Mortgage Market Monitor June 2011

MetWest is a wholly-owned subsidiary of The TCW Group, Inc.
Mortgage-Backed Securities
Mortgage Market Monitor

June 2011 Remittances
Table of Contents
Forward .............................................................................................. 3 Overview ............................................................................................ 7 Section A: Serious Delinquencies ................................................... 10 I. II. Serious Delinquencies as % of Unpaid Principal Balance..... 11 Foreclosure and REO as % of Unpaid Principal Balance ...... 13 III. IV. Loss Severity by City............................................................... 48 Loss Severity by Unpaid Principal Balance ........................... 50
Section E: Servicing ......................................................................... 52 I. II. III. IV. V. VI. Modifications.......................................................................... 53 Recidivism .............................................................................. 58 Liquidation Timeline .............................................................. 61 Cash Flow Velocity ................................................................. 64 Short Sales.............................................................................. 67 California Severity by Servicer................................................ 70
III. 12 months of Clean Delinquency History .............................. 18 IV. Updated Consumer Credit Data............................................ 22
Section B: Defaults .......................................................................... 25 I. II. III. CDR by Sector......................................................................... 26 CDR and Serious Delinquencies by Sector ........................... 28 CDR by Delinquency Status ................................................... 33
VII. Advancing............................................................................... 72 Section F: Origination Trends ......................................................... 75 I. II. Freddie Mac New Origination by FICO Band ........................ 76 Freddie Mac New Origination by DTI .................................... 78
Section C: Prepayments .................................................................. 35 I. II. Voluntary Prepayments by Sector .......................................... 36 CPR Breakout by Sector .......................................................... 38
III. Freddie Mac New Origination in Limited Doc Loans ........... 80 IV. Freddie Mac New Origination in Jumbo Conforming Loans 82 V. Freddie Mac New Origination in Loans with LTV > 100% ..... 84 Section G: Home Prices .................................................................. 86 I. Home Price Indices ................................................................. 87
III. Voluntary Prepayments by Delinquency Status ..................... 40 Section D: Loss Severity .................................................................. 42 I. II. Loss Severity by Sector............................................................ 43 Loss Severity by State.............................................................. 45
II. Case Shiller Summary .............................................................. 89
This publication is for general information purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, any security. Any holdings of a particular company or security discussed herein are under periodic review by the portfolio management group and are subject to change without notice. In addition, TCW manages a number of separate strategies, and portfolio managers in those strategies may have differing views or analysis with respect to a particular company, security or the economy than the views expressed herein. An investment in the strategy described herein has risks, including the risk of losing some or all of the invested capital. Before embarking on the described investment program, an investor should carefully consider the risks and suitability of the described strategy based on their own investment objectives and financial position. Past performance is no guarantee of future results. The information contained herein may include estimates, projections and other forward-looking statements. Due to numerous factors, actual events may differ substantially from those presented herein. TCW assumes no duty to update any such forward-looking statements or any other information or opinions in this document. Any information and statistical date contained herein derived from third party sources are believed to be reliable, but TCW does not represent that they are accurate, and they should not be relied on as such or be the basis for an investment decision. Copyright 2011 TCW 2
Forward
The Mortgage Market Monitor draws from a variety of data sources to identify market moving trends in the first lien residential mortgage market. The two main data sources are the First American CoreLogic LoanPerformance securitized loans database and the TCW Loan Level Database. The following definitions will facilitate use of this report: Sector The sector definition is based upon the following distinctions: Prime: FICO > 725 and Loan to Value (LTV) < 75% and No Negative Amortization Alt-A: FICO between 675 and 725 or FICO > 725 and LTV >= 75% and No Negative Amortization Option Arm: Any loan that allows Negative Amortization Subprime: FICO < 675 and No Negative Amortization Serious Delinquency We define a serious delinquency as a loan that is: more than 60 days delinquent; in foreclosure; in bankruptcy; or classified as real estate owned (REO). There are two different standards used in the mortgage industry to characterize a loans delinquency status. The Office of Thrift Supervision (OTS) defines a loan as past due when the borrower fails to make a second consecutive scheduled payment. The Mortgage Bankers Association (MBA) defines a loan as past due when a scheduled payment is unpaid for 30 days or more. In certain situations (such as the loan due date on the first of the month and the servicer reporting date on the last day of the month) a newly delinquent borrower can be flagged as under 30 by the OTS methodology and 30-59 days delinquent by the MBA methodology. The MBA methodology is typically used for Prime loans and the OTS methodology is typically used for Subprime loans. In this report we use the MBA methodology for all loans, making apples to apples comparison across sectors possible. Roll Rates Roll rates are displayed as what they imply for Serious Delinquencies, Voluntary Prepayments and Defaults. For example, if the one month roll rate (aka transition rate) for Subprime loans from Current to Current is 92% then we hold that rate static and apply it to the Subprime delinquency pipeline. Likewise, we take the average roll rate from Current to 30 days delinquent, 30 to 30 days delinquent, 30 to Current, and all the remaining roll pairs (63 in all) to project implied Serious Delinquencies, Voluntary Prepayments and Defaults for 12 months into the future. The accuracy of these projections depends upon the assumption that the roll rates stay static over the next 12 months. We know they will not and, consequently, we take the 1 month average roll rate projection and compare it to the 3 month roll rate projection to see which way the most recent roll rates are trending.
Consumer Credit Information Equifax, one of the three consumer credit companies, furnishes TCW with updated consumer credit information on all loans in our database on a monthly basis. This detailed credit information gives us a current view of the borrowers credit profile. The Vantage score is a score that summarizes the consumers credit behavior, not unlike the FICO score. While FICO score distributions tend to be normal, Vantage score distributions on the same consumers have much fatter tails. In this report we show a weighted average Vantage score by sector, and we also take advantage of the Vantage scores strength in identifying consumer credit distress by looking at the tails. CPR Constant Prepayment Rate (CPR) is an annualization of the unscheduled monthly mortality rate of loan balance. To calculate this metric one compares the balance of loans that left the pool of loans through default or voluntary payoff to the outstanding balance of the pool of loans in the previous month. Distinguishing between loans that leave the pool with a loss and loans that leave the pool without a loss yields the Conditional Default Rate (CDR) and the Constant Rate of Reduction (CRR), respectively. These can be viewed as the two components of CPR. Loss Severity If a loan leaves a pool of loans and experiences a loss, then it will have a loss severity. The loss severity is calculated by dividing the total loss amount by the unpaid principal balance of the loan at the time it becomes inactive. Modification A loan whose terms are changed by the servicer becomes a modified loan. Typical modifications include: rate reduction; capitalization of delinquent interest, taxes and insurance; term extension; principal forbearance; and principal forgiveness. We use a proprietary algorithm to determine which loans receive capitalization