A simplifying assumption used to calculate Accrued Interest for many fixed rate bonds in the home equity market. The assumption is that every month is composed of exactly 30 days, and that the entire year has exactly 360 days. Under the 30/360 assumption, the bond accrues interest for each day during a month at the coupon rate divided by 360 times the beginning of month class balance, however, the total interest paid for any month will equal 30 divided by 360 times the coupon rate times the beginning of month class balance regardless of how many days there actually are in the month. If a sold bond is not settled on the first day of the accrual period, the buyer pays the Seller this daily amount for the number of days the Seller held the bond during the accrual period. See Accrual Type for more information.

The aggregate balance of loans in a pool that are delinquent by 30-59 days at the end of the month. This category of loans is often referred to as "30-days delinquent", "30-days late" or as just "30-days" for short. Technically, the loans reported in this category are two payments delinquent on the date the tape was created. See definition of Delinquent for additional detail.

The aggregate number of loans in a pool that are delinquent by 30-59 days at the end of the month. Technically, the loans reported in this category are in fact two payments delinquent on the date the tape was created. See definition of Delinquent for additional detail.

The percentage of loans in a pool that are delinquent 30-59 days based on aggregate end of month loan and pool balances. It is calculated as the 30-Day Delinquent Balance divided by the Ending Pool Balance. See definition of Delinquent for additional detail.

The percentage of loans at the end of the month that are delinquent by 30-59 days based on end of month loan counts. The number is calculated as the 30-Day Delinquent Number divided by the Loan Count End of Month. See definition of Delinquent for additional detail.

The form used (and found on the SEC web site EDGAR) to file a Prospectus or Prospectus Supplement with the SEC.

The aggregate balance of loans in a pool that are delinquent by 60-89 days at the end of the month. See definition of Delinquent for additional detail.

The aggregate number of loans in a pool that are delinquent by 60-89 days at the end of the month. See definition of Delinquent for additional detail.

The percentage of loans in a pool that are delinquent by 60-89 days at the end of the month based on end of month loan and pool balances. See definition of Delinquent for additional detail.

The percentage of loans in a pool that are delinquent by 60-89 days based on end of month loan counts. See definition of Delinquent for additional detail.

The sum of the current dollar balances of all loans that are in the 60-Day Delinquency rate category or higher, including loans in Foreclosure, bankruptcy and REO, divided by the total end of month pool balance (Ending Pool Balance). A moving average of this statistic is often used in the Delinquency Trigger Test to determine whether the Subordinate Bonds and/or OC are allowed to Step-Down. See definition of Delinquent for additional detail.

A form used to report several types of information of interest to ABS investors. The first 12 remittance reports are typically filed with the SEC as 8-k's, as are the Computational Materials. The Pooling and Servicing Agreement and other deal documents are also filed as 8-k's.

The aggregate balance of loans in a pool that are delinquent by 90-days or more at the end of the month. See definition of Delinquent for additional detail.

The aggregate number of loans in a pool that are delinquent by 90-days or more at the end of the month. See definition of Delinquent for additional detail.

The percentage of loans in a pool that are delinquent by 90-days or more based on end of month loan and pool balances. See definition of Delinquent for additional detail.

The percentage of loans in a pool that are delinquent by 90 days or more, based on the number of loans outstanding at the end of the month. See definition of Delinquent for additional detail.

In the asset-backed security market, the term ABS has two meanings. Most commonly, it is short for Asset-Backed Security. But the term ABS also names a prepayment model used to quote speeds in the Auto market. Mathematically, the equation to convert from a SMM rate (i.e., the Single Month Mortality rate) to an ABS prepayment speed is:



Where SMM is express as a percent (i.e., as 2.34 as opposed to .0234) M is the age of the loans in the pool (not the age of the pool), in months, since origination.

A method for calculating Accrued Interest. In the Actual/360 method, a daily interest amount is calculated by dividing the annual coupon rate by 360 days and then multiplying this daily interest rate by the face amount of the bond at the beginning of the period (typically a month). On the Distribution Date, the Trustee will pay the Owner of Record this daily amount times the number of days in the month. Similarly, if a bond is between Record Dates, the buyer pays the Seller this daily amount for the number of days the Seller held the bond during the month of sale (typically up to the Settlement Date).

A method for calculating Accrued Interest. In the Actual/Actual method, a daily interest amount is calculated by dividing the annual coupon rate by actual number of days in the year and then multiplying this daily interest rate by the face amount of the bond (Beginning Class Balance) at the beginning of the period (typically a month). On the Distribution Date, the Trustee will pay the owner of record this daily amount times the number of days in the month. Similarly, if a bond is between Record Dates the buyer pays the Seller this daily amount for the number of days the Seller held the bond during the month of sale (typically up to the Settlement Date).

This field lists the method used to calculate Accrued Interest due on a bond. Each month, the Trustee must calculate the interest due to each Certificateholder using the Accrual Type disclosed in the Prospectus Supplement. In addition, when a bond is sold mid-month, the interest earned during the month is generally split between the buyer and Seller. Typically, the buyer will be the Owner of Record (which is often at the end of the month) by the time the sale is settled, and so will receive the full payment due for that month. To compensate the Seller for the interest accrued during the portion of the month the Seller held the bond, the purchase price is increased to replace the interest accrued but not paid for the time the Seller held the bond. Three methods are commonly used in the ABS markets to calculate Accrued Interest and are defined under their own headings in this Glossary. See: Actual/Actual, Actual/360, 30/360.

Interest earned but not paid. See Accrual Type for details.

(See also New Advances Total, New Interest Advances, New Principal Advances, Total Advances Beginning of Month, Total Advances End of Month, Advances Repaid, Incremental Advances)
Virtually all transactions require the Servicer to remit a full month of scheduled interest (and usually scheduled principal) on each loan, even if the Servicer does not collect the full amount from the borrowers. There are two reasons why the Servicer may not collect the full amount due. First, a borrower may prepay-in-full during the month. In these circumstances, the borrower is only required to pay interest up to the day of prepayment, leaving an interest shortfall for the balance of the month. Monies the Servicer pays to make up for these prepayment related shortfalls are called Compensating Interest (defined under Compensating Interest below).

The second, and more common reason in the home equity market, is that the borrower may be delinquent. In these cases, the Servicer is generally required to pay, from its own funds, all delinquent payments plus, if needed, all costs incurred in the Foreclosure and liquidation process. Monies the Servicer pays to cover delinquency related shortfalls are called Advances. Given the lengthy Foreclosure process in some states, the high rates of interest on Home Equity Loans, and the costs of property insurance, property taxes, legal fees, and property maintenance, the total amount advanced is often substantial. On a loan that ultimately ends up in liquidation, Advances can easily total 20% to 50% of the loan amount.

Operationally, Advances are a loan to the Trust. The Servicer is repaid in one of two ways. First, the borrower may cure by remitting all Delinquent payments and all associated delinquency and Foreclosure costs. These funds are then used to repay the Servicer. Second, if the borrower does not cure, the Servicer will complete the Foreclosure process, liquidate the property, and is then entitled, on a first priority basis, to take from the liquidation proceeds all monies needed to repay all Advances. The Certificateholders only get what is left over. No explicit interest is earned by the Servicer for "loaning" money to the Trust, but the late fees associated with delinquent payments and excess liquidation proceeds beyond the face amount of the liquidated loan (if any) are usually given to the Servicer as additional compensation for both the work involved and for making the "loan" to the Trust.

