2006-10-CAMCO - Chotin

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Nov 18, 2013 (3 years and 6 months ago)

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2

Chotin Asset Management Corporation

Overview

____________________

Source: The Chotin Group Corporation. As of August 28, 2006.


Chotin Asset Management Corporation (“CAMCO") is an affiliate of The Chotin Group Corporation ("TCG") and
encompasses all of the asset management functions of the firm.


TCG, a private company, has been in business for 20 years and has been actively involved in structured debt
financings and asset securitization primarily for its own account. TCG has been a key player in the more credit
sensitive subordinate and residual real estate security markets.


TCG and affiliated companies have extensive experience analyzing, acquiring, and managing significant
portfolios of structured product assets including CMO, MBS, and various other credit
-
sensitive ABS in all market
environments, generally with a "hold
-
to
-
maturity" strategy.


CAMCO’s investment process is a bottom
-
up team approach with a commitment to quantitative analysis, risk
management and pre/post acquisition surveillance.


Through National Mortgage Corporation ("NMC") (an affiliated company) TCG originated over $1 billion of
nonconforming mortgage loans from 1991 to 1999.


Through its FAIC and FAIC II shelves, TCG securitized and structured in excess of $3.95 billion of NMC
-
originated
and third party loans.


CAMCO’s subsidiary Chotin Fund Management Corporation (“CFMC”) is the collateral manager of seven ABS CDOs.



3

Chotin Asset Management Corporation

History of The Chotin Group Corporation and Steven B. Chotin

____________________

Source: The Chotin Group Corporation. As of August 28, 2006.

1975
-
1978

President

Solarcell, an affiliate of MDC Holdings

1978
-
1984

Senior Vice President

MDC Holdings (NYSE “MDC”)

1979

While at MDC, Mr. Chotin founded American Southwest Financial Services, the first mortgage conduit comprised of eighty
-
eight
home
builders across the country.

Founded and became President of Home American Mortgage Corporation, a captive mortgage origination company which facilitated
activities between MDC Holdings and American Southwest Financial Services.

Aided in the successful co
ngressional approval of SMMEA (“Secondary Mortgage Market Enhancement Act”), which allowed the private
sector to issue mortgage
-
backed securities using government guarantees.

1984

Founder

The Chotin Group Corporation

With the formation of the Chotin Grou
p, Mr. Chotin facilitated the securitization of a variety of structured finance products for clients such
as savings and loans, homebuilders and pension funds.

1988

Mr. Chotin formed The Fund America Investor securitization shelves to issue CMO and MBS tr
ansactions.

1989

In the late 1980s, Mr. Chotin identified the need for new securitization structures to facilitate the placement of residual interests, which
were previously held by savings and loans.

He created Fund America Ventures Corporation (FAVC) t
o purchase those residual interests. FAVC ultimately was expanded to include
substantial holdings in all classes of RMBS with particular focus on subordinate securities.

1991

Mr. Chotin acquired National Mortgage Corporation (NMC), which was a prime resi
dential mortgage servicer. He developed NMC into a
nationwide sub
-
prime lending and servicing platform. NMC securitized a portion of the loans it originated through the Fund America
Investor shelves. NMC also sold assets when economics warranted doing so.
NMC was closed in 1999.

1996

FAVC issued its
first re
-
securitization of subordinate securities.

2002

Mr. Chotin decided to focus the firm’s business activities on
third party
asset management through
Chotin Asset Management
Corporation
(CAMCO)
.

2004

Cho
tin Fund Management Corporation
(CFMC), a subsidiary of CAMCO
closed its first CDO, Saturn Ventures 2004

Fund America
Investors III, Ltd.

2006

CFMC closed its seventh ABS CDO, bringing its assets under management up to $4.25 billion.


4

Chotin Fund


Management

Corporation

Formerly known
as Fund America
Management
Corporation is the
manager of the
CDO issuance
platform

Fund America

Investors Corporation &

Fund America

Investors Corporation II

Limited purpose finance companies
established to issue public bonds and
other similar securities collateralized
by mortgage loans, mortgage
certificates and other mortgage
-
related assets.

As of August, 2006, TCG has structured
and issued over $3.95 billion in RMBS
through its Fund America Investors
securitization platforms.


Fund America

Ventures

Corporation


Invested, for its own
account, in excess of
$500 million in
mortgage


related securities.