modifications, principal forgiveness modifications and fixed rate loan interest rate modifications. We look to the Loanperformance modification data for information on adjustable rate mortgage interest rate modifications as well as P&I modifications. Recidivism A borrower whose loan was modified and subsequently falls back into delinquency is a recidivist. To eliminate noise when we track recidivism we let the modification season for six months. Of those seasoned modified loans we determine what percentage is now seriously delinquent. Liquidation Timeline When a loan becomes delinquent and ultimately liquidates it can progress through three main stages: Pre-foreclosure delinquency; Foreclosure; and REO. Each of these stages lasts a number of months. The length varies substantially by geographic region and servicer. A geographic area with a longer than average timeline might require a more formal court proceeding before title can be transferred to the servicer (Judicial states); it may be an area that is experiencing capacity constraints in recording offices, or attorney networks; there may be an abundant supply of homes on the market making it difficult to sell an REO; or the servicer may be understaffed and unable to attend to the various liquidation requirements of a loan in a timely manner. This report shows how servicers perform relative to one another in timeline management in California. We focus on one state to eliminate the noise produced by these dynamics across states.
Cash Flow Velocity This metric is used to track a servicers ability to get payments from borrowers that are currently delinquent. It is defined as Total Principal and Interest (P&I) paid by delinquent borrowers divided by Total Principal and Interest due from delinquent borrowers. For example, assume there are two borrowers being serviced by a servicer who are 60-89 days delinquent and both borrowers have P&I payments of $1,500. A servicer with the right calling campaign and incentive structure for its loss mitigators may be able to get one of the two borrowers to pay $1,500 despite having already missed two payments. This borrower would remain 60-89 days delinquent while the remaining borrower would roll into 90-119 days delinquent. The cash flow velocity for the month in this situation would be $1,500 / ($1,500 + $1,500) = 50%. The higher the cash flow velocity the more adept the servicer is when dealing with delinquent borrowers. Short Sale In this report we define Short Sale as any loan that liquidates with a loss but never reaches the REO status. Short sales typically have lower severities compared to REO sales. Those servicers that successfully implement a short sale focused liquidation strategy relative to other servicers will likely have lower severities. Advancing When a borrower misses a mortgage payment on a first lien mortgage the servicing contract obligates the servicer to make the interest and principal payment for the borrower. This is called advancing. The servicer advances the mortgage payment to the certificate holders, expecting to be repaid at some point in the future. The reimbursement requirement is fulfilled through collection of liquidation proceeds, late collections, and/or insurance proceeds from the loan that has been advanced upon. If the servicer believes that the advance is not recoverable, it is freed from the contractual obligation to advance on the loan. Assuming the decision to stop advancing is legitimate; investors can gain insight into a servicers opinion on future severities of loans on which it has stopped advancing. However, since the determination that advances will not be recoverable is largely subjective, opportunity exists for servicers to save money (funding costs on advances). Servicing The impact of servicing on a bonds IRR is difficult to measure. The two main contributors to this difficulty are: approximately one third of securitized non-agency mortgages are serviced by more than one servicer; and recent industry consolidation in the servicing industry makes it difficult to identify the current servicing platform/management team responsible for a bond. These two difficulties are avoided at TCW by calculating bond level servicing performance. That is, the servicing level metrics displayed in this report are calculated at the bond level for all RMBS securities, thereby removing the uncertainties described above. This bond level analysis is supplemented by a broad, quantitative based opinion formed on servicers in the industry. Factors influencing the rankings from highest weighted to lowest weighted include: Modifications as of 2010, Recidivism, Cash Flow Velocity, Liquidation Timelines, and Modification Timeline, with weights of 40%, 20%, 15%, 15%, and 10%, respectively. While we arrived at these weightings through scenario analysis, they are more last cash flow friendly and front pay unfriendly.
Home Prices Various home price indices have been constructed to gauge the change in home prices over time. In this report we focus on the Radar logic 28 day moving national composite, the Case Shiller 10 city aggregate, and the FHFA Purchase only indices. Additionally, we include the Case Shiller futures contracts that trade on the CME to get the markets perspective on where home prices are heading in the next few years. The index values are all normalized to facilitate an apples-to-apples comparison across indices.
Overview
Serious delinquencies as a percentage of outstanding balance declined in the Subprime and Alt-A sectors; they were flat in the Option Arm sector and they increased in the Prime sector. Roll rates indicate delinquencies will be flat to slightly rising across all sectors in the months to come. The loan data suggest that well see a decrease in foreclosures as a percentage of outstanding balance across Alt-A, Option Arm and Subprime sectors. In the Prime sector foreclosures as a percentage of outstanding balance appears to be trending flat to upwards. Roll rates indicate that the REOs as a percentage of outstanding loans will be flat or declining across all sectors in the months to come. The percentage of borrowers with a clean 12 month pay history moving into delinquency for the first time continued dropping across all sectors this month. Borrowers rolling from a clean 12 month pay history to sixty days delinquent over two payment periods appears to be moving flat to upward across all sectors this month. Credit scores improved across all sectors this month. CDRs were flat across all sectors this month. Voluntary prepayments dropped in the Prime sector, and were flat in the Alt-A, Subprime and Option Arm sectors. Low voluntary prepays rates continue to indicate severe distress in home values relative to outstanding debt in the Subprime, Option Arm and low quality Alt-A sectors as they pay between one and three CRR. In order for Subprime and Option Arm pools to avoid the 90%+ total collateral liquidation, voluntary prepayments must somehow rise over time or we must see an increase in the percentage of borrowers who pay their mortgage through maturity. Successful modifications have the potential to serve as a bridge for some borrowers to more prepayment activity in the future. Until that happens, the two most important questions are severity and timing of the loss. Severities are trending sideways across all sectors this month. Severities are likely to rise due to longer timelines and more supply coming to market. On the servicing front, modifications increased, recidivism of 2010-2011 mods continues to outperform earlier mods, liquidation timelines increased, cash flow velocity was flat and stop-advancing increased. The ranking of servicers by sector is shown in the table below:
Servicer Ranking by Sector* Option Arm 6 4 8 NA 3 NA NA NA 2 5 7 NA 1 NA NA NA NA NA NA NA NA NA
Servicer AHM AURORA BANK OF AMERICA CARRINGTON CENTRAL MORTGAGE CITIMORTGAGE CREDIT SUISSE METLIFE GMAC MORTGAGE INDYMAC JPMORGAN CHASE LONE STAR OCWEN OCWEN (LITTON) OCWEN (SAXON) NATIONSTAR NOVASTAR PHH PNC POPULAR SUNTRUST WELLS FARGO
All 10 9 22 12 6 14 5 21 3 11 20 1 4 7 8 2 13 19 15 16 17 18
Prime 3 4 10 NA NA 5 7 13 1 2 12 NA NA NA NA NA NA 11 9 NA 6 8
Alt-A 7 6 16 NA NA 9 5 14 1 2 15 NA 3 4 8 NA NA 13 10 NA 12 11
Subprime 5 10 18 14 NA 9 1 NA 6 13 16 4 3 8 7 2 11 17 NA 12 NA 15
*Stronger services are in green, weaker servicers are in red.
With the bulk of new origination coming from FHA and the GSEs, we look to our Freddie Mac loan level data to identify origination trends. The flight to quality (high credit scores, more documentation, and lower debt-to-income ratios) remains the focus at Freddie. Full documentation is an absolute must. However, Debt-to-Income ratios are showing a troubling trend upwards across the FICO spectrum. And, the GSEs continue limited involvement in the > 100% LTV program and the jumbo conforming program. We had a slight tick upwards in home price indices this month. Case Shiller futures indicate that a new low is on the horizon for May 2012. A three percent price drop from current levels is projected in the national futures index before bottoming out.
Section A: Serious Delinquencies
10
I.
Serious Delinquencies as % of Unpaid Principal Balance
11
Securitized Mortgages: Serious Delinquencies as % of Unpaid Principal Balance as of June 2011

