For questions 2 and 3 consider the following hypothetical
private label conduit deal structure:
Class Size CE
A 700,000 30.00%
AJ 100,000 20.00%
B 35,000 16.50%
C 40,000 12.50%
D 25,000 10.00%
E (first loss) 100,000
2) (50 points) Assume the above deal has 450mm loans default
with a 30% loss severity.
a) What are the total losses on the defaulted loans and how
much principal was recovered?
b) Which classes take losses and how much?
c) Which classes receive principal payments and par and
how much?
d) Please update the table below to reflect the new sizes
and effective CE after the defaulted loans and payment of
recovered principal.
Class Size Original CE New CE
A 30.00%
AJ 20.00%
B 16.50%
C 12.50%
D 10.00%
E (first loss)
2) (20 points) Assume instead of having defaults the deal had
175mm loans defease. Please fill out the below table with
new defeasance adjusted CE:
Class Size Original CE Defeasance Adjusted CE
A 700,000 30.00%
AJ 100,000 20.00%
B 35,000 16.50%
C 40,000 12.50%
D 25,000 10.00%
E (first loss) 100,000