In 1996, FAVC issued a

resecuritization of $72
million in bonds.



National
Mortgage

Corporation

Nationwide
sub
-
prime
Originator,
Servicer and


Mortgage
Banker

1991
-
1999

Chotin Asset

Management Corporation

Relevant Affiliated Companies

Chotin Asset Management Corporation

____________________

Source: The Chotin Group Corporation. As of August 28, 2005.

5

Chotin Asset Management Corporation

CDO Platform


In 2003, TCG through FAMC extended its core competencies of credit analysis and financial structuring to establish itself as
a value added investor and asset manager of multi
-
sector CDOs of ABS

Issuer

Type

Notional
$(mm)


Closing Date

Saturn Ventures 2004
-
Fund America Investors III

Mezzanine ABS CDO

400.0


April 2004

Mercury CDO 2004
-
1

High Grade ABS CDO

750.0


November 2004

Neptune CDO 2004
-
1

Mezzanine ABS CDO

400.0


January 2005

Neptune CDO
II

Mezzanine ABS CDO

300.0


July 2005

Mercury CDO II

High Grade ABS CDO

1,000.0


December 2005

Neptune CDO III

Mezzanine ABS CDO

400.0


March
2006

Mercury CDO III

High Grade ABS CDO

1,000.0


May 2006

TOTAL


4
,250.0




CFMC cash
-
flow CDOs under management

____________________

Source: The Chotin Group Corporation. As of August 28, 2006

6

Chotin Asset Management Corporation

Organizational Chart

____________________

Source: The Chotin Group Corporation. As of August 28, 2006


Jennifer M
.
Land
Executive Assistant
/
HR Diresctor
Leslie A
.
Bonino
Executive Assistant
to the President
Doug A
.
Sanders
Systems
Administrator
Julie E
.
Backer
Staff Accountant
Andy P
.
Wolf
Investment
/
Surveillance Analyst
Peter O
.
Reynolds
Trading Operations

Ross S
.
Chotin
Associate
Chris R
.
Medema
Investment
/
Surveillance Analyst
Ben S
.
Molk
Systems Developer
Co Heads
Structured Finance
Steven B
.
Chotin
Chairman
/
CEO
Helen M
.
Dickens
President
/
COO
Zachary H Pashel
Executive Vice
President
John G
.
Grant
Senior Vice President
Chief Investment
Officer
Eric Westerhausen
Originator
/
Servicer
Surveillance Analyst
Jim K
.
Peaslee
Vice President
/
Portfolio Manager
Jeff W
.
Stemmermann
Vice President
/
Portfolio Manager
Richard J
.
Reisman
Vice President
/
General Counsel
Paris A
.
McIntosh
Senior Accountant
Payroll
/
Benefits
David D
.
Frederick
Chief Financial
Officer
Michael Piel
Senior Software
Engineer
Hilary U
.
Snyder
Investment
/
Surveillance Analyst
As of
10
/
17
/
06
7

Chotin Asset Management Corporation

Investment Philosophy


CAMCO’s Investment Objectives:


Create products backed by a well
-
diversified pool of quality assets, with the assets selected for their long
-
term
potential to generate superior risk
-
adjusted returns


Focus on real estate ABS, primarily residential MBS and ABS CDOs


Bottom
-
up approach to asset selection


Rigorous analytical approach applied by team


Collateral and deal structure paramount


Macro economic overview helps identify troubled sectors


Investment Committee approves all purchases


Modified Static Structure


Limited trading reinforces proper asset selection up front, while allowing proactive loss mitigation


Avoids incentives that encourage aggressive portfolio postures

____________________

Source: The Chotin Group Corporation. As of August 28, 2006.

8


Asset Selection


Bottom
-
up credit focus


Pool and loan level data used to estimate default and loss probabilities


Indices database monitored for relative performance comparison


Cash flow modeling under multiple interest rate and prepayment scenarios


Mortgage originator and servicer due diligence and review


Constant monitoring of performance against initial expectations


Surveillance & Monitoring


Assets are monitored for collateral performance, structural features performance and relative
performance against appropriate cohorts:


OC growth, stagnation or deterioration


Losses exceeding excess interest


“DPIPE”, a classic delinquency analysis


Step
-
Down trigger analysis


Assets ranked monthly based on relative performance versus proprietary indices


Rating agency action monitored


Monthly and quarterly trustee reports are reconciled against asset
-
level cash flows and performance
levels.



