Chotin Asset Management Corporation. 1 ● Chotin Asset Management Corporation (“CAMCO") is an affiliate of The Chotin Group Corporation ("TCG") and encompasses.
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Chotin Asset Management Corporation
Chotin Asset Management Corporation2
● 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 privately held 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 $4 billion of NMC-originated and third party loans.
● CAMCO’s subsidiary Chotin Fund Management Corporation (“CFMC”) is the
collateral manager of ten ABS CDOs.
Overview
History of The Chotin Group
Chotin Asset Management Corporation3
Prior to 1984
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.
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.
Mr. Chotin 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 a 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 CFMC issued its first two CDOs, Saturn Ventures 2004 – Fund America Investors III,
Ltd., and Mercury CDO 2004-12005 CFMC issued three CDOs, Neptune CDO 2004-1, Neptune CDO II, and Mercury CDO II,
bringing the notional asset issuance up to $2.85 billion.2006 CFMC issued two CDOs, Neptune CDO III, and Mercury CDO III, bringing the notional asset
issuance up to $4.25 billion.2007 As of June, CFMC is the manager of three new CDOs, Neptune CDO IV, Neptune CDO V and
Mars CDO I, it’s first CDO of CDO’s, bringing its total CDO issuance up to $6.2 billion across ten CDOs.
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CDO Issuance
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
Neptune CDO IV Mezzanine ABS CDO 1,000.0 March 2007
Mars CDO I Synthetic CDO of CDOs 600.0 April 2007
Neptune CDO V Mezzanine ABS CDO 350.0 June 2007
Total 6,200.0
Issuer Type Notional $(mm) Closing Date
CFMC cash-flow CDOs under management
In 2003, TCG through CFMC 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
Chotin Asset Management Corporation
Chotin Asset Management Corporation5
Organizational Chart
Jennifer M. LandExecutive Assistant/
HR Director
Nicole BrownExecutive Assistant
to the President
Doug A. SandersSystems
AdministratorJulie E. Backer
Staff Accountant
Andy P. WolfInvestment/
Surveillance Analyst
Peter O. ReynoldsTrading Operations
Ross S. ChotinAssociate
David HattelSenior Software
Engineer
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 PielDirector of Information
Technology
Hilary U. SnyderInvestment/
Surveillance Analyst
Matthew R. KrumpInvestment/
Surveillance Analyst
Nathan B. CallardInvestment/
Surveillance Analyst
Eric KnabQuantitative Analyst
Isaia M. CarruciInvestment/
Surveillance Analyst
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
Chotin Asset Management Corporation6
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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Structured Finance Process
Chotin Asset Management Corporation8
Structured Finance Process Cont’d
Chotin Asset Management Corporation9
Structure and collateral complexion drives asset selection from the bottom-up
Asset & Collateral Review
Delinquency Performance
Ratings Migration Pricing
Surveillance
Analytics PurchaseCDO
Portfolio
CDO Surveillance & Monitoring
Ratings Tests Compliance Tests Quality Tests
Information used to enhance analytics
Proactive Loss Mitigation
A Tale of Two Mortgage Pools, Same Dealer Shelf
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Positive Attributes
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)
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)
• Bond #1 - Issued July 2004• New Century originated collateral• Avg. FICO 616• Baa3/BBB-• Initial Total Support: 3.40%
• Bond #2 - Issued June 2004• Argent collateral, Ameriquest wholesale • Avg. FICO 620• Baa3/No S&P Rating• Initial Total Support: 3.55%
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 July, 2004.
Chotin Asset Management CorporationChotin Asset Management Corporation
CAMCO invested in Bond #1 and rejected Bond #2
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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.
Chotin Asset Management Corporation
____________________Source: The Chotin Group Corporation. As of July, 2004.
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Performance to Date:
Through both a quantitative and qualitative
analysis,we steered clear of the sub-performing asset.
Was CAMCO right?
Bond #2
Cumulative losses: 6.50%
REO: 6.40%
60+ Delinquency: 5.30%
Moody’s Downgrade from (Baa3/BBB-) to
(B3/B-)
Bond #1
Cumulative losses: .71%
REO: 3.79%
60+ Delinquency: 1.96%
No Change in Ratings (Baa3/BBB-)
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 May 25, 2007, Remittance Report.