60% Prime Alt-A Option Arm Subprime Alt A 3mo RR Alt A 1mo RR Option Arm 3mo RR Option Arm 1mo RR Prime 3mo RR Prime 1mo RR Subprime 3mo RR Subprime 1mo RR
50%
46.8%
40%
42.6%
30%
23.72%
20%
8.929% 10%
0%
Exhibited by TCW from First American CoreLogic LoanPerformance Data 12
II. Foreclosure and REO as % of Unpaid Principal Balance
Prime Securitized Mortgages: Foreclosure and REO as % of Unpaid Principal Balance as of June 2011
4.5%
4.0%
Prime FC Prime REO 3.9%
3.5%
Prime REO 3mo RR Prime REO 1mo RR Prime FC 3mo RR
3.0%
2.5%
Prime FC 1mo RR
2.0%
1.5%
1.0%
0.5%
0.7%
0.0%
Alt-A Securitized Mortgages: Foreclosure and REO as % of Unpaid Principal Balance as of June 2011
12.0%
Alt-A FC 10.0% Alt-A REO Alt-A REO 3mo RR 8.0% Alt-A REO 1mo RR Alt-A FC 3mo RR Alt-A FC 1mo RR 6.0% 10.4%
4.0%
2.0% 2.2%
0.0%
Option Arm Securitized Mortgages: Foreclosure and REO as % of Unpaid Principal Balance as of June 2011
25.0%
Option Arm FC 20.0% Option Arm REO 19.7% Option Arm REO 3mo RR Option Arm REO 1mo RR 15.0% Option Arm FC 3mo RR Option Arm FC 1mo REO
10.0%
5.0% 4.5%
0.0%
Subprime Securitized Mortgages: Foreclosure and REO as % of Unpaid Principal Balance as of June 2011
20.0% 18.0% 16.0% 14.0% 12.0% Subprime FC 3mo RR 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 3.5% Subprime FC 1mo RR
Subprime FC Subprime REO Subprime REO 3mo RR Subprime REO 1mo RR 17.6%
III. 12 months of Clean Delinquency History
18
Percentage of outstanding loans with 12 month Clean DQ history as of June 2011

