Securitization

With the refinance boom of 2003 seemingly over, extension risk in the home equity sector will be a hot topic in 2004. Although origination volume is expected to remain somewhat constant, as lenders move up the credit spectrum, prepayment activity should decline dramatically with some seeing segments extending out by nine additional years.

The credit quality of high yield CDOs, particularly at the senior level, is improving, Merrill Lynch reported last week in research.

A move toward increasing deposits could affect the level of securitization business done by Capital One, the company said during a presentation at last week's Investors Conference hosted by Friedman, Billings, Ramsey Group.

In scaling back a $2 billion loan-origination program by more than half, diversifying its business with monolines and raising FICO targets, it appears a leaner AmeriCredit Corp. has emerged to close out 2003. Speaking to equity investors last week at Friedman, Billings, Ramsey Group's Annual Investor Conference, company President Daniel Berce credited the ABS market for providing the liquidity it needed throughout the year.

Year to date as of 12/10 Term (days) 12/04 12/05 12/08 12/09 12/10 1-week

2003 2002 2001 ABS (Public and 144A) 531,261 412,274 346,881 ABS (Public and 144A excluding CDOs) 488,837 366,574 300,564 ABS (Public Only) 428,095 330,142 255,987 ABS (144A Only) 103,166 82,132 90,894 Non-Agency MBS 307,964 232,079 182,467 Agency MBS 537,092 502,875 340,515 CMBS 65,452 47,687 59,383 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 JP Morgan 11,052.5 1 16.4 17 Credit Suisse First Boston 7,996.7 2 11.9 15 Morgan Stanley 7,181.2 3 10.7 10 Deutsche Bank AG 7,041.4 4 10.5 11 Citigroup 5,750.3 5 8.6 11 BANK ONE Corp 5,321.8 6 7.9 10 Banc of America Securities LLC 4,347.2 7 6.5 10 Barclays Capital 4,301.4 8 6.4 11 Wachovia Corp 2,978.1 9 4.4 11 Bear Stearns & Co Inc 2,856.5 10 4.3 1 Industry Total 67,256.1 - 100.0 85 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 Credit Suisse First Boston 5,935.8 1 14.0 16 Wachovia Corp 4,137.6 2 9.8 16 Deutsche Bank AG 4,121.1 3 9.7 11 Goldman Sachs & Co 3,450.3 4 8.1 7 Citigroup 3,321.7 5 7.8 10 Bear Stearns & Co Inc 2,834.2 6 6.7 11 Merrill Lynch & Co Inc 2,690.7 7 6.3 9 Morgan Stanley 2,582.6 8 6.1 8 UBS 2,245.0 9 5.3 5 Lehman Brothers 2,179.4 10 5.1 7 Industry Total 42,424.2 - 100.0 120 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 14,670.9 1 23.3 21 BANK ONE Corp 11,756.6 2 18.7 22 JP Morgan 10,553.7 3 16.8 18 Barclays Capital 5,748.8 4 9.2 12 Banc of America Securities LLC 4,062.3 5 6.5 13 Morgan Stanley 3,954.5 6 6.3 5 Deutsche Bank AG 3,834.6 7 6.1 14 Credit Suisse First Boston 2,818.7 8 4.5 10 Lehman Brothers 2,048.1 9 3.3 7 Merrill Lynch & Co Inc 1,744.5 10 2.8 7 Industry Total 62,850.8 - 100.0 104 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 2,184.6 1 27.8 7 Banc of America Securities LLC 922.7 2 11.8 2 BANK ONE Corp 900.0 3 11.5 2 JP Morgan 875.0 4 11.2 4 Barclays Capital 710.7 5* 9.1 1 Lehman Brothers 710.7 5* 9.1 1 Merrill Lynch & Co Inc 521.2 7* 6.6 2 Societe Generale 521.2 7* 6.6 2 Citigroup 500.0 9 6.4 1 Industry Total 7,846.1 - 100.0 12 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 37,422.4 1 13.2 90 Citigroup 26,404.0 2 9.3 67 Credit Suisse First Boston 25,476.2 3 9.0 61 Morgan Stanley 23,662.9 4 8.4 50 Royal Bank of Scotland Group 22,936.0 5 8.1 47 JP Morgan 20,260.5 6 7.2 28 Bear Stearns & Co Inc 20,158.6 7 7.1 43 Countrywide Securities Corp 19,852.7 8 7.0 38 Deutsche Bank AG 19,555.4 9 6.9 47 Banc of America Securities LLC 18,659.3 10 6.6 57 Industry Total 282,803.0 - 100.0 564 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 7,352.6 1 21.2 14 Merrill Lynch & Co Inc 5,143.5 2 14.8 11 Morgan Stanley 4,898.6 3 14.1 10 Credit Suisse First Boston 4,203.5 4 12.1 9 Deutsche Bank AG 3,841.8 5 11.1 7 UBS 2,368.0 6 6.8 5 JP Morgan 2,096.2 7 6.0 6 Banc of America Securities LLC 2,090.1 8 6.0 6 Lehman Brothers 956.3 9 2.8 2 BANK ONE Corp 507.6 10 1.5 1 Industry Total 34,713.0 - 100.0 36 Source: Thomson Financial