In some cases, it may turn out that the Servicer has Advanced more than can be recovered from the sale of the property. If so, the Servicer is usually still entitled to a full recovery of Advances, however in these cases, repayment of the missing funds is often made from deal cash flows left over at the bottom of the WaterFall (i.e., after all other distributions have been made), although the exact priority of repayment of over-advanced funds does vary from deal to deal. Because the Servicer is at risk if they over-Advance, there are limits on the Servicer's obligation to Advance. By and large, the Servicer is not obligated to Advance on a particular loan if the Servicer believes that a full recovery of Advances is not possible from the liquidation of that loan.

Total Advances repaid to the Servicer during the month. See Advances for details.

A Trigger Test that requires a deal to exceed some minimum age before certain payments can be made to Subordinate Bonds and/or to the OC holder. The most common minimum deal age in the home equity market is three years, although occasionally other minimums are used. See Trigger Test for more detail.

The market for mortgage-backed securities issued or guaranteed by Freddie Mac, Fannie Mae, or Ginnie Mae. The term can also refer to the market for debentures issued by any of these institutions.

A loan designed to pay itself off over a fixed amount of time through regular periodic payments of interest and principal. Most residential mortgages in the U.S. are amortizing.

See APR.

For Student Loan transactions, only.

    Claims In Process Balance/Loans in Repayment Balance

Following certain events based on loan delinquency, an appraisal will be performed to determine if the property value justifies any further advances by the master servicer. If the value is reduced below the loan balance plus authorized advances, the master servicer will stop or reduce principal and interest payments on that loan to the Trustee. The Trustee will then reduce principal and interest payments to the certificate holders in order of their priority, beginning with the first-loss security.

Short for Annual Percentage Rate. The APR is the Internal Rate of Return (from the borrower's perspective) on a mortgage after accounting for certain fees and costs as defined in the Federal Truth-In-Lending Act (15 USC 1606).

Short for Adjustable-Rate Mortgage. A one-to-four family residential mortgage with an interest rate that changes over time to reflect changes in some market interest rate. The market interest rate chosen to calibrate the ARM adjustment at each Change Date is called the Index. Common Indexes include the one-year U.S. Treasury rate, six-month LIBOR, and the 11th District Cost of Funds rate. In most ARMs, rates adjust once a year and then remained fixed until the next Change Date, although six month adjustment periods are also common and others exist. Many ARMs have an initial period of uneven length during which time a lower than normal rate may be charged. This period is often referred to as the long Teaser Period. ARMs with especially long Teaser Periods(offering low fixed rates for two to seven years) are called Hybrid ARMs, and these have become very popular in the home equity market.

A security collateralized by, or representing an ownership interest in, a pool of loans or receivables. The two key exceptions to this definition are securities backed by commercial mortgages, which are called Commercial Mortgage-Backed Securities, and those backed by prime residential mortgages, which are called Mortgage-Backed Securities in the Agency world (or MBS for short) and Residential Mortgage Backed in the non-Agency world (or RMBS for short). The phrase Asset-Backed Security is often shortened to ABS. There are dozens of different types of ABS (defined by the collateral backing the security), however the three largest classes of ABS - Home Equities, Autos, and Credit Cards - comprise the bulk of the market.

The average size loan balance of all loans still outstanding in the pool. Calculated by dividing the end of month pool balance by the end of month number of loans outstanding (including loans on REO's).

The average size of the pool during the month calculated by adding the Beginning Pool Balance to the Ending Pool Balance and dividing by two.

See DTI.

Party that agrees to take over the servicing of the pool if the primary Servicer fails to perform.

A mortgage that must be paid in full before it is completely amortized. Most Home Equity Balloon mortgages mature in 5 or 7 years, but amortize on a 30-year schedule, so that at the maturity date, most of the original balance of the loan is still outstanding and must be paid. From an investor's point of view, balloon loans have the advantage of limiting extension risk, but carry additional credit risk because the homeowner may be unable to repay the large lump sum due at the maturity date. Note that even if the home owner has a good credit record and solid employment credentials, the borrower could still default at the balloon date simply because interest rates have risen to the point where the borrower does not qualify for refinancing.

For the purposes of this data base, Bankruptcy means that a Mortgagor (i.e., borrower) has filed for relief under any one of the chapters of the U.S. bankruptcy code. Remittance reports usually do not indicate the chapter under which the borrower has filed. In the ABS market, when a homeowner files for bankruptcy, they are most often attempting to forestall a Foreclosure process, so bankruptcies are an indicator of future credit problems in a pool. Note, however, that in some cases, borrowers file bankruptcy to protect assets other than their home (for example, a business), and these borrowers generally continue to pay their mortgage on time.

The face amount of loans in the pool at the end of the month with borrowers who have filed for Bankruptcy protection.

The percentage of loans at the end of the month, based on dollar amounts, with borrowers who have filed for Bankruptcy protection. Mathematically, it equals the Bankruptcy Balance divided by the Ending Pool Balance.

The number of borrowers in a pool at the end of the month who have filed for Bankruptcy protection.

The number borrowers at the end of the month who have filed for Bankruptcy protection divided by the Ending Pool Count.

One one-hundredth of one percent, which means that one percent is composed of 100 basis points. The term is used to avoid certain ambiguities that arise when discussing changes in interest rates. For example, if an ARM initially has an interest rate of 10%, and upon reset has a rate of 11%, one could say that the rate has increased by 1% (i.e., 10% plus 1%), but one could also say the rate has increased by 10% (i.e., 10% times 1.1). By stating that the increase is 100 Basis Points, the ambiguity is avoided.

Common usages for the term Basis Point:

1. For Spreads: If a bond is offered at a Spread of 75 basis points over some benchmark, and if that benchmark yield is at 6.00%, then the bond is being offered at a 6.75% yield (IRR).
2. To state the Underwriting Fee: If the Underwriter's Discount listed in the Prospectus is 25 Basis Points, and if the deal size is $100 million, then the Underwriter will earn $250,000 (0.25% of $100 million) for Underwriting the transaction.

The word Basis Point is sometimes abbreviated as either BP or as bp.

The balance at the beginning of the month for a particular bond (NOT the pool).

The sum of the face value of all loans plus all funds held in prefunding accounts at the beginning of the month. After all Prefunding is used or returned, the Beginning Potential Pool Balance will equal the Beginning Pool Balance.

The Beginning Pool Balance is the sum, taken at the beginning of the month, of the face amount of all loans in the pool, including loans that had existed on REO's but excluding any amounts held in Basis Points. The Beginning Pool Balance in any month always equals the Ending Pool Balance of the prior month.

Number of loans in a pool at the beginning of the month.

The member of the Underwriting Syndicate that keeps track of all bids received during the new issue process. Usually, the Lead Manager is also the Book Runner.

The term Bond is used loosely in the ABS world to refer to both true Bonds and more commonly, to Certificates of Ownership issued by the Trust that holds the assets.

