MORTGAGE-BACKED SECURITIES Mortgage Market Monitor April 2018 Remittances
Table of Contents Foreword... 3 Overview... 7 Section A: Serious Delinquencies... 8 I. Serious Delinquencies as % of Unpaid Principal Balance... 9 II. Foreclosure and REO as % of Unpaid Principal Balance... 11 III. 12 months of Clean Delinquency History... 16 IV. Updated Consumer Credit Data... 20 Section B: Defaults... 23 I. CDR by Sector... 24 II. CDR and Serious Delinquencies by Sector... 26 III. CDR by Delinquency Status... 31 Section C: Prepayments... 33 I. Voluntary Prepayments by Sector... 34 II. CPR Breakout by Sector... 36 III. Voluntary Prepayments by Delinquency Status... 38 Section D: Loss Severity... 40 I. Loss Severity by Sector... 41 II. Loss Severity by State... 43 III. Loss Severity by City... 46 IV. Loss Severity by Unpaid Principal Balance... 48 Section E: Servicing... 50 I. Liquidation Timeline... 52 II. Cash Flow Velocity... 55 III. Short Sales... 58 IV. California Severity by Servicer... 61 V. Advancing... 63 Section F: Home Prices... 66 I. Home Price Indices... 68 II. Case Shiller Summary... 70 1
This material is for general information purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, any security. TCW, its officers, directors, employees or clients may have positions in securities or investments mentioned in this publication, which positions may change at any time, without notice. While the information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and should not be relied on as such or be the basis for an investment decision. The information contained herein may include preliminary information and/or "forward-looking statements." Due to numerous factors, actual events may differ substantially from those presented. TCW assumes no duty to update any forward-looking statements or opinions in this document. Any opinions expressed herein are current only as of the time made and are subject to change without notice. Past performance is no guarantee of future results. 2018 TCW 2
Foreword 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 loan s 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. 3
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 borrower s credit profile. The Vantage score is a score that summarizes the consumer s 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 score s 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 and/or liquidates 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 4
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 servicer s 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) = 5. 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 servicer s 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 bond s 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 4, 2, 15%, 15%, and 1, respectively. While we arrived at these weightings through scenario analysis, they are more last cash flow friendly and front pay unfriendly. 5
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 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 market s 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. DTI Debt-to-income Ratio. We track the debt-to-income ratio at origination for Freddie Mac loans at the loan level. The debt-to-income ratio indicates the sum of the borrower s monthly debt payments, including monthly housing expenses, divided by the total monthly income used to qualify the borrower, expressed as a percentage This disclosure is subject to the widely varying standards originators use to verify borrowers assets and liabilities. 6