Year to date as of Dec 3 Coupon Type Market Average Life Buckets Asset Class Volume Pub/144A Fixed Rate Floating Rate Public 144A 0.0 to 0.9 1.0 to 2.9 3.0 to 5.9 6.0 to 7.9 8.0 to 11.0 Aircraft Leases 3,229 2,202 1,027 3,229 2,202 457 361 208 Auto Loans/Recs 77,763 59,537 18,226 73,519 4,244 22,885 39,143 15,475 125 113 Cash 599 249 350 599 599 Commercial Loans 311 188 123 311 311 Corp Bond/Note 5,349 1,896 3,420 5,349 2,863 874 468 1,144 Corporate Loans 8,069 606 7,426 8,069 2,124 1,206 161 2,624 1,932 Credit Card Rec 62,851 17,611 45,240 61,869 981 20,969 5,408 31,974 2,000 2,500 Equip Loans 514 514 514 177 337 Equip. Leases 9,128 5,167 3,960 6,684 2,443 3,230 4,743 1,080 75 Floorplan Recs 7,846 2,132 5,714 7,010 836 2,532 1,790 3,524 Franchisee Loans 228 228 228 109 Home Impr Loans 8 8 8 8 Junk Bonds 7,919 1,695 6,224 7,919 2,970 2,038 2,911 Leases 1,388 1,388 1,388 760 178 Loans 2,998 2,998 2,998 2,998 Mnfrd Housing Ct 714 593 121 575 139 103 186 11 359 Mutual Fund Fees 991 116 875 991 991 Non-Jumbo Mtg Ln 75,134 27,981 43,931 67,363 7,770 34,727 17,259 21,427 1,262 307 Oil Receivables 750 750 750 750 Preferred Sec 2,061 651 1,385 2,061 854 108 177 921 Prv Issued Sec 1,899 1,159 615 198 1,701 1,899 Rental Car Rec. 4,125 2,400 1,725 1,000 3,125 1,500 460 2,165 Rev Cred/Home Eq 211,994 86,334 114,478 191,177 20,818 92,228 65,975 47,322 4,215 2,027 Sm Business Loan 845 845 845 401 444 Struc Fin Credit 25,056 5,291 19,728 25,056 11,400 758 4,077 5,087 3,652 Student Loans 36,963 1,900 28,601 30,193 6,770 11,281 5,939 9,685 7,020 1,926 Tax Liens 86 86 86 86 Ticket Rec 220 10 210 220 220 Timeshare Loans 848 715 133 848 170 678 Tobacco Receives 154 154 154 154 Trade Recs 225 105 120 225 225 Unspecified/NA 667 542 125 667 667 Note: Figures are preliminary and subject to change. Data includes U.S. deals and dollar Euro 144As.Source: Thomson Financial

Rev Cred/Home Eq 38% Auto Loans/Recs 14% Non-Jumbo Mtg Ln 14% Credit Card Rec 11% Student Loans 7% Other 16%

Forget yanking the wishbone - two CDOs were reportedly yanked from the market just prior to the holiday break. Investors, however, were still able to devour the collateral pool of one of the pulled deals.

New-issue supply slowed to roughly $6 billion ahead of the Thanksgiving holiday, as offerings from the previous week exited the pipeline and only a few issuers tapped the market prior to Wednesday. The most visible names to price last week were Big-Three captive auto lender Daimler-Chrysler N.A. Holdings and MBNA America Bank, which bought its 12th triple-A credit card ABS of the year.

News that Warren Buffett's Berkshire Hathaway would purchase manufactured housing lender Oakwood Homes for $373 million left the market optimistic that the issuer - when combined with previously acquired Clayton Homes - would provide stability to the lagging sector. But the news did not persuade players that outstanding transactions would miraculously remedy themselves.

Spreads on collateralized loan obligations are unusually wide given currently lower default rates and improved recoveries, suggesting now might be a good opportunity to purchase CLO paper.

Credit risk manager The Murrayhill Company is looking to expand its presence in the consumer asset-backed and CDO markets next year with new product offerings. Murrayhill, which typically offers oversight for mortgage pools of all sorts, is set to launch an array of initiatives, including CDO collateral manager services and an independent mark-to-market valuation service.

Year to date as of 12/03 Term (days) 11/27 11/28 12/01 12/02 12/03 1-week