The word Bondholder is commonly used to refer to investors in asset-backed securities, even though most asset-backed securities are issued as trust certificates, not bonds, and so technically, most investors in ABS are Certificateholders. Operationally, the distinction is immaterial for most investors. Most home equity transactions make a REMIC election, and under REMIC, ABS Certificates are taxed as if they were true debt obligations.

An unconditional and irrevocable insurance policy that promises investors they will receive timely payments of all interest and ultimate payment of all principal due on the insured Certificates or Bonds. Bond Insurance is often referred to as a Wrap.

The dollar amount paid each month for Bond Insurance. The insurance premium paid each month as a percent of the beginning of month pool balance. This amount is generally constant throughout the life of the deal. Often this number is estimated from the remittance data because it is rarely explicitly listed in any of the publicly available deal documents or reports.

A company in the business of issuing insurance policies on specific bonds that protect investors against losses on Bonds. If a bond is insured, the Bond Insurer's name will be listed on ABSNet's Deal Summary and Class Summary Pages in the Credit Support area. Most Bond Insurers will only guarantee bonds that already have some form of first loss credit support, typically, enough support for the bonds to carry at least a triple-B rating on a stand alone basis. Over the late 1990s and early 2000s, roughly half of all new issue home equity Certificates were enhanced with Bond Insurance.

A Bond Rating is an opinion on the likelihood of a bond paying investors interest and principal as promised. Most often, a Bond Rating is simply referred to as a Rating. Currently, three Bond Rating Agencies dominate the United States ABS market: Standard & Poors, Moody's Investors Service, and Fitch IBCA. Duff and Phelps Credit Rating Agency was active in the ABS markets until it was purchased by Fitch IBCA in the year 2000. Bond Ratings are listed by Rating Agency in the field Current Rating on the Deal Summary Page and in the Bond Ratings section of the Class Summary page.

Any one of several private companies that expresses opinions on the credit worthiness of various bonds and corporations. The three main Bond Rating Agencies in the United States are: Standard & Poors, Moody's Investors Service, and Fitch IBCA. See the Bond Rating and Rating Agency for more detail.

See Mortgage Broker and Wholesale Channel.

Most home equity asset-backed securities are issued as Certificates which represent a beneficial interest in the Trust that holds the assets securitized. Some ABSs are issued as Notes or Bonds.

Most home equity asset-backed securities are issued as Certificates that represent a beneficial ownership interest in the Trust that holds the pool of mortgages securitized. The owners of these Certificates are Certificateholders. See also Bondholder and Certificate.

Date on which the payment on an ARM adjusts. See Dates for other important dates in the life of a deal.

Loan balances that have been written down to zero. The term Charge-Off is commonly used in the credit card, HLTV, and other unsecured sectors of the ABS industry where recoveries tend to be scant, and is not commonly used to describe liquidations in other areas of the ABS market.

A list of classes senior to a class or senior to a form of credit support or liquidity support.

Technically, a Class refers to a group of bonds that all have the same level of credit risk, however in practice, the term Class and Tranche are used interchangeably. Many ABS transactions have a senior class, which is the last class to take losses, supported by junior, or subordinated, classes, which take losses in a specific order. The senior class is often subdivided into Tranches that specify when principal will be repaid.

Each Certificate in a transaction has a name, typically composed of letters that indicate seniority and numbers or roman numerals that indicate a loan group, or a position in a sequential pay order, or both. Usually, Class Names with the letter A in it are Senior Bonds, Class Names with an M in it are high investment grade Subordinate Bonds, while Class Names with a B in it are lower rated Subordinate Bonds. Numbers used within the senior Class Names typical indicate in which principal is repaid to the various certificates.

There are two normal ways for a Home Equity transaction to terminate. First, all of the underlying loans in the pool can pay off, either through scheduled repayment of principal, through Prepayments, or through default induced terminations. Second, virtually all deals grant one of the parties to the deal (most often, the Servicer) the right to call the collateral after the deal has paid down to some specified level. There are no industry standards for the design of the call option, but there are common themes. Most home equity deals can be called only after the Pool Factor has fallen to 10% or less, although more recently, 20% levels have been adapted by some Issuer's. The right to exercise the call option is usually held by the Servicer, and the strike price is usually set to equal the Accrued Interest, plus the face amount of the remaining loans, plus the face amount of the loans that existed on all REO. This strike formula insures that the when the deal is called, the bondholders receive all interest due plus the par value of their bond. Occasionally, the strike price to equal all interest due, plus the face amount of the loans, plus only the appraised value of the REO, which means that when the call is exercised, there may not be enough proceeds to payoff all the bonds at par. In deals with multiple loan groups, some deals allow each loan group to be called separately, others require all groups to be called together. Many other variations exist. The exact provisions of the Cleanup Call option are usually listed in the Prospectus Supplement under the heading "Optional Termination".

Pool Factor level at which a pool or deal can first be called. See Cleanup Call Option for details.

Lists whether sub-pools can be called separately (separate) or only at the same time (joint).

Party or parties who holds the right to exercise the Cleanup Call Option. Often, when several parties have the right to call the collateral, one party has the first right, followed by others in a specific sequence.

Date on which the assets are transferred into the Trust, are paid for, and all of the documents creating the securitization are executed. See Dates for other important dates in the life of a deal.

See Combined Loan-to-Value Ratio.

The sum of the face values of all mortgages on a particular property divided by the market value of that property. The CLTV is a primary measure of risk in the Second Lien and High LTV sectors of the Home Equity market. Often abbreviated to CLTV.

See The Computational Materials.

Money paid into the Trust during the month (typically by the Servicer from its own funds) to make up for interest shortfalls caused by mid-month Prepayments. See Advances for more detail.

The amount of interest due but not obligated to be paid to Certificateholders because of mid-month Prepayments. Also called Prepayment Interest Shortfalls. See Advances for more detail.

A disclosure document different than and separate from the Prospectus and Prospectus Supplement that may be distributed to investors prior to the sale of new ABS and which is allowed to contain descriptive information about the securities being offered. Typically, the Computational Materials show for each security that is expected to be issued, the size, the expected WAL, whether the coupon will be fixed or floating, the expected rating levels, and other types of information typically included in the Summary Section and the Pool Stratification Section of a Prospectus Supplement. Yield tables are also typically included in the Computational Materials. The Computational Materials must be filed as a form 8-k with the SEC within two days of first use.

A company in the business of pooling large numbers of loans for the purpose of securitization. The Conduit is sometimes referred to as the Sponsor or the Seller in a Prospectus and, the Conduit is also often incorrectly called the Issuer by many market participants.

A mortgage that meets Fannie Mae and/or Freddie Mac purchase requirements. Generally, Fannie Mae and Freddie Mac purchase only prime quality loans below a Federally mandated limit. Conforming loans are generally not found in Home Equity pools because it is more efficient to sell these loans to Fannie Mae or Freddie Mac.

See CPR.

A measure of the rate of change of Duration. See Duration for more detail.