100.0% 90.0% 84.9% 80.0% 70.0% 64.2% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Prime Alt-A Option Arm Subprime 38.7% 32.1%
Exhibited by TCW from First American CoreLogic LoanPerformance Data
19
Percentage of 12 month Clean DQ history loans rolling to 30 Days DQ as of June 2011

6.00% Prime Alt-A 5.00% Option Arm Subprime
4.00%
3.00% 2.2% 2.00% 2.0%
1.00%
1.0% 0.48%
0.00%
20
4.00%
Percentage of 12 month Clean DQ history loans rolling to 60 days Delinquent over 2 Payment Periods as of June 2011
Prime Alt-A Option Arm Subprime
3.50%
3.00%
2.50%
2.00%
1.50%
1.3%
1.00% 0.6% 0.5% 0.23% 0.00%
0.50%
21
IV. Updated Consumer Credit Data
22
Credit Score Migration using Vantage Score (501 - 990)
950
900
850
800
750
700 AltA Prime 600 Subprime OptArm
650
550
500
Exhibited by TCW from CoreLogic LoanPerformance and Equifax Data
23
Vantage Score less than 600 as a percentage of Unpaid Balance

45%
40%
AltA Prime Subprime 32.70%
35%
30%
OptArm 26.25%
25%
20%
15% 11.47% 10%
5%
4.09%
0%
Exhibited by TCW from CoreLogic LoanPerformance and Equifax Data
24
Section B: Defaults
25
I.
CDR by Sector
26
18.0% Prime Alt-A Option Arm Subprime Alt A 3mo RR Alt A 1mo RR Option Arm 3mo RR Option Arm 1mo RR Prime 3mo RR Prime 1mo RR Subprime 3mo RR Subprime 1mo RR
Securitized Mortgages: Default Rates (CDR) as of June 2011
16.0%
14.0%
12.0%
11.2%
10.0%
8.0%
7.9% 7.5%
6.0%
4.0%
2.7%
2.0%
0.0%
II. CDR and Serious Delinquencies by Sector
28
12.0% Prime CDR Prime 60+ Prime 60+ 3mo RR Prime 60+ 1mo RR Prime CDR 3mo RR Prime CDR 1mo RR
Securitized Mortgages: Prime 60+ and Prime CDRs as of June 2011
10.0%
8.929%
8.0%
6.0%
4.0% 2.7%
2.0%
0.0%
Securitized Mortgages: Alt-A 60+ and Alt-A CDRs as of June 2011 AltAlt30.0% Alt-A CDR Alt-A 60+ Alt A CDR 3mo RR Alt A CDR 1mo RR Alt-A 60+ 3mo RR Alt-A 60+ 1mo RR
25.0%
23.72%
20.0%
15.0%
10.0%
7.5% 5.0%
0.0%
60.0%
Securitized Mortgages: Option Arm 60+ and Option Arm CDRs as of June 2011
Option Arm CDR Option Arm 60+ Option Arm CDR 3mo RR Option Arm CDR 1mo RR Option Arm 60+ 3mo RR Option Arm 60+ 1mo RR
50.0%
46.8%
40.0%
30.0%
20.0%
10.0%
11.2%
0.0%
Securitized Mortgages: Subprime 60+ and Subprime CDRs as of June 2011