Chotin Asset Management Corporation

Structured Finance Process

____________________

Source: The Chotin Group Corporation. As of August 28, 2006.

9

Chotin Asset Management Corporation

Structured Finance Process

Collateral

Characteristics

Deal

Structure

Originator,
Servicer,
Manager


Cash flow structure


Performance stress runs


Defaults


Loss Severity


Prepayments


Interest rates


Evaluate underwriting guidelines


Historical performance


Diligence call and/or visit


Ratings


Macro Economic Outlook


Loan level analysis


Pool level analysis


FICO


LTV


FRM % vs. ARM %


2nd Lien %


Industry Trends

____________________

Source: The Chotin Group Corporation. As of August 28, 2006.

10

Chotin Asset Management Corporation

Structured Finance Process (cont’d)

Collateral

Characteristics

Deal

Structure

Originator,
Servicer,
Manager

Asset & Collateral
Review


Delinquency
Performance


Ratings Migration


Pricing Surveillance

Analytics

Purchase

CDO

Portfolio

CDO Surveillance &
Monitoring


Ratings Tests


Compliance Tests


Quality Tests

Information used to enhance analytics

Proactive Loss Mitigation

Structure and collateral complexion drives asset selection from the bottom
-
up.

____________________

Source: The Chotin Group Corporation. As of August 28, 2006.

11

A Tale of Two Mortgage Pools, Same Dealer Shelf


Bond #1
-

Issued July 2004


New Century originated collateral


Avg. FICO 616


Baa3/BBB
-


Initial Total Support: 3.40%

Positive Attributes

Note
:

The

information

above

is

historical

and

represents

the

attributes

of

a

particular

investment

we

made
.

It

should

not

be

considered

to

be

indicative

of

our

possible

future

investments,

nor

should

it

be

extrapolated

to

be

indicative

of

our

possible

future

performance,

each

of

which

could

differ

significantly
.


FICO < 550: 16.6%


Avg. LTV: 79%


98% 1st Lien


10% IOs


6.5% Investor Loans


Avg. Loan Size: $167k


3% IL; 3% MI; <2% OH; <2% IN

Negative Attributes


64% Cash Out Refinance


42% Reduced Documentation


Small Servicer (Saxon)


Bond #2
-

Issued June 2004


Argent collateral, Ameriquest wholesale


Avg. FICO 620


Baa3/No S&P Rating


Initial Total Support: 3.55%

Positive Attributes


Avg. FICO: 620 (FICO < 550: 11%)


100% 1st Lien


63% Full Documentation


No IOs

Negative Attributes


Avg. LTV: 87% (LTVs > 90%: 30%)


27% Investor Loans


8% IL; 7% MI; 7% OH; 6% IN


Avg. Loan Size: $78k (55% < $100k)

Chotin Asset Management Corporation

____________________

Source: The Chotin Group Corporation. As of August 28, 2006.

12

Chotin Asset Management Corporation

CAMCO invested in Bond #1 and rejected Bond #2

Bond #1

Scenario Name

BASE

FAST CASE

SLOW CASE

STRESS

STRESS

STRESS

STRESS

Forward Rate Shock (bps)

0

0

0

-
50

50

-
100

100

Prepay Rate

Pricing

125% Pricing

75% Pricing

Pricing

Pricing

Pricing

Pricing

Default Severity

50%

50%

50%

50%

50%

50%

50%

Breakeven Loss

8.75

5.46

10.42

9.17

7.02

9.56

6.83

Expected Loss (%)

4.50

4.50

4.50

4.50

4.50

4.50

4.50

Coverage Ratio

1.94

1.21

2.32

2.04

1.56

2.12

1.52

Bond #2

Scenario Name

BASE

FAST CASE

SLOW CASE

STRESS

STRESS

STRESS

STRESS

Forward Rate Shock (bps)

0

0

0

-
50

50

-
100

100

Prepay Rate

Pricing

125% Pricing

75% Pricing

Pricing

Pricing

Pricing

Pricing

Default Severity

80%

80%

80%

80%

80%

80%

80%

Breakeven Loss

11.27

8.73

13.58

11.68

10.86

12.09

10.4

Expected Loss (%)

9.00

9.00

9.00

9.00

9.00

9.00

9.00

Coverage Ratio

1.25

0.97

1.51

1.30

1.21

1.34

1.16

Note
:

The

information

above

is

historical

and

represents

the

attributes

of

a

particular

investment

we

made
.

