/COO
Leslie A. Bonino
Executive Assistant
to the President
Co Heads John G. Grant
David D. Frederick Zachary H Pashel Michael Piel Richard J. Reisman
Structured Finance Senior Vice President
Chief Financial Executive Vice Senior Software Vice President/
Chief Investment
Officer President Engineer General Counsel
Officer
Paris A. McIntosh Jeff W. Stemmermann Jim K. Peaslee
Ross S. Chotin
Senior Accountant Vice President/ Vice President/
Associate
Payroll/Benefits Portfolio Manager Portfolio Manager
Chris R. Medema Eric Westerhausen Ben S. Molk Doug A. Sanders
Julie E. Backer
Investment/ Originator/Servicer Systems Developer Systems
Staff Accountant
Surveillance Analyst Surveillance Analyst Administrator
Hilary U. Snyder
Investment/ Peter O. Reynolds
Surveillance Analyst Trading Operations
Andy P. Wolf
Investment/
Surveillance Analyst
As of 10/17/06
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Source: The Chotin Group Corporation. As of August 28, 2006
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Chotin Asset Management Corporation
Investment 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
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Source: The Chotin Group Corporation. As of August 28, 2006.
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Chotin Asset Management Corporation
Structured Finance Process
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.
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Source: The Chotin Group Corporation. As of August 28, 2006.
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Chotin Asset Management Corporation
Structured Finance Process
Macro Economic Outlook
Loan level analysis
Pool level analysis
Collateral FICO
Characteristics LTV
FRM % vs. ARM %
2nd Lien %
Industry Trends
Cash flow structure
Performance stress runs
Deal Defaults
Structure Loss Severity
Prepayments
Interest rates
Evaluate underwriting guidelines
Originator, Historical performance
Servicer, Diligence call and/or visit
Manager Ratings
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Source: The Chotin Group Corporation. As of August 28, 2006.
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Chotin Asset Management Corporation
Structured Finance Process (cont’d)
Structure and collateral complexion drives asset selection from the bottom-up.
Collateral
Characteristics Proactive Loss Mitigation
CDO Surveillance &
Monitoring
Ratings Tests
Compliance Tests
Quality Tests
Deal CDO
Structure Analytics Purchase
Portfolio
Asset & Collateral
Review
Delinquency
Performance
Originator, Ratings Migration
Servicer, Pricing Surveillance
Manager
Information used to enhance analytics
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Source: The Chotin Group Corporation. As of August 28, 2006.
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Chotin Asset Management Corporation
A Tale of Two Mortgage Pools, Same Dealer Shelf
• Bond #1 - Issued July 2004 • Bond #2 - Issued June 2004
• New Century originated collateral • Argent collateral, Ameriquest wholesale
• Avg. FICO 616 • Avg. FICO 620
• Baa3/BBB- • Baa3/No S&P Rating
• Initial Total Support: 3.40% • Initial Total Support: 3.55%
Positive Attributes Positive Attributes
FICO 90%: 30%)
27% Investor Loans
Negative Attributes 8% IL; 7% MI; 7% OH; 6% IN
Avg. Loan Size: $78k (55% < $100k)
64% Cash Out Refinance
42% Reduced Documentation
Small Servicer (Saxon)
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.
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Source: The Chotin Group Corporation. As of August 28, 2006.
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Chotin Asset Management Corporation
CAMCO 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 August 28, 2006.
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Chotin Asset Management Corporation
Was CAMCO right?
Performance to date1:
Bond #1 Bond #2
Cumulative losses: .36% Cumulative losses: 3.80%
REO: 1.56% REO: 5.37%
60+ Delinquency: 1.69% 60+ Delinquency: 6.18%
No Change in Ratings (Baa3/BBB-) Moody’s Downgrade from Baa3 to B3
Through both a quantitative and qualitative analysis, we steered clear of the sub-
performing asset.
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.
1Performance data as of July 31, 2006 and based on original collateral balances.
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Source: The Chotin Group Corporation. As of August 28, 2006.
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Biographies
Chotin Asset Management Corporation
Biographies
Steven B. Chotin Mr. Chotin founded The Chotin Group Corporation in 1984 as a firm specializing in asset
Founder & Chairman 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.
Helen M. Dickens Ms. Dickens is responsible for strategic planning and implementation of all structured finance and
President and Chief Operating operational activities. She joined Chotin in 1989 as manager of accounting and was promoted to
Officer 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.
Zachary H Pashel Mr. Pashel is responsible for structuring and implementation of structured finance and new
Executive Vice President and Co- business products. Prior to joining Chotin in 2004, Mr. Pashel’s employment included Deson
Head of Structured Finance 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.
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Source: The Chotin Group Corporation. As of August 28, 2006.
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Chotin Asset Management Corporation
Biographies (cont’d)
John G. Grant, CFA He joined Chotin in 2004 after a decade at ING Investment Management, where he served as Senior
Senior Vice President/Chief Vice President and Senior Portfolio Manager. From 1988 to 1993, Mr. Grant was a Senior Investment
Investment Officer and Co-Head of Officer at Allmerica Asset Management, and prior to that time he served as an Analyst at United
Structured Finance Investment Research. Mr. Grant holds a Bachelor of Arts degree in Sociology from Boston University
and an MBA from Northeastern University. In addition, he has earned the right to use the Chartered
Financial Analyst designation.
Jeffrey Stemmermann, CFA Mr. Stemmermann is responsible for fixed income trading and portfolio management. His primary
Vice President/Portfolio Manager responsibilities include credit analysis and the acquisition of assets for our CDOs. Prior to joining
Chotin in 2005, 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.
Jim Peaslee, CFA Mr. Peaslee is responsible for fixed income trading and portfolio management. He joined Chotin in
Vice President/Portfolio Manager 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.
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Source: The Chotin Group Corporation. As of August 28, 2006.
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Chotin Asset Management Corporation
Biographies (cont’d)
Hilary U. Snyder Ms. Snyder is a member of the fixed income trading and analytics team. She is responsible for
Investment/Surveillance Analyst 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.
Chris Medema Mr. Medema is a member of the fixed income trading and analytics team. He supports the portfolio
Investment/Surveillance Analyst 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.
Andy Wolf Mr. Wolf is a member of the fixed income trading and analytics team. He supports the portfolio
Investment/Surveillance Analyst 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.
David Frederick Mr. Frederick is responsible for managing all accounting functions at The Chotin Group. Prior to
Vice President/Treasurer 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.
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Source: The Chotin Group Corporation. As of August 28, 2005.
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Chotin Asset Management Corporation
Biographies (cont’d)
Richard J. Reisman Mr. Reisman is responsible for managing all of the legal aspects of the work of Chotin and its
Vice President and General affiliates. Prior to joining Chotin, Mr. Reisman was a senior associate with Skadden, Arps, Slate,
Counsel 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.
David Frederick Mr. Frederick is responsible for managing all accounting functions at The Chotin Group. Prior to
Chief Financial Officer 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.
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Source: The Chotin Group Corporation. As of August 28, 2005.
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