An agent in the primary mortgage market who originates and funds loans, generally according to a Conduit's guidelines with the expectation of selling the loans to the conduit. Also known as a Mortgage Banker. Some Correspondents sell loans on a "flow" basis to Conduits, which means they are sold as they are produced, while other choose to sell on a "bulk" basis, meaning the Correspondent acquires a large number of loans and then sells them as a block to the best bidder. See Origination Channels

The interest rate paid on a bond expressed as a percentage of par. Can also be quoted as a spread over an index (such as LIBOR ) for a floating rate bond. The Coupon Rate can change over time, even on fixed rate bonds. For example, many fixed rate home equity Certificates pay a higher rate of interest after the Optional Termination Date if the Cleanup Call is not exercised on the Optional Termination Date. The Coupon Rate at any point in time is listed in the database in a field called Current Coupon.

This field on the Class Summary page lists whether the bond coupon is fixed or floating rate.

CPR (Constant Prepayment Rate or Conditional Prepayment Rate) is the annualized, compounded SMM rate (Single Month Mortality rate). The formula to convert the SMM (when expressed in decimal form) into a CPR is:



For example, if Prepayments total $1,000,000 in a month, and if the scheduled return of principal equals $100,000, and if the beginning pool balance started at $100,100,000, then the SMM would be 1.00% ( = 1,000,000 / [100,100,000 - 100,000] ) and the CPR would be 11.3652% ( = 1 - [1 - .01]¹² ).

A loss of principal or interest caused by a bankruptcy court allowing a change in the original terms of a mortgage. Losses due to Cram Downs occur, but are rare.

See Credit Repository.

See Bond Rating.

Historical data on an individual's credit relationships including number, kind, tenure, payment history (e.g. charge-offs, late payments, foreclosures) as well as information contained in the public records such as bankruptcy filings or public liens filed. In addition to raw data, credit reports are now typically sold with a Credit Score, such as those provided by Fair Isaac and Company (called a FICO score), which is a single summary number designed to measure the probability of an individual defaulting on an obligation.

A private company in the business of collecting and reselling information on the number and types of credit relationships a consumer has, as well as information on how the consumer uses and pays on these credit relationships. The repositories also collect public record information on consumers such as lien, judgement and bankruptcy filings. The Credit Repositories typically do not have information concerning a consumer's employment, assets, income, or property. The three main Credit Repositories in the United States at the time of this writing are: Equifax, Trans Union, and Experian. Credit Repositories sell their data as Credit Reports, and these in turn are used by companies such as Fair Issac to generate Credit Scores. Credit Repositories are also referred to as Credit Bureaus.

A single summary number that measures the likelihood of a consumer defaulting. Credit scores are in common use, the most common being the FICO score. Most credit scores are based on a statistical analysis of large samples of data pulled from consumer Credit Reports maintained by the various Credit Repositories. Credit scores are typically not based on an applicant's job history, income level, assets, or information about the house being financed since this data is typically not contained in a credit report. Credit scores correlate well with the Risk Based Pricing system used by most Home Equity originators, however, the measures are not the same. Risk Based Pricing systems takes more information into account, for example, the borrower's debt-payment-to-income ratio and the LTV on the property being financed.

Cumulative Loss taken on a particular bond as of the end of the month. If the pool suffers losses that exceed support that protects any bond (typically OC and Excess Spread), then the Bond will suffer a loss of principal. In many deals, the loss can be reversed later on by future Excess Spread.

The sum of the face amount of all loans Liquidated (i.e., all Involuntary Terminations).

The sum of the face amount of all loans Liquidated (i.e., all Involuntary Terminations) divided by the original pool amount.

The sum of all losses of principal suffered to date by a pool regardless of how the losses are absorbed. Losses suffered on loans repurchased out of the pool at par and disposed of outside of the transaction are generally not included in the Cumulative Loss number. A few Issuer's, however, voluntarily report as an additional piece of information the extent of repurchase activity and what the Cumulative Loss would have been if the repurchased loans had remained in the transaction. In any month, the Cumulative Loss level will equal the current month's Incremental Loss plus the prior month's Cumulative Loss. Cumulative losses are generally reported on both an absolute dollar basis and as a percentage of the Original Pool Balance (unlike delinquencies which are generally reported as a percentage of the current Ending Pool Balance).

The Cumulative Loss divided by the Original Pool Balance.

Ending schedule balance of all loans modified during life of deal.

     Prior period Cumulative modified loan amount + current period modification amount

Cumulative number of loans modified.

     Prior period cumulative modified loan count + current period modification count

The total dollar amount of money recovered over the life of the pool to date from the liquidation of REO properties, Short Saless, and other dispositions of defaulted loans.

The total dollar amount of money recovered over the life of the pool to date from the liquidation of REO properties, Short Saless, and other dispositions of defaulted loans divided by the total balance of all the loans underlying these properties.

The total dollar amount of loans on units (e.g., Manufactured Houses, Autos, etc.) that have been repossessed due to borrower default.

The total dollar amount of loans on units (e.g., Manufactured Houses, Autos, etc.) that have been repossessed due to borrower default as a percentage of the Original Pool Balance.

The total dollar amount of new loans added to a pool that are not part of any Basis Point. After a deal is closed, the Seller will often substitute a new, good loan for a defective loan if the defective loan is found to not meet the original representations the Seller made for that loan.

The repayment of all past due sums owed by a Delinquent borrower. A borrower typically cures by simply paying all delinquent sums due, but it is not uncommon in the home equity market for borrowers to cure by completely paying off the loan in full, either by refinancing or from the sale of the house.

The percentage, based on dollar balances, of a group of Delinquent loans that Cure.

The interest payment as a percentage of the beginning of period face amount of the bond.

The current face dollar amount of a pool or a bond divided by the original face dollar amount of that pool or bond. Also just called the Factor.

This field shows the most recent Bond Rating assigned by each Bond Rating Agency. The Bond Rating Agencies periodically review the credit worthiness of each deal they rate and adjust the rating as they see fit. See Bond Rating for more detail.

The current dollar amount of all classes, Reserve Accounts, Overcollateralization and other credit support protecting the Senior Bonds from credit losses. This amount does not include Excess Spread.

The current amount of all classes, Reserve Accounts, Overcollateralization, and other credit support protecting the Senior Bonds from credit losses, expresses as a percentage of the Ending Pool Balance. Excess Spread is not used in calculating this amount.

The current dollar amount of all classes and Overcollateralization supporting a particular bond. This amount does not include Excess Spread.

The current percentage amount of all classes and Overcollateralization supporting a particular bond. This amount does not include Excess Spread.

    (Subordination Amount + Overcollateralization) / Ending Pool balance

A CUSIP is a sequence of nine numbers and letters that uniquely identifies each publicly traded security. The word CUSIP is short for Committee on Uniform Securities Identifying Procedures.

A voluntary prepayment of less than the full balance of the loan outstanding. Many home-owners choose to pay down their mortgage at an accelerated rate by including in their monthly payment more than the required, scheduled amount of principal due. In a fixed rate mortgage, this has the effect of shortening the term of the loan.

Date on which the composition of the pool is first fixed, typically the first day of the month in which the deal is sold. Note, however, that if the deal has Prefunding, the composition of the pool will change as new loans are added. The Cutoff Date is sometimes called the Issue Date. See Dates for other important dates in the life of a deal.