It

should

not

be

considered

to

be

indicative

of

our

possible

future

investments,

nor

should

it

be

extrapolated

to

be

indicative

of

our

possible

future

performance,

each

of

which

could

differ

significantly
.

____________________

Source: The Chotin Group Corporation. As of August 28, 2006.

13

Was CAMCO right?


Bond #1


Cumulative losses:

.36%


REO:


1.56%


60+ Delinquency:

1.69%


No Change in Ratings (Baa3/BBB
-
)


Bond #2


Cumulative losses:

3.80%


REO:


5.37%


60+ Delinquency:

6.18%


Moody’s Downgrade from Baa3 to B3



Performance to date
1
:

Through both a quantitative and qualitative analysis, we steered clear of the sub
-
performing asset.

1
Performance data as of July 31, 2006 and based on original collateral balances.

Note
:

The

information

above

is

historical

and

represents

the

attributes

of

a

particular

investment

we

made
.

It

should

not

be

considered

to

be

indicative

of

our

possible

future

investments,

nor

should

it

be

extrapolated

to

be

indicative

of

our

possible

future

performance,

each

of

which

could

differ

significantly
.

Chotin Asset Management Corporation

____________________

Source: The Chotin Group Corporation. As of August 28, 2006.


Biographies

15

Chotin Asset Management Corporation

Biographies

____________________

Source: The Chotin Group Corporation. As of August 28, 2006.


Ms. Dickens is responsible for strategic planning and implementation of all structured finance and
operational activities. She joined Chotin in 1989 as manager of accounting and was promoted to
Chief Operating Officer in 1995, and to President in 2002. She has managed all phases of the asset
securitization process as well as securities trading and operations. Prior to joining Chotin, Ms.
Dickens was Corporate Secretary of Uniwest Financial Corporation, a savings and loan holding
company with 13 branches. She was responsible for accounting, human resources and shareholder
relations. Ms. Dickens holds a Bachelor of Science degree in Accounting from Metropolitan State
College.


Mr. Chotin founded The Chotin Group Corporation in 1984 as a firm specializing in asset
securitization and structured financings. In subsequent years Mr. Chotin created a group of
affiliates to invest in a variety of asset classes and to provide securitization services to the
investment banking community. He served as Senior Vice President of MDC Corporation (NYSE:
"MDC"), where he played a primary role in the formation of American Southwest Financial
Corporation, one of the first mortgage banking conduits serving participants nationwide. Mr.
Chotin also created Home American Mortgage Corporation, a full
-
service mortgage banking
operation for MDC.




Steven B. Chotin
Founder & Chairman



Helen M. Dickens
President and Chief Operating
Officer


Mr. Pashel is responsible for structuring and implementation of structured finance and new
business products. Prior to joining Chotin in 2004, Mr. Pashel’s employment included Deson
Ventures and Greyrock Capital Partners, both groups specializing in middle market private equity
and M&A advisory services. Mr. Pashel also owned and operated numerous companies in the real
estate and aviation industries. Mr. Pashel was educated at Brandeis University.




Zachary H Pashel
Executive Vice President and Co
-
Head of Structured Finance

16

Chotin Asset Management Corporation

Biographies (cont’d)

____________________

Source: The Chotin Group Corporation. As of August 28, 2006.


He joined Chotin in 2004 after a decade at ING Investment Management, where he served as Senior
Vice President and Senior Portfolio Manager. From 1988 to 1993, Mr. Grant was a Senior Investment
Officer at Allmerica Asset Management, and prior to that time he served as an Analyst at United
Investment Research. Mr. Grant holds a Bachelor of Arts degree in Sociology from Boston University
and an MBA from Northeastern University. In addition, he has earned the right to use the Chartered
Financial Analyst designation.




John G. Grant, CFA
Senior Vice President/Chief
Investment Officer and Co
-
Head of
Structured Finance


Mr. Peaslee is responsible for fixed income trading and portfolio management. He joined Chotin in
2005 after twelve years in structured finance at Great
-
West Life & Annuity Insurance Co. where he
managed portfolios consisting of Home Equity ABS, Franchise Loans and Affordable Housing Tax
Credits. From 1988
-
1991, Mr. Peaslee was a Staff Auditor with Ernst & Young. Mr. Peaslee holds a
Bachelor of Arts from the University of Oregon and a Master of Business Administration and a Master
of Public Health from the A.B. Freeman School of Business, Tulane University. In addition, he has
earned the right to use the Chartered Financial Analyst designation.