Chotin Asset Management Corporation
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Biographies
Chotin Asset Management Corporation
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Helen M. DickensPresident and Chief Operating Officer
Biographies
Steven B. ChotinFounder and Chairman
Zachary H PashelExecutive Vice President and Head of Structured Finance
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.
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. 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.
Chotin Asset Management Corporation
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Jim Peaslee, CFAVice President/Portfolio Manager
Biographies
Jeffrey Stemmermann, CFAVice President/Portfolio Manager
Ross S. ChotinAssociate
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.
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. Chotin is a member of the Structured Finance Group and is involved with all aspects of business development and investor relations. Previously, he was responsible for trading operations, which included trade settlement, asset pricing, and warehouse reconciliation. Prior to joining Chotin in 2003, Mr. Chotin worked in hotel management for Sage hospitality, a nationally recognized hotel management company, based in Denver.
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Andy WolfInvestment/Surveillance Analyst
Biographies
Hilary U. SnyderInvestment/Surveillance Analyst
Matthew R. KrumpInvestment/Surveillance Analyst
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 Chotin, 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.
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.
Chotin Asset Management Corporation
Ms. Snyder is a member of the fixed income trading and analytics team. She is responsible for maintaining Chotin’s 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.
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Isaia M. Carucci, CFAInvestment/Surveillance Analyst
Biographies
Nathan B. CallardInvestment/Surveillance Analyst
Nathan B. Callard is a member if 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, he was at Clayton Fixed Income Services and responsible for valuing ABS and RMBS portfolios and an analyst in their Credit Risk Management group, performing loan level surveillance on home equity ABS deals. Mr. Callard also worked as an analyst for Manning & Napier Advisors, a privately held money manager. He holds a BA in Economics from St. Lawrence University. He is currently a Level 2 Chartered Financial Analyst candidate.
Isaia M. Carucci is a member of the fixed income trading and analytics team. He is involved with credit and surveillance analysis for the Structured Finance Group. Prior to joining Chotin, Mr. Carucci worked as an independent market maker in fixed income derivatives. Mr. Carucci also has experience as a stock market analyst at Charles Schwab and a floor trader for Societe Generale in the Eurodollar options pit at the Chicago Mercantile Exchange. He holds a Bachelor of Science degree in Industrial Engineering from Purdue University and an MBA from the Marshall School of Business at the University of Southern California. Mr. Carucci has earned the right to use the Chartered Financial Analyst designation.
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.
Chotin Asset Management Corporation
Eric WesterhausenOriginator / Servicer Surveillance Analyst
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Peter ReynoldsTrading Assistant
Biographies
Eric KnabQuantitative Analyst
Jennifer M. LandExecutive Assistant to the Chairman/HR Director
Mr. Knab is a member of the structured finance trading and analytics team primarily responsible for portfolio analytics and research. Prior to joining Chotin, Mr. Knab was a Senior Financial Analyst for CollegeInvest, where he managed the Financial Planning and Analysis function of the organization, including developing analytic and reporting systems, pricing and forecasting models, and investment strategies. Prior to CollegeInvest, Mr. Knab spent three years with the MurrayHill Company as the Manager of Analytics and Research. Mr. Knab holds a Master of Arts degree in Economics from the University of Colorado and a Bachelor of Science degree in Economics from the University of Minnesota.
Mr. Reynolds manages operations for the fixed income trading team, including all settlement and transaction oriented duties. Before joining Chotin, 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 has also been involved in the mortgage industry as a mortgage banker. He holds a Bachelor of Arts degree from Vanderbilt University.
Ms. Land oversees office administration for Chotin and its affiliates, including the Chotin Foundation where she serves as a director. She also heads all aspects of the firm’s human resources function, including recruiting and benefit implementation. Ms. Land also serves as Mr. Steven Chotin’s Executive Assistant, a role she has held since 1996. She joined Chotin in 1993 as a part of the company’s administrative staff and has held increasing roles of responsibility since that time, including serving as project manager on a number of Chotin initiatives that fall outside the scope of her job responsibilities. Prior to joining Chotin, Ms. Land held administrative positions in the graphics and medical software development industries.
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Michael B. PielDirector of Information Technology
Biographies
Richard R. ReismanVice President and General Counsel
David FrederickChief Financial Officer
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.
Mr. Piel is the Director of Information Technology 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.
Mr. Frederick is responsible for managing all accounting functions at Chotin. 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 department. David graduated from the University of Houston in 1981 with a BBA in accounting and is a Certified Public Accountant.
Chotin Asset Management Corporation
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