For convenience, various dates defined in this Glossary are listed with hyperlinks below:

• Closing Date
• Change Date
• Cutoff Date
• Dated Date
• Determination Date
• Distribution Date
• Due Date
• Earliest Step-down Date
• Final Scheduled Payment Date
• First Payment Date
• Launch Date
• Legal Final
• Pricing Date
• Record Date
• Settlement Date

The date on which the registration of a new security filed with the SEC becomes effective. Also called the Effective Date. See Dates for other important dates in the life of a deal.

Debt Service Coverage Ratio - A measure of a mortgaged property's ability to cover monthly debt service payments, defined as the ratio of net operating income or net operating cash flow to the debt service payments. A DSCR less than 1.0 means that there is insufficient cash flow by the property to cover debt payments.

In a narrow sense, (and according to the Bond Market Association manual) Default is defined as a failure to pay interest and principal on time that never cures. Operationally, this is a difficult definition to work with because a priori, it is impossible to know which loans will cure. We define Default as the event of either a Short Sale, a deed-in-lieu of Foreclosure or, most commonly, a loan passing from Foreclosure to REO, because virtually no loans cure out of these states. Remittance reports rarely present sufficient information for calculating Default Rates, however the Default Rate can be estimated from the Liquidation Rate.

The dollar amount of new Defaults in a month divided by the beginning of month pool balance.

The act of making an investment whole. The supplementing of existing terms available (typically through a cash payment) to make the currently available market yield equivalent to that of a pre-existing investment that is being terminated.

See Delinquent.

This field stores the value of the delinquency rate used to test whether the Subordinate Bonds are allowed to Step-Down. See Trigger Tests for details and definition.

Most Home Equity transactions require low delinquencies (typically measured as the 60+ Day Delinquency Rate) in relation to the remaining senior credit support level before the Subordinate Bonds can start to receive principal repayments. The Delinquency Trigger Test Target is the maximum delinquency rate for the pool that still allows the Subordinate Bonds to receive repayment of principal, assuming all other Step-Down tests are passed. See Trigger Tests for details and definition.

A loan that has not been paid by its Due Date; a loan that is past due. Every mortgage has a contractually specified date on which payments are to be made called the Due Date. If a borrower has not paid in full by the Due Date, then technically the borrower is Delinquent, although in practice, most loans allow a grace period of between 10 to 15 days, and the borrower will not incur a late penalty if the payment is made within the grace period. Most delinquency statistics reported in Home Equity remittance reports are based on a computer tape the Servicer creates after the close of business on the last day of the month. The Home Equity market generally uses the OTS convention of assuming that each month has exactly 30 days, so a borrower who has not paid on the last day of the month is only 29 days late and therefore is not included in the 30-day (i.e., 30 to 59 day) delinquency calculation. This means that borrowers listed as 30 to 59 days late have in fact missed two consecutive payments at the time the tape was cut. Similarly, borrowers classified as being 60-days delinquent (i.e., 60 to 89 days) are actually down by three consecutive payments, while loans that are reported in the 90-plus day delinquent category are actually down by at least four consecutive payments.

Delinquency data is usually reported in absolute dollar terms and as the number of loans delinquent. This data is also often converted into percentage terms. The denominator in the percentage calculation should use the end of month pool balance. This allows the statistic to be interpreted as a measure of how much of an investment is tied up in non-performing collateral. On occasion, however, we have seen the beginning of month balance and/or loan count used, which understates the delinquency levels.

For Student Loan transactions, additional delinquency buckets are available that take into account only loans currently in repayment mode.

To ensure that the transfer of loans from the Seller to the Trust is a valid true sale, the transfer is typically made in two steps. First, the Seller sells the loans to an intermediary called a Depositor, and then the Depositor sells the loans to the Trust in exchange for the Certificates.

The day of the month on which the Trustee is required to calculate the amount that it needs to pay to the bondholders on the next Payment Date (also called a Distribution Date). Typically, the Determination Date is around the middle of the month and precedes the Payment Date by seven to ten days. See Dates for other important dates in the life of a deal.

See Payment Delay.

A Bond whose selling price is below Par.

The day on which the Trustee is required to pay the Certificateholders. The Distribution Date in most Home Equity transactions is the 25th day of the month, but the 15th and 20th day of the month are also common, and some deals pay on other days of the month. If the Distribution Date is not a business day, then payment is typically made on the next following business day. The Distribution Date is set well after the Due Date on the loans to give the Servicer and Trustee enough time to collect and sort out the payments, but it also introduces a delay in the receipt of payment that effects the value of the security. Also called the Payment Date. See Dates for other important dates in the life of a deal.

Location where the assets reside.

Short for Debt-Payment-to-Income Ratio. The DTI is a type of financial leverage ratio designed to measure a borrower's ability to pay their mortgage. There are two different DTIs in common use, one called the "Front-end Ratio" and another called the "Back-end Ratio." The Front-end Ratio is calculated by dividing the borrower's total, monthly, housing related expense (defined as the monthly mortgage payment plus the cost on a monthly basis of property taxes and hazard insurance) by the borrower's total monthly income. Basically, the Front-end Ratio measures the percentage of the borrower's income that must be allocated to supporting the house. In the prime market, major lenders traditionally preferred this ratio to be at or below 28%. Subprime lenders do not traditionally use this ratio. Note that the numerator in this calculation is sometimes referred to as PITI, short for principal, interest, taxes and insurance, and all calculations are done pre-tax. The Back-end ratio is similar to the front-end ratio except that the numerator is expanded to include all other debt obligations, for example, the monthly cost of a car loan or student loan. Prime lenders traditionally preferred this ratio to be at or below 36% in the Agency market, and below 40% in the Jumbo market, while many Subprime lenders will allow this ratio to go as high as 60%.

The contractually specified day of the month on which the mortgage payment is due. Most loans, especially in the prime market, are due on the first day of the month. However, other days of the month are not uncommon in the home equity industry, particularly mid-month due dates. Most mortgages allow a grace period after the Due Date. If the borrower pays within the grace period, no late penalty is charged. See Dates for other important dates in the life of a deal.

The original formulation of Duration by Frederick Macaulay has two interpretations. First, it measure the rate of change in the price of a security given a small change in interest rates for the simple reason that the Macaulay Duration measure is the elasticity of price with respect to yield, which in turn is based on the first derivative of the basic bond pricing equation (i.e., the price of a bond equals the present value of its future cash flows). Second, duration also measures the average amount of time that an investment is tied up in the security, earning the yield on the security. For example, if a bond has a Macaulay Duration of 3 years, and the bond matures in 10 years, the investor's overall rate of return will be a linear combination of 3/10's of the IRR of the bond plus 7/10's the reinvestment rate earned on the intermediate cash flows generated by that bond. The Duration on most bonds changes as market interest rates change, and the rate of change of the duration is called Convexity. See also Effective Duration and Modified Duration and WAL.

The first date on which the Subordinate Bonds and OC can receive principal reductions, assuming that all other trigger tests are passed. See Dates for other important dates in the life of a deal.

Short for Eurodollar Synthetic Forward Curve, an interest rate benchmark for pricing short term, fixed-rate Home Equity Certificates and other short term ABS such as Autos and Equipment Leases. EDSF was first used in the late 1990s, after the 1998 liquidity crisis, as a replacement for Treasuries.

A Duration measure that takes into account the fact that the cash flows produced by a mortgage pool change as interest rates change because changes in interest rates affect the rate of prepayment.