60.0% Subprime CDR Subprime 60+ Subprime CDR 3mo RR Subprime CDR 1mo RR Subprime 60+ 3mo RR Subprime 60+ 1mo RR
50.0%
42.6%
40.0%
30.0%
20.0%
10.0% 7.9% 0.0%
III. CDR by Delinquency Status
33
Prime CDR Mix by Delinquency Status 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 100% 80% 60% 40% 20% 0%
Option Arm CDR Mix by Delinquency Status
AltAlt-A CDR Mix by Delinquency Status 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Subprime CDR Mix by Delinquency Status
Section C: Prepayments
35
I.
Voluntary Prepayments by Sector
36
Securitized Mortgages: Voluntary Prepayment Rates (CRR) as of June 2011

40.0% Prime Alt-A 35.0% Option Arm Subprime Alt A 3mo RR 30.0% Alt A 1mo RR Option Arm 3mo RR 25.0% Option Arm 1mo RR Prime 3mo RR Prime 1mo RR 20.0% Subprime 3mo RR Subprime 1mo RR 15.0% 14.8% 10.0%
5.0%
6.5% 2.4% 1.8%
0.0%
II. CPR Breakout by Sector
38
Prime CPR 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%
Option Arm CPR
CRR
CDR
CRR
CDR
AltAlt-A CPR 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%
Subprime CPR 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%
CRR
CDR
CRR
CDR
III. Voluntary Prepayments by Delinquency Status
40
Prime CRR Mix by Delinquency Status 100% 99% 98% 97% 96% 95% 100% 95% 90% 85% 80% 75% 70%
Option Arm CRR Mix by Delinquency Status
R C 3 6 9 B F R
AltAlt-A CRR Mix by Delinquency Status 100% 99% 98% 97% 96% 95% 94% 93% 92% 91% 90% Subprime CRR Mix by Delinquency Status 100% 95% 90% 85% 80% 75% 70%
Section D: Loss Severity
42
I.
Loss Severity by Sector
43
Historical Loss Severity By Sector

80.0% 73.4% 70.0% Prime Alt-A 60.0% Option Arm Subprime 61.2% 58.1%
50.0% 43.6% 40.0%
30.0%
20.0%
10.0%
0.0%
II. Loss Severity by State
45
Prime Loss Severity by State 160% 140% 120% 100% 80% 60% 40% 20% 0% OK IN AK NH MS DC KY WI RI AL OH MT FL MI NV IL ID AR AZ LA MA HI MO NC GA OR MN SC KS TN CT NJ WA CO NY CA IA UT MD TX PA VA ME DE 120% 100% 80% 60% 40% 20% 0%
Option Arm Loss Severity by State
1mo LossSeverity
3mo LossSeverity
Alt-A Loss Severity by State Alt90% 80% 70% 60% 50% 40% 30% 20% 10% 0% OH FL IL MI IN WI ME RI NY MS NV NJ MO PA WV AZ CT MD DE MN AR MA GA SC NH ID DC LA KY SD TN CA AL OK MT VT IA NM KS NE OR NC WA AK UT HI TX WY VA CO ND 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
1mo LossSeverity
3mo LossSeverity
OH MI IL FL WI MS NJ IN ME NV NY MO RI AZ IA PA GA CT MD LA MN AL KY DE VT NH DC MA TN SC NE WV AR CA OK KS ID NM NC SD WA ND OR HI WY TX MT VA CO UT AK 1mo LossSeverity 3mo LossSeverity
MS ME KY KS IA FL IL NV MI OH IN LA NE SD NJ MN WI GA AZ WV MA ID MD SC NY DC RI MO CA CT NM AL NC AR OK OR NH PA MT UT WA HI TN CO VA DE TX WY AK 1mo LossSeverity 3mo LossSeverity Subprime Loss Severity by State
80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%
Historical Loss Severity - California Prime Alt-A Option Arm Subprime 66.1% 58.8% 52.7% 37.9%
90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%
Historical Loss Severity - New York Prime Alt-A Option Arm Subprime
81.9% 70.3% 68.9%
11.0%
100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%
Historical Loss Severity - Florida 89.9% Prime Alt-A Option Arm Subprime 75.9% 72.7% 55.9%
90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%
Historical Loss Severity - Nevada Prime Alt-A Option Arm Subprime 78.3% 73.3% 68.5% 55.6%
III. Loss Severity by City
48
Prime Loss Severity Across Top 10 Cities by UPB 120% 100% 80% 60% 40% 20% 0% 100% 80% 60% 40% 20% 0%
Option Arm Loss Severity Across Top 10 Cities by UPB
1mo Loss Severity
3mo Loss Severity
1mo Loss Severity
3mo Loss Severity
AltAlt-A Loss Severity Across Top 10 Cities by UPB 120% 100% 80% 60% 40% 20% 0% 120% 100% 80% 60% 40% 20% 0%
Subprime Loss Severity Across Top 10 Cities by UPB
1mo Loss Severity
3mo Loss Severity 1mo Loss Severity 3mo Loss Severity
IV. Loss Severity by Unpaid Principal Balance
50
Prime Loss Severity by Current Balance 120% 100% 80% 60% 40% 20% 0% 120% 100% 80% 60% 40% 20% 0% 1mo LossSeverity 3mo LossSeverity
Option Arm Loss Severity by Current Balance
1mo LossSeverity
3mo LossSeverity
AltAlt-A Loss Severity by Current Balance 120% 100% 80% 60% 40% 20% 0% 120% 100% 80% 60% 40% 20% 0% Subprime Loss Severity by Current Balance
1mo LossSeverity
3mo LossSeverity
1mo LossSeverity
3mo LossSeverity
Section E: Servicing
52
I.
Modifications
53
NonPercent of Non-agency Securitized Loans Modified by Modification Type

