CDOs/CLOs

Lehman Brothers last week closed its second reverse mortgage transaction since 2002. Contrasting from its 2005 issue, the $598 million SASCO 2006RM1, incorporates a $25 million single-A tranche. At least five more deals are expected in the market from various issuers prior to yearend.

At the American Securitization Forum (ASF) Sunset Seminar on rating agency reform last Tuesday held at its headquarters, panelists urged ABS market professionals to bring their opinions on the issue before the Securities and Exchange Commission. It's a race against time before the SEC and Congress begin to enact rules on credit rating agency reform, at the Federal government's behest, that could significantly impact the ABS industry in general.

LAS VEGAS - Subprime lenders are beginning to report marked increases in the number of borrowers either failing to make their first mortgage payment or falling behind shortly afterward - a trend some say is the result of overly aggressive mortgage brokers misrepresenting borrower income or home values.

Since its inception more than a year and a half ago, brokerage firm Pali Capital's CDO structuring business has provided new options for middle market insurance companies, smaller banks and wealth management firms that focus on alternative investments. Pali has done this by developing CLO vehicles and credit default swap (CDS) CDOs that better fit the needs of middle market clients. These investors, not often coveted by larger banks, tend to have shorter duration and lower risk expectations.

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JP Morgan 9,288.5 1 16.5 18 Citigroup 8,456.9 2 15.0 13 Wachovia Corp 6,422.4 3 11.4 12 Barclays Capital 6,232.3 4 11.0 10 Deutsche Bank AG 5,413.9 5 9.6 12 Banc of America Securities LLC 3,740.6 6 6.6 7 Royal Bank of Scotland Group 3,644.0 7 6.5 7 Credit Suisse 3,466.3 8 6.1 7 HSBC Holdings PLC 2,389.3 9 4.2 3 Merrill Lynch & Co Inc 1,847.5 10 3.3 4 Industry Total 56,402.2 - 100.0 63 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Merrill Lynch & Co Inc 23,876.8 1 11.9 38 Citigroup 23,630.7 2 11.8 40 Deutsche Bank AG 18,933.0 3 9.4 27 Credit Suisse 13,572.0 4 6.8 21 Bear Stearns & Co Inc 12,863.1 5 6.4 25 Wachovia Corp 12,578.7 6 6.3 31 Banc of America Securities LLC 12,209.6 7 6.1 28 Morgan Stanley 11,341.8 8 5.6 38 UBS 10,006.1 9 5.0 43 JP Morgan 9,647.6 10 4.8 25 Industry Total 200,847.1 - 100.0 377 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Banc of America Securities LLC 14,428.3 1 28.6 19 Citigroup 9,982.0 2 19.8 15 JP Morgan 8,924.7 3 17.7 20 Morgan Stanley 3,529.0 4 7.0 4 Deutsche Bank AG 3,424.9 5 6.8 10 Barclays Capital 3,096.8 6 6.1 7 HSBC Holdings PLC 1,999.9 7 4.0 2 Credit Suisse 1,800.0 8 3.6 9 ABN AMRO 1,000.0 9* 2.0 5 Merrill Lynch & Co Inc 1,000.0 9* 2.0 4 Industry Total 50,537.4 - 100.0 74 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Deutsche Bank AG 1,750.0 1 21.3 3 ABN AMRO 1,250.0 2* 15.2 2 Lehman Brothers 1,250.0 2* 15.2 2 Royal Bank of Scotland Group 1,000.0 4* 12.2 2 Banc of America Securities LLC 1,000.0 4* 12.2 2 Barclays Capital 855.0 6 10.4 1 JP Morgan 500.0 7 6.1 1 Merrill Lynch & Co Inc 300.0 8* 3.7 1 Citigroup 300.0 8* 3.7 1 Industry Total 8,205.0 - 100.0 7 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Lehman Brothers 44,451.1 1 11.0 98 Countrywide Securities Corp 35,223.3 2 8.7 54 Royal Bank of Scotland Group 34,777.1 3 8.6 80 Morgan Stanley 29,712.1 4 7.4 30 Credit Suisse 28,418.0 5 7.0 76 Deutsche Bank AG 27,807.1 6 6.9 60 Bear Stearns & Co Inc 25,617.4 7 6.4 74 Citigroup 23,271.4 8 5.8 61 JP Morgan 23,016.2 9 5.7 52 Merrill Lynch & Co Inc 21,276.7 10 5.3 37 Industry Total 403,349.8 - 100.0 764 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Citigroup 7,390.8 1 15.6 10 Deutsche Bank AG 7,242.4 2 15.2 10 Credit Suisse 5,627.8 3 11.8 9 Lehman Brothers 3,873.7 4 8.2 3 Goldman Sachs & Co 3,809.3 5 8.0 5 Merrill Lynch & Co Inc 3,420.1 6 7.2 3 Banc of America Securities LLC 3,418.5 7 7.2 5 Morgan Stanley 2,928.3 8 6.2 4 Wachovia Corp 2,649.5 9 5.6 2 RBC Capital Markets 1,500.0 10 3.2 2 Industry Total 47,542.8 - 100.0 35 Source: Thomson Financial