The face amount of a class or Tranche at the end of the month, after taking account of all distributions made during the month.

The sum of the face amounts of all loans in a pool, including loans that had existed on REO's, taken at the end of the month after all distributions have been made. The Ending Pool Balance in any month will always equal the Beginning Pool Balance for the next month.

The number of loans in a pool at the end of the month, including loans on REO.

The Ending Scheduled Pool Balance is the balance that would have obtained at the end of the month if the only principal reductions during the month came from schedule amortization. Mathematically, the Ending Scheduled Pool Balance equals the observed Ending Pool Balance plus Curtailments, plus the balance of all loans terminated for any reason including Prepayments in full, Liquidations, and Short Sales. The Ending Scheduled Pool Balance can be (and often is) estimated by assuming that the pool is one big loan and using the Beginning of Month Balance as the loan size, the WAC as the interest rate, and the WAM as the term.

Short for the Employee Retirement Income Security Act of 1974, a federal law which limits the investment options available to most private pension and benefit plans. Until late 2000, the ERISA rules generally limited private pension that invested in ABS to Senior Bonds with at least a single-A rating. Subordinate Bonds were prohibited regardless of the bond's rating. On November 13, 2000, the Department of Labor approved a proposal to amend ERISA (with an effective date of August 23, 2000) which now allows private pension plans to purchase many types of subordinate ABS (as well as MBS and CMBS) so long as the bonds carry at least a triple-B rating. See Federal Register Vol. 65, No. 219, pages 67765- 67774 for details.

States whether the Certificate is allowed to be owed by pension funds subject to ERISA.

All cash flow left over after paying for 1) the administration of a deal (i.e., Servicing Fees, Trustee Fees, etc.), 2) the costs of external credit support (if any), and 3) the cost of financing a deal (payments to Bondholders). We distinguish between three levels of Excess Spread: Gross Excess Spread, Net Excess Spread, and Free Excess Spread.

The risk that a bond's maturity and/or average life may be longer than originally anticipated. Extension risk is most often associated with rising interest rates and the concomitant slowdown in prepayment rates, but there are other causes. For example, Subordinate Bonds are generally locked out from receiving principal payments until a series of Trigger Tests (related to pool's age and performance) are passed. If the pool does not pass these tests, and if there are still Senior Bonds outstanding, the Subordinate Bonds are not allowed to receive principal and so extend. The last bonds (senior or subordinate) in a deal will also extend if the Cleanup Call Option is not exercised. In this case, however, many deals compensate the investor by paying Certificateholders a higher interest rate after the cleanup call is exercisable but remains unexercised (see Step-up Coupon).

The current face dollar amount of a pool or a bond divided by the original face dollar amount of that pool or bond. Also called Current Factor.

See Trigger Tests.

Short for a commonly used Credit Score based on statistical models developed by Fair Isaac and Company, Inc. headquartered in San Rafael California.

The last theoretically possible Distribution Date, assuming no Prepayments, no defaults, and no exercise of the Cleanup Call Option. Also called the Legal Final. See Dates for other important dates in the life of a deal.

The date the first payment will be made to Certificateholders. Also called First Distribution Date. See Dates for other important dates in the life of a deal.

A mortgage with an interest rate that does not change. Note that although the interest rate on a FRM is fixed, the payment in some FRM designs can change, as, for example, in a graduated payment mortgage.

The dollar amount of Excess Spread left for distribution to the Issuer after covering all losses and after using Excess Spread to build or rebuild OC. It is in essence the residual cash left over at the bottom of the WaterFall that belongs to the owner of the residual interests (typically the Seller or a NIM transaction). When reported at the sub-pool level, we try to isolate each sub-pool's Free Excess Spread as if there were no cross-collateralization. When reported at the deal level, the composite Free Excess Spread cash flow from all sub-pools combined reflects any offsets due to cross-collateralization.

The Free Excess Spread generated during a month divided by that month's Beginning Pool Balance.

Foreclosure is a procedure that allows a lender to force the sale of a property at public auction to pay back a debt secured by that property. The details of the Foreclosure process vary from state to state. A loan typically enters Foreclosure when a Notice of Default (NOD) is sent warning the borrower that payment is past due and that the property will be sold to satisfy the debt if the borrower does not pay all sums owed.

Foreclosure typically ends in one of five ways:

• First, the borrower can "Cure" their deficiency, which means they pay back all sums due and the sale is canceled. The amount due can be substantial. In addition to past due interest and scheduled principal payments, the borrower must pay late penalties, missed hazard insurance and/or property tax payments, legal fees, filing costs, and all other costs associated with the Foreclosure process. Curing, however, is relatively common in the home equity market.
• Second, and more commonly, the borrower will fight the Foreclosure process, typically by filing for Bankruptcy protection. Often, the bankruptcy court will stay the foreclosure proceeding if the borrower starts making regular monthly payments again and repays arrearages over time. Sometimes this works and the Default cures, but more often, the borrower Defaults again and it only delays the ultimate loss of the house through Foreclosure sale.
• Third, the borrower may simply let the foreclosure process proceed, which will cause them to lose their house.
• Fourth, and less commonly, the borrower may not be able to pay back the sums owed, but rather than fighting the foreclosure process or letting the process proceed, the borrower may simply deed the property to the lender which obviates the need for Foreclosure. This is technically called a Deed-in-Lieu of Foreclosure, and is more colloquially called "mailing in the keys".
• Last, a borrower in foreclosure may make a good faith effort to try and sell their house to payoff the loan, but find that the best offer they get is not enough to repay the debt. In some cases, the lender (or in the case of an ABS, the Servicer on the Trust's behalf) will allow the sale at this insufficient price because the sale will cause a smaller loss than that anticipated from going through a lengthy foreclosure process. This type of settlement is called a Short-Sale.

This field tracks the face value of all loans that are in the process of being Foreclosed at the end of the month. See Foreclosure for details.

This field reports the Foreclosure Balance (i.e., the face value of all loans that are in the process of being Foreclosed at the end of the month) as a percentage of the end of month pool balance. See Foreclosure for details.

This field tracks the number of loans that are in the process of being Foreclosed at the end of the month. See Foreclosure for details.

This field reports the Foreclosure Number (i.e., the number of loans that are in the process of being Foreclosed at the end of the month) as a percentage of the end of month pool balance. See Foreclosure for details.

"See DTI".

For Student Loan transactions, the aggregate balance of all cash/reserve accounts that are factored into the senior and subordinated parity ratios.

In relation to a month, a trading party's general funding share reflects its proportionate share of the aggregate of charges for that month.

Generally accepted accounting principals require home equity Conduits to recognize gains at the time a pool is sold into a securitization. Since most home equity transactions leave the Seller with a residual cash flow stream, the revenue side of the sale needs to include an estimate of the present value of the expected future earning generated by this residual. For many small, stand alone Issuer's, the sum of these estimated future residual values represents the bulk of the companies' net worth. The estimation procedure, however, requires the company to accurately model each transaction and then to run each model using assumed prepayment, loss and discount rates. In practice, the size of the gain booked is extremely sensitive to the assumed inputs, and many companies over the late 1990s were forced to take significant write downs because their prepayment and/or loss assumptions were too optimistic.