20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 1.8% Total Rate Capitalization Forgiveness Principal and Interest 12.9%
17.6%
7.7% 7.0%
Percentage of Securitized Loans Modified by Sector

35% 33.2% 30% Prime AltA Option Arm 25% Subprime
20%
15%
15.4%
10%
9.7%
5% 2.6% 0%
Prime 3 Month Mod Volume as Percentage of UPB 2% 2% 1% 1% 1% 1% 1% 0% 0% 0% 4% 4% 3% 3% 2% 2% 1% 1% 0%
Option Arm 3 Month Mod Volume as Percentage of UPB
Mod Volume Last 3m Mod Volume Last 3m 3m Avg Mod Volume Last 3mo
3m Avg Mod Volume Last 3mo
AltAlt-A 3 Month Mod Volume as Percentage of UPB 5% 4% 4% 3% 3% 2% 2% 1% 1% 0% 8% 7% 6% 5% 4% 3% 2% 1% 0%
Subprime 3 Month Mod Volume as Percentage of UPB
Mod Volume Last 3m
Mod Volume Last 3m
56
Prime Avg # Months in DQ Prior to Modification 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 -
Option Arm Avg # Months in DQ Prior to Modification
ModSpeed
3mo Avg ModSpeed
ModSpeed
3mo Avg ModSpeed
AltAlt-A Avg # Months in DQ Prior to Modification 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 -
Subprime Avg # Months in DQ Prior to Modification
ModSpeed
3mo Avg ModSpeed
ModSpeed
3mo Avg ModSpeed
57
II. Recidivism
58
Monthly Recidivism by Mod Vintage and Mod Age

80.0%
70.0%
60.0%
50.0%
40.0%
2011 2010
30.0%
2009 2008
20.0%
2007
10.0%
0.0% 0 10 20 30 40 50 60 70
2010Prime Recidivism Rate on 2010-2011 Modifications at 6 Months of Seasoning 25% 20% 15% 10% 5% 0% 30% 25% 20% 15% 10% 5% 0%
2010Option Arm Recidivism Rate on 2010-2011 Modifications at 6 Months of Seasoning
Recidivism
3mo Avg Recidivism
Recidivism
3mo Avg Recidivism
Alt2010Alt-A Recidivism Rate on 2010-2011 Modifications at 6 Months of Seasoning 20% 15% 10% 5% 0%
2010Subprime Recidivism Rate on 2010-2011 Modifications at 6 Months of Seasoning 35% 30% 25% 20% 15% 10% 5% 0%
Recidivism
3mo Avg Recidivism
Recidivism
3mo Avg Recidivism
III. Liquidation Timeline
61
Average Liquidation Timeline (Months)

