Potential Opportunity for RMBS



While improving, default rates and loss severities post '07/'08 crash remain at historically high levels, presenting opportunity for improved RMBS collateral performance.


Drivers Behind Recent Mortgage Market Rally

Housing price stabilization and appreciation

Significant decline in inventories and foreclosures

'Buy to Rent' funds created


Expected Drivers Going Forward

Inflationary expectations due to large increase in money supply from government policies

Homes with LTV>100 have showed substantial decline1

6.2% at the end of 2016, down from 19.8% in Q1 2013

Average Loan to Value ratios have declined to 55.5%, down from 67.2% in Q1 2013

Should allow for increase in voluntary prepays due to pent-up desire to move, increasing housing turnover

Subprime voluntary prepays historically average approximately 5% per year (excluding refi's), rates remain in the 1-2% per year, presenting opportunity for improvement2

Continued improvement of underlying collateral performance

1 Core Logic Equity Report – Q4 2016

2 Black Box Logic - Crystal Logic



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