A non-taxable form of ownership sometimes used to issue asset-backed securities. In the home equity markets, deals are more commonly issued as REMICS.

The Excess Spread generated by a deal before all losses (including losses due to cross-collateralization) and before using Excess Spread to build OC.

A term sometimes used to define Liquidations, which are the total face value of all loans liquidated during a period of time, typically a month. The term Gross Loss is misleading because it technically does not represent a loss, but rather, a potential for loss since REO's, when liquidated, produce a Recovery. See also Liquidations and Default.

The Gross WAC is the dollar-weighted, average coupon rate on all loans in a pool. In essence, the Gross WAC is a measure of a pool's total revenue potential as a percentage of the pool's balance. If you multiply the Beginning of Month Balance by the Gross WAC at the beginning of the month, the product is the total dollar amount of interest that is expected to be generated by the pool over that month, assuming a full month's interest is collected from each borrower (i.e., assuming full Advances and no Compensating Interest short falls). For a pool with n loans, the Gross WAC can be calculated as:

See Home Equity Loan.

Short for Home Equity Prepayment model. A Prepayment model which in the base case, assumes Prepayments start in month one at a 1% CPR, and then rise linearly to 10% CPR by month 10, remaining flat at 10% CPR thereafter. Similar to the PSA curve, one can use multiples of the HEP curve. For example, 20% HEP means that Prepayments are assumed to start at 2% CPR in month one, rising linearly to 20% CPR over ten months (notice the ramp length remains constant at 10 months), and then remaining constant at 20% CPR thereafter.

Originally, the term Home Equity Loan was applied to second lien mortgages made for the purpose of raising additional cash, as opposed to loans made for the purchase a home or loans made to refinance an existing loan at more advantageous rates or terms. Later, the use of the term expanded to include first lien one-to-four family Subprime residential mortgages because most of these loans are also made for the purpose of raising additional cash. These first lien loans were originally called B&C loans. Home Equity Loans in general are also often referred to as Subprime Mortgages or as Subprime loans. Generally, most loans now in the home equity market are first liens made to borrowers with either weak credit and/or borrowers who are over-leveraged (see DTI).

Short for High LTV loan, also sometimes called a 125 loan. HLTV loans are usually second liens made to borrowers with prime or near-prime credit histories but somewhat higher than prime levels of DTIs. The names 125 and High LTV come from the fact that in this market, the total indebtedness (the existing first lien plus the HLTV second lien) is allowed to exceed the value of the property by as much as 25%. The market for HLTV loans expanded rapidly in the mid-1990s until the liquidity crisis of October of 1998 forced many of the Sponsors of the this product to either go bankrupt of abandon the business.

See ARM.

Interest Coverage Ratio - The ratio between the interest earned on the assets and the interest on the securities plus servicing fees plus interest rate swap costs. Generally this ratio must be greater than at least one.

The coupon on the First Payment Date.

The interest amount owed on a Certificate in a given month. The Interest Due equals the face amount of the bond at the beginning of the month (i.e., the Beginning Balance) times the Current Coupon for that bond, times the number of days during the period (based on the Accrual Type) divided by the number of days assumed for the year (again based on the Accrual Type). See Accrual Type for more details.

The amount of interest paid in a given month on a particular bond. The Interest Paid may not equal the Interest Due for a number of reasons. See Interest Shortfall for details.

The monthly effective rate paid (or received, if you are a creditor) on borrowed money that will be reimbursed. Expressed as a percentage of the sum borrowed.

Certificate holders are not always paid all of the full interest they are due for any of several reasons. First, there could be shortfalls in collections due to delinquencies and defaults, and these may not be covered by Advances. Prepayments can also cause Interest Shortfalls (See Compensating Interest Shortfall ). In addition, many floating rate home equity bonds are issued as Funds Available Floaters, which means by definition that interest is only paid to the extent it is available from the underlying collateral.

A contract in which one party agrees to pay a fixed interest rate in return for receiving a floating interest rate from another party. See Swap.

The interest rate that equates the present value of all inflows to the present value of all out flows on an investment. Since it is generally assumed within the ABS world that there is only one out flow (the initial investment) which is followed by a series of strictly positive or zero inflows, the IRR calculated will be unique and is, therefore, the yield earned, given the purchase price, Accrued Interest, the assumed prepayment, default and severity rates, and the assumptions made about the exercise of the Cleanup Call Option. The IRR calculated on the monthly flows generated by a HEL security is defined by the Bond Market Association as the Mortgage Yield, and it is usually converted into a Bond Equivalent Yield.

Most home equity loans terminate because the borrower chooses to prepay the balance in full. This is a voluntary action: homeowners have the right but not the obligation to pay off the loan in full at any time. Some loans also terminate through the process of making normal, scheduled payments that by design amortize the loan balance in full over time. We denote all remaining loan terminations as involuntary. By and large, Involuntary Terminations are the result a borrower's inability or unwillingness to pay, which causes either a Foreclosure Sale, Deed-in-Lieu of Foreclosure, Short Sale, or other transfer of property to the Trust. The Trust then in turn sells the property. The Involuntary Termination is recorded in the month the Trust disposes of the property. Most often, Involuntary Terminations are caused by a drop in earnings or job loss, although sickness, death, divorce, incarceration, fire and natural disasters can also cause Involuntary Terminations.

See Involuntary Prepayment.

The law firm that represents the Issuer in a transaction.

Technically, the Certificates (or more loosely, the Bonds) that investors buy are issued by a Trust that holds the collateral, so the Trust is the Issuer. Market participants, however, often refer to the company (i.e., the Seller, Sponsor, or Conduit) that caused the Trust to be created and that assembled the collateral for the Trust, as the Issuer.

See Subordinate Bond.

First date a deal is announced in the marketplace. The purpose of the launch is to gauge market demand. See Dates for other important dates in the life of a deal.

The name of the Underwriter (or occasionally, Underwriters) with the primary responsibility for managing a particular ABS transaction. Also called Lead Underwriter or placement agent.

See Lead Manager.

See Final Scheduled Payment Date.

Short for the London Interbank Offering Rate, which is the interest rate at which banks offer to trade Eurodollar deposits in the London market. LIBOR is fixed once a day for a series of maturities. One-month LIBOR has become a widely used benchmark in the ABS market, particularly for floating rate ABS.

Lifetime average Loss Severity is calculated by dividing the Cumulative Loss by the balance of all loans Liquidated in producing that loss. Generally, the calculation does not include losses suffered on repurchased loans, although some Issuer's present the data both ways. The number is calculated by summing all losses over the life of the deal from the liquidation of REO properties, Short Sales, and other involuntary terminations, and dividing this total loss by the sum of the face amount of these loans at the time they were liquidated. Some issuers calculate this number using the original loan balances in the denominator, which lowers the resulting severity calculation.

The sum of the current face amounts of all loans extinguished during a period for involuntary reasons. The bulk of these will be from the sale of REO property, although Short Sales are another common reason for involuntary terminations.

All Liquidations in a month divided by that month's Beginning Pool Balance. Can be considered to be the Default Rate with no lag.

See Recoveries.

The total number of loans (including REO's) in a pool at the beginning of the month.

The total number of loans (including REO's) in a pool at the end of the month.