25
20
15
10
Prime Avg # Months from DQ to Liquidation 30.0 25.0 20.0 15.0 10.0 5.0 30.0 25.0 20.0 15.0 10.0 5.0 -
Option Arm Avg # Months from DQ to Liquidation
Timeline
3mo Avg Timeline
Timeline
3mo Avg Timeline
AltAlt-A Avg # Months from DQ to Liquidation 30.0 25.0 20.0 15.0 10.0 5.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 -
Subprime Avg # Months from DQ to Liquidation
Timeline
3mo Avg Timeline
Timeline
3mo Avg Timeline
IV. Cash Flow Velocity
64
Securitized Mortgages: Cashflow Velocity (P&I Paid / P&I Due) on Delinquent Loans as of May 2011
90.0%
80.0%
70.0%
60.0%
50.0%
40.0% Prime 30.0% Alt-A Option Arm 20.0% Subprime 29.3% 24.8% 21.4% 16.8% 10.0%
0.0%
Servicer Level Cashflow Velocity on DQ Prime Loans 40% 35% 30% 25% 20% 15% 10% 5% 0% 35% 30% 25% 20% 15% 10% 5% 0%
Servicer Level Cashflow Velocity on DQ Option Arm Loans
1mo Cashflow Velocity
AltServicer Level Cashflow Velocity on DQ Alt-A Loans 35% 30% 25% 20% 15% 10% 5% 0% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
Servicer Level Cashflow Velocity on DQ Subprime Loans
V. Short Sales
67
Prime Short Sales as % of Total Defaults 100% 80% 60% 40% 20% 0% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Option Arm Short Sales as % of Total Defaults
Short Sales
REO
Short Sales
REO
AltAlt-A Short Sales as % of Total Defaults 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Subprime Short Sales as % of Total Defaults
Short Sales
REO
Short Sales
REO
Percentage Prime Defaults Liquidated via Short Sale by Servicer 100% 80% 60% 40% 20% 0% 70% 60% 50% 40% 30% 20% 10% 0%
Percentage Option Arm Defaults Liquidated via Short Sale by Servicer
1mo Short Sales 1mo Short Sales 3mo Short Sales
3mo Short Sales
AltPercentage Alt-A Defaults Liquidated via Short Sale by Servicer 80% 70% 60% 50% 40% 30% 20% 10% 0%
Percentage Subprime Defaults Liquidated via Short Sale by Servicer 60% 50% 40% 30% 20% 10% 0%
1mo Short Sales
3mo Short Sales
1mo Short Sales
3mo Short Sales
VI. California Severity by Servicer
70
Prime Average CA Severity by Servicer 60% 50% 40% 30% 20% 10% 0% 70% 60% 50% 40% 30% 20% 10% 0%
Option Arm Average CA Severity by Servicer
1mo Avg Severity
3mo Avg Severity
1mo Avg Severity
3mo Avg Severity
AltAlt-A Average CA Severity by Servicer 80% 70% 60% 50% 40% 30% 20% 10% 0% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Subprime Average CA Severity by Servicer
1mo Avg Severity 1mo Avg Severity 3mo Avg Severity
3mo Avg Severity
VII. Advancing
72
Securitized Mortgages: % 60+ Loans No Longer Advanced Upon as of June 2011

30.0%
Subprime 25.0% OptArm AltA Prime 20.0% 25.4%
15.0%
14.1%
10.0%
9.3%
5.0% 2.8% 0.0%
Prime Percentage 60+ Not Advanced Upon by Servicer 30% 25% 20% 15% 10% 5% 0% 35% 30% 25% 20% 15% 10% 5% 0%
Option Arm Percentage 60+ Not Advanced Upon by Servicer
1mo % 60+ No Advance
AltAlt-A Percentage 60+ Not Advanced Upon by Servicer 70% 60% 50% 40% 30% 20% 10% 0%
Subprime Percentage 60+ Not Advanced Upon by Servicer 60% 50% 40% 30% 20% 10% 0%
Section F: Origination Trends
75
I.
Freddie Mac New Origination by FICO Band
76
Origination Volume by FICO Band

100% > 730 FICO 680-730 FICO < 680 FICO
90% 80%
70% 60%
50% 40% 30%
20% 10%
0%
Exhibited by TCW from LoanLevel Database 77
II. Freddie Mac New Origination by DTI
78
Debt to Income Ratio by FICO Bands

41%
39%
37%
35%
33%
31%
> 730 FICO 680-730 FICO < 680 FICO
29%
27%
25%
III. Freddie Mac New Origination in Limited Doc Loans
80
Percent Origination Volume in Limited Doc Loans

14%
12%
10%
8%
6%
4%
2%
0%
Limited Documentation
IV. Freddie Mac New Origination in Jumbo Conforming Loans
82
Percentage Origination Volume in Jumbo Conforming Loans
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Jumbo Conforming
V. Freddie Mac New Origination in Loans with LTV > 100%
84
Percentage Origination Volume into > 100 LTV Loans

6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
LTV > 100
Section G: Home Prices
86
I.
Home Price Indices
87
National Home Price Indices