Market Update Non-Agency RMBS once again posted another strong month amidst a backdrop of elevated macro uncertainty. While various risks to a bullish economic outlook continued to intensify, such as escalating tensions of a potential trade war with China, spreads were stable and ended April mostly unchanged. The demand for mortgage credit assets was once again driven by real money accounts as well as the dealer community. Trace reported a slowdown in overall trading activity from 13.6bn in March to 12.2bn where dealers were net longer for the first time in three months by 651mm. Meanwhile, secondary bid list volumes stayed comparatively steady month-over-month and only dipped marginally to 4.5bn. A continuation of selling by legacy holders provided a measurable share of the supply, including another bid list from a GSE seller for the second month in a row. Consisting of nine subprime bonds totaling 626mm, it was the month s largest list and saw all line items exchange hands. Positive fundamental and technical factors remained in place within Non-Agency RMBS and should continue to contribute to the sector s low correlation to broader markets. Non-prime securitization picked up in April as issuance included two transactions from repeat issuers. Shelter Growth issued its first of the year and third overall, 140mm SGR 2018-1, where the AAA rated super senior priced at 65/n. Invictus Capital Partners came out with its second deal of the year but one that s entirely backed by investor properties. 249mm of VERUS 2018-INV1 was offered and the AAA rated senior A1 priced at 78/n. Collateral Performance Serious delinquencies decreased across all sectors in February. Prime decreased by 16 basis point to 5.27%; Alt-A delinquencies decreased by 39 basis points to 11.81%; Option Arm delinquencies decreased by 56 basis points to 18.9 and Subprime delinquencies decreased by 99 basis points to 22.77%. Voluntary prepayments were mixed across sectors this month. Prime CRRs came in at 13.6%, up 242 basis points month-over-month; Alt-A CRRs were 12.8%, up 158 basis points month-over-month; Option Arm CRRs were 10.1%, up 171 basis points month-over-month and Subprime CRRs were 9., down 177 basis points month-over-month. Month-over-month changes in CDRs all increased. Prime CDRs increased by 35 basis points to 1.57%; Alt-A CDRs increased by 79 basis points to 3.64%; Option Arm CDRs increased by 34 basis points to 4.69% and Subprime CDRs increased by 60 basis points to 5.17%. Case-Shiller futures indicate a continuation of slow gains in residential home prices, predicting home prices will rise two to three percent annually during the next three years. Year-over-year, home prices are up 6.8% across Case-Shiller s 20 major city index. At the national level, changes in severities were mixed across all sectors. At the state level, California Subprime severities were lower at 48% this month. Florida Subprime severities decreased to 75%. New York Subprime severities decreased to 78%; and Nevada Subprime severities decreased to 68%. 7
Section A: Serious Delinquencies 8
I. Serious Delinquencies as % of Unpaid Principal Balance 9
6 Securitized Mortgages: Serious Delinquencies as % of Unpaid Principal Balance as of April 2018 Prime 5 Alt-A Option Arm 4 Subprime 3 22.77% 2 18.9 1 11.8% 5.273% Exhibited by TCW from CoreLogic LoanPerformance Data 10
II. Foreclosure and REO as % of Unpaid Principal Balance Exhibited by TCW from CoreLogic LoanPerformance Data 11
Prime Securitized Mortgages: Foreclosure and REO as % of Unpaid Principal Balance as of April 2018 5.0 4.5 4.0 Prime FC Prime REO 3.5 3.0 2.5 2.0 1.5 1.85% 1.0 0.5% 0.5 0.0 Exhibited by TCW from CoreLogic LoanPerformance Data 12
Alt-A Securitized Mortgages: Foreclosure and REO as % of Unpaid Principal Balance as of April 2018 12. 10. Alt-A FC Alt-A REO 8. 6. 4. 4.1% 2. 1.1% 0. Exhibited by TCW from CoreLogic LoanPerformance Data 13
Option Arm Securitized Mortgages: Foreclosure and REO as % of Unpaid Principal Balance as of April 2018 25. Option Arm FC 20. Option Arm REO 15. 10. 5. 6.5% 1.9% 0. Exhibited by TCW from CoreLogic LoanPerformance Data 14
20. Subprime Securitized Mortgages: Foreclosure and REO as % of Unpaid Principal Balance as of April 2018 18. 16. Subprime FC Subprime REO 14. 12. 10. 8. 6. 4. 6.4% 1.8% 2. 0. Exhibited by TCW from CoreLogic LoanPerformance Data 15
III. 12 months of Clean Delinquency History 16