Scheduled principal balance of loans for which enforcement (aka foreclosure) proceedings are in process.

Number of loans for which enforcement (aka foreclosure) proceedings are in process.

Current rate of loans for which enforcement (aka foreclosure) proceedings are in process.

     Loans under enforcement — amount / beginning pool balance

Average Realized Loss (in percent) for all loans liquidated in a month (including losses on Short Saless). The Loss Severity is calculated by dividing the total Incremental Loss suffered during a period by the face value of all loans Liquidated to produce that loss.

Short for Loan-to-Value Ratio. The LTV equals loan amount divided by the value of the property. It is a primary measure of credit risk. The original distribution of the LTVs in a pool is usually reported in the Prospectus Supplement, but LTVs change over time as the loans amortize and as property values change.

Homes constructed in a factory and then shipped to a site, installed on a foundation, and attached to utility hookups. Often abbreviated as MH. Over the 1980s and 1990s, roughly 20% to 30% of all new homes sold were Manufactured Housing. Most loans made to finance the acquisition of MH are secured by the MH unit but not by the land under the unit. The land is typically rented. Consequently, Loss Severities tend to be high on MH when compared with other residential loan products. All Manufactured Housing units produced today must be certified as meeting standards set in the National Manufactured Housing Construction and Safety Standards Act of 1974 which is similar in scope and rigor to most state and local building codes. In fact, the construction materials used to build Manufactured Housing are essentially the same as those used in site built homes. For more information on Manufactured Housing, see the Manufactured Housing Institute's website manufacturedhousing.org.

See MHP.

Loans whose maturity dates have passed without being paid off.

See Subordinate Bond.

Short for Manufactured Housing and used to denote securities backed by loans on Manufactured Housing units. See Manufactured Housing for more details.

Short for Manufactured Housing Prepayment Rate, a common way to quote prepayment speeds in the MH market. The MHP model defines 100% MHP as a prepayment rate that ramps up from 3.7% CPR in month one by 0.1% CPR per month until it reaches 6.0% CPR in month 24. For month 24 and beyond, 100% MHP is defined as 6.0% CPR. Like the PSA prepayment model, MH speeds can be quoted as a multiple of 100% MHP. For example, if a MH pool prepays at 12% CPR in month 26, that can be quoted as 200% MHP (i.e., twice the standard MHP rate).

Ending scheduled balance of loans modified during the reporting period.

Number of loans modified during the reporting period.

Modified Duration measures the approximate percentage change in a bond's price when interest rates change by 100 Basis Points and assuming the cash flows are fixed. The Bond Market Association defines Modified Duration as the Macaulay Duration divided by (1+bond equivalent yield/200). See the Bond Market Association's Uniform Practices Standard Formulas Manual, Chapter SF, page 49, for more details.

A document that creates a security interest in real property, typically use to secure a debt evidenced by a promissory note.

A non-banking company that lends mortgage money directly to homeowners. The Mortgage Banker takes title to the loans it makes, and then typically sells the loans within a fairly short period of time to securitization Sponsors/Conduits or other investors. Mortgage Bankers charge borrowers fees for their loans, and also make money trying to sell their loans at above par prices. Some Mortgage Bankers retain the servicing rights, others sell them with the loans.

An agent in the primary mortgage market that arranges loans by matching homeowners with lenders, but the Mortgage Broker does not fund the loan itself and so is not in the chain of title. Typically, a Mortgage Broker collects all of the information needed to apply for a loan, and is adept at finding an underwriting program that matches the borrower's needs and characteristics. Mortgage Brokers typically earn fees from the borrower for arranging the loan, and may also earn fees from the purchaser of the loan.

The party (homeowner) who borrows money, issuing a mortgage as security.

The party that lends money to a homeowner, taking a mortgage or deed of trust on the property as security.

Multi-Currency deals are deals that have tranches denominated in more than one currency. The class balances of Multi-Currency deals will always be converted to the pool currency of the deal and the FX Rates used in the calculations will be displayed in the FX rate hyperlink listed on the deal and class summary pages on ABSNet. For example, if a deal has multiple tranches denominated in different currencies, then all class balances will be converted to the pool currency based on the conversion rate that is available. The example listed below is a GBP based deal that has available rates for the different currency tranches:

Class Currency Ending Balance Rate Converted Balance

A-1 USD 500,000 .546448 273,224 A-2 GBP 400,000 N/A 400,000 B EUR 30,000 1.2582 37,746 C AUD 20,000 .734899 14,697         725,667 Total Converted Aggregate Bal

The following list of fields below that use total class and pool balances in their calculations will reflect the new converted balances:

• Subordination Amount
• Subordination Amount (Ex O/C)
• Over-collateralization
• Total Credit Support Amount (Ex O/C)
• Total Credit Support Amount

The Excess Spread (in dollars) available after covering all losses but without regard for building OC. This is calculated separately for each loan group without regard for cross-collateralization, and then calculated for the deal as a whole including the effects of cross-collateralization. The Net Excess Spread amount is an input for the "Cash-In" method of Gain-on-Sale Accounting.

The Net Excess Spread generated during a month divided by that month's Beginning Pool Balance.

The incremental dollar loss suffered by a pool in a given month, regardless of how that loss is absorbed. It equals the face amount of all loans liquidated (including short-sales) less all net recoveries from the sale of the property (i.e., net of all liquidation expenses) plus any other miscellaneous losses (e.g., from Cram Downs, or other rare events). The sum of all losses suffered up to a point in time is called the Cumulative Loss.

The annualized rate of loss of principal in a month as a percentage of that month's Beginning Pool Balance. Mathematically, the Incremental Loss Rate is equivalent to the CPR calculation if one substitutes the dollars lost in a month for the dollars prepaid.

Short for Net Weighted Average Coupon, it is the Gross WAC less servicing costs, all in percentage terms. For a pool with n loans, the Net WAC can be calculated as:



In most home equity transactions, the Servicing Fee Rate is the same for all loans, and in this case, the Net WAC simply equals the Gross WAC minus the Servicing Fee Rate.

See Recoveries.

Total additional advances made during a month. See Advances for a more general discussion.

Total additional interest advances made during a month. See Advances for a more general discussion.

Total additional principal advances made during a month. See Advances for a more general discussion.

Short for Net Interest Margin, is the name given to a resecuritization of existing residual interests from transactions that are structured with Excess Spread. The NIM holders generally get first claim on all Free Excess Spread (i.e., Excess Spread after losses and after building or replenishing OC), and many NIMs are additionally backed by other sources of cash flow such as prepayment penalty income. A new variation on the NIM, called a NIMlet, creates a NIM backed by a single deal, as part of the initial securitization, and with all OC funded up front so that the NIM can cash slow immediately.

See NIM.

Net Operating Income - Total income less operating expenses and adjustments. Also affected by mortgage payments, tenant improvements, replacement reserves and leasing commissions. NOI is commonly used as a basis for many financial calculations.

Loans that are in default or close to being in default. Specifically, when payments of interest and principal are past due by 90 days or more, or at least 90 days of interest payments have been capitalized, refinanced or delayed by agreement.

A written document sent to a borrower and filed to show that the borrower is in default on a mortgage or deed of trust. Filing the Notice of Default is the first step in the Foreclosure process. Often shortened to NOD.