250 FHFA Purchase 230 Radar Logic 210 190 170 150 130 110 90 70 50 Case Shiller 10 City Case Shiller Futures
Exhibited by TCW from S&P, Radar Logic, and FHFA Data
88
II. Case Shiller Summary
89
Geographic Area Atlanta Boston Charlotte Chicago Cleveland Dallas Denver Detroit Los Angeles Las Vegas Miami Minneapolis New York Phoenix Portland San Diego Seattle San Francisco Tampa Washington DC 10 City Aggregate 20 City Aggregate
Peak to Now -25% -19% -20% -35% -21% -10% -13% -51% -39% -59% -51% -38% -24% -56% -29% -38% -30% -40% -47% -26% -33% -33%
Now to Trough
Peak to Trough
Months since peak 47 69 46 57 59 48
Months until trough -27 17
NA -3%
-20% -37%
-5% NA -3% -5% -3%
-17% -42% -60% -54% -27%
58 66 57 58 54 57 60 60 47
11 -25 11 5 17
NA NA NA -3%
-42% -46% -34% -35%
67 47 61 59 61 60 59
-26 -27 -27 11
Exhibited by TCW from S&P, Radar Logic, and FHFA Data
90

Mortgage Market Monitor June 2011

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MetWest is a wholly-owned subsidiary of The TCW Group, Inc.

Mortgage Market Monitor

II. Case Shiller Summary .............................................................. 89

Servicer Ranking by Sector* Option Arm 6 4 8 NA 3 NA NA NA 2 5 7 NA 1 NA NA NA NA NA NA NA NA NA

*Stronger services are in green, weaker servicers are in red.

Section A: Serious Delinquencies

Serious Delinquencies as % of Unpaid Principal Balance

Securitized Mortgages: Serious Delinquencies as % of Unpaid Principal Balance as of June 2011

Exhibited by TCW from First American CoreLogic LoanPerformance Data 12

II. Foreclosure and REO as % of Unpaid Principal Balance

Exhibited by TCW from First American CoreLogic LoanPerformance Data 13

Prime FC Prime REO 3.9%

Prime REO 3mo RR Prime REO 1mo RR Prime FC 3mo RR

Exhibited by TCW from First American CoreLogic LoanPerformance Data 14

Exhibited by TCW from First American CoreLogic LoanPerformance Data 15

Exhibited by TCW from First American CoreLogic LoanPerformance Data 16

Exhibited by TCW from First American CoreLogic LoanPerformance Data 17

III. 12 months of Clean Delinquency History

Percentage of outstanding loans with 12 month Clean DQ history as of June 2011

Exhibited by TCW from First American CoreLogic LoanPerformance Data

Percentage of 12 month Clean DQ history loans rolling to 30 Days DQ as of June 2011

3.00% 2.2% 2.00% 2.0%

Exhibited by TCW from First American CoreLogic LoanPerformance Data

1.00% 0.6% 0.5% 0.23% 0.00%

Exhibited by TCW from First American CoreLogic LoanPerformance Data

IV. Updated Consumer Credit Data

Credit Score Migration using Vantage Score (501 - 990)

700 AltA Prime 600 Subprime OptArm

Exhibited by TCW from CoreLogic LoanPerformance and Equifax Data

Vantage Score less than 600 as a percentage of Unpaid Balance

AltA Prime Subprime 32.70%

15% 11.47% 10%

Exhibited by TCW from CoreLogic LoanPerformance and Equifax Data

Securitized Mortgages: Default Rates (CDR) as of June 2011

Exhibited by TCW from First American CoreLogic LoanPerformance Data 27

II. CDR and Serious Delinquencies by Sector

Securitized Mortgages: Prime 60+ and Prime CDRs as of June 2011

Exhibited by TCW from First American CoreLogic LoanPerformance Data 29

Exhibited by TCW from First American CoreLogic LoanPerformance Data 30

Exhibited by TCW from First American CoreLogic LoanPerformance Data 31

Securitized Mortgages: Subprime 60+ and Subprime CDRs as of June 2011

10.0% 7.9% 0.0%

Exhibited by TCW from First American CoreLogic LoanPerformance Data 32

III. CDR by Delinquency Status

Option Arm CDR Mix by Delinquency Status

Subprime CDR Mix by Delinquency Status

Exhibited by TCW from First American CoreLogic LoanPerformance Data 34

Voluntary Prepayments by Sector

Securitized Mortgages: Voluntary Prepayment Rates (CRR) as of June 2011

6.5% 2.4% 1.8%

Exhibited by TCW from First American CoreLogic LoanPerformance Data 37

II. CPR Breakout by Sector

Option Arm CPR

AltAlt-A CPR 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%

Exhibited by TCW from First American CoreLogic LoanPerformance Data 39

III. Voluntary Prepayments by Delinquency Status

Option Arm CRR Mix by Delinquency Status

Exhibited by TCW from First American CoreLogic LoanPerformance Data 41

Section D: Loss Severity

Loss Severity by Sector

Historical Loss Severity By Sector

50.0% 43.6% 40.0%

Exhibited by TCW from First American CoreLogic LoanPerformance Data 44