Mr. Stemmermann is responsible for fixed income trading and portfolio management. His primary
responsibilities include credit analysis and the acquisition of assets for our CDOs. Prior to joining
Chotin in 2005, Mr. Stemmermann worked at ING Investment Management as an analyst and junior
portfolio manager from 2001 through 2004. The Georgia Institute of Technology awarded Mr.
Stemmermann both a Bachelor of Science degree in Industrial and Systems Engineering and a
Master of Science degree in Quantitative and Computational Finance. In addition, he has earned
the right to use the Chartered Financial Analyst designation.




Jeffrey Stemmermann, CFA
Vice President/Portfolio Manager



Jim Peaslee, CFA
Vice President/Portfolio Manager

17

Chotin Asset Management Corporation

Biographies (cont’d)

____________________

Source: The Chotin Group Corporation. As of August 28, 2005.


Mr. Medema is a member of the fixed income trading and analytics team. He supports the portfolio
managers with credit analysis across all asset classes with an emphasis in residential mortgage
backed securities. His duties extend to surveillance and loss modeling. Prior to joining TCG, Mr.
Medema spent two years working as an analyst for a Colorado based hedge fund group and asset
management firm. He holds Bachelor of Arts degrees in both Mathematics and Economics from the
University of Colorado, Boulder.



Ms. Snyder is a member of the fixed income trading and analytics team. She is responsible for
maintaining our transaction database and supervises the surveillance and monitoring process. Ms.
Snyder holds a Bachelor of Science degree in Applied Mathematics with an emphasis in Computer
Science from the University of Colorado at Boulder.




Hilary U. Snyder
Investment/Surveillance Analyst



Chris Medema
Investment/Surveillance Analyst


Mr. Frederick is responsible for managing all accounting functions at The Chotin Group. Prior to
joining Chotin in 2005, David served as SVP and CFO of Duke Energy Field Services, the nations
largest natural gas processor headquartered in Denver, CO. David moved to Denver in 1998 from
Houston, Texas, where he held various positions with Duke Energy and its predecessor company,
Pan Energy Corp. David started his career with Deloitte and Touche where he spent seven years in
the audit. David graduated from the University of Houston in 1981 with a BBA in accounting and is a
Certified Public Accountant.


Mr. Wolf is a member of the fixed income trading and analytics team. He supports the portfolio
managers with credit analysis across all asset types and is actively involved in the surveillance and
monitoring process. Prior to joining TCG, Mr. Wolf was an investment analyst concentrating on
commercial loans at Merchants Mortgage and Trust and was a field coordinator for the Joe
Lieberman for President Campaign. He holds a Bachelor of Science degree in Business Management
from the University of Colorado, Boulder.




Andy Wolf
Investment/Surveillance Analyst





David Frederick
Vice President/Treasurer

18

Chotin Asset Management Corporation

Biographies (cont’d)

____________________

Source: The Chotin Group Corporation. As of August 28, 2005.


Mr. Reisman is responsible for managing all of the legal aspects of the work of Chotin and its
affiliates.


Prior to joining Chotin, Mr. Reisman was a senior associate with Skadden, Arps, Slate,
Meagher & Flom in London, England.


Mr. Reisman’s work there was of a general corporate
nature.


Before joining Skadden, Mr. Reisman was an associate with Cahill Gordon & Reindel in New
York, specializing in corporate finance.


Mr. Reisman received his J.D. from the University of
Chicago Law School and his B.A. from Dartmouth College.




Richard J. Reisman
Vice President and General
Counsel



Mr. Frederick is responsible for managing all accounting functions at The Chotin Group. Prior to
joining Chotin in 2005, David served as SVP and CFO of Duke Energy Field Services, the nations
largest natural gas processor headquartered in Denver, CO. David moved to Denver in 1998 from
Houston, Texas, where he held various positions with Duke Energy and its predecessor company,
Pan Energy Corp. David started his career with Deloitte and Touche where he spent seven years in
the audit. David graduated from the University of Houston in 1981 with a BBA in accounting and is a
Certified Public Accountant.



David Frederick
Chief Financial Officer