10 Percentage of outstanding loans with 12 month Clean DQ history as of April 2018 9 8 87.9% 75.4% 7 66.9% 6 5 52.5% 4 3 2 Prime Alt-A Option Arm Subprime 1 Exhibited by TCW from CoreLogic LoanPerformance Data 17
7.0 Percentage of 12 month Clean DQ history loans rolling to 30 Days DQ as of April 2018 6.0 Prime Alt-A Option Arm 5.0 Subprime 4.0 3.0 2.0 1.0 0.0 1.1% 0.72% 0.52% 0.3 Exhibited by TCW from CoreLogic LoanPerformance Data 18
4.0 Percentage of 12 month Clean DQ history loans rolling to 60 days Delinquent over 2 Payment Periods as of April 2018 3.5 3.0 Prime Alt-A Option Arm Subprime 2.5 2.0 1.5 1.0 0.5 0.0 0.25% 0.18% 0.09% 0.13% Exhibited by TCW from CoreLogic LoanPerformance Data 19
IV. Updated Consumer Credit Data 20
FICO Score Migration 775 725 675 AltA Prime Subprime OptArm Subprime Peak 625 575 Exhibited by TCW from CoreLogic LoanPerformance and Equifax Data 21
5 FICO less than 550 as a percentage of Unpaid Balance 45% 4 35% AltA Prime Subprime OptArm 3 25% 2 15% 1 5% Exhibited by TCW from CoreLogic LoanPerformance and Equifax Data 22
Section B: Defaults 23
I. CDR by Sector 24
18% Securitized Mortgages: Default Rates (CDR) as of April 2018 16% Prime 14% 12% 1 AltA OptArm Subprime 8% 6% 4% 2% 5.17% 4.69% 3.6% 1.57% Exhibited by TCW from First American CoreLogic LoanPerformance Data 25
II. CDR and Serious Delinquencies by Sector 26
12% Securitized Mortgages: Prime 60+ and Prime CDRs as of April 2018 Prime CDR 1 Prime 60+ 8% 6% 5.273% 4% 2% 1.57% Exhibited by TCW from CoreLogic LoanPerformance Data 27
3 Securitized Mortgages: Alt-A 60+ and Alt-A CDRs as of April 2018 Alt-A CDR 25% Alt-A 60+ 2 15% 1 11.8% 5% 3.6% Exhibited by TCW from CoreLogic LoanPerformance Data 28
5 Securitized Mortgages: Option Arm 60+ and Option Arm CDRs as of April 2018 45% Option Arm CDR 4 Option Arm 60+ 35% 3 25% 2 15% 18.9 1 5% 4.69% Exhibited by TCW from CoreLogic LoanPerformance Data 29
6 Securitized Mortgages: Subprime 60+ and Subprime CDRs as of April 2018 Subprime CDR 5 Subprime 60+ 4 3 2 22.77% 1 5.17% Exhibited by TCW from CoreLogic LoanPerformance Data 30
III. CDR by Delinquency Status 31
10 8 6 4 2 Prime CDR Mix by Delinquency Status 10 8 6 4 2 Option Arm CDR Mix by Delinquency Status C 3 6 9 B F R C 3 6 9 B F R 10 9 8 7 6 5 4 3 2 1 Alt-A CDR Mix by Delinquency Status 10 8 6 4 2 Subprime CDR Mix by Delinquency Status C 3 6 9 B F R C 3 6 9 B F R Exhibited by TCW from First American CoreLogic LoanPerformance Data 32
Section C: Prepayments 33
I. Voluntary Prepayments by Sector 34
Securitized Mortgages: Voluntary Prepayment Rates (CRR) as of April 2018 30. Prime Alt-A 25. Option Arm Subprime 20. 15. 13.6% 12.8% 10. 10.1% 9. 5. 0. Exhibited by TCW from CoreLogic LoanPerformance Data 35
II. CPR Breakout by Sector 36
Prime CPR 30. Option Arm CPR 25. 20. 20. 15. 15. 10. 5. 0. 10. 5. 0. CRR CDR CRR CDR 25. 20. 15. 10. 5. 0. Alt-A CPR 25. 20. 15. 10. 5. 0. Subprime CPR CRR CDR CRR CDR Exhibited by TCW from First American CoreLogic LoanPerformance Data 37
III. Voluntary Prepayments by Delinquency Status 38
10 99% 98% 97% 96% 95% 94% 93% 92% 91% Prime CRR Mix by Delinquency Status 10 95% 9 85% 8 75% 7 Option Arm CRR Mix by Delinquency Status C 3 6 9 B F R C 3 6 9 B F R 10 98% 96% 94% 92% 9 88% 86% 84% Alt-A CRR Mix by Delinquency Status 10 95% 9 85% 8 75% 7 Subprime CRR Mix by Delinquency Status C 3 6 9 B F R C 3 6 9 B F R Exhibited by TCW from First American CoreLogic LoanPerformance Data 39
Section D: Loss Severity 40
I. Loss Severity by Sector 41
Historical Loss Severity By Sector 90. 80. 70. 60. 50. Prime Alt-A Option Arm Subprime 68.6% 61.6% 57.1% 48.9% 40. 30. 20. 10. 0. Exhibited by TCW from CoreLogic LoanPerformance Data 42
II. Loss Severity by State 43
Prime Loss Severity by State 16 14 12 10 8 6 4 2 VT CT WI OH RI NV NE KS NJ DE IL SC WA NY NM INFL MI MA MD ID HI PA MN WY OR AZ MO CO TX NC AL CA UT GA KY VA NH DC TN 1mo LossSeverity 3mo LossSeverity Alt-A Loss Severity by State 14 12 10 8 6 4 2 VT ME NJ CT AR NY IL NM PA FL NH OH WI NE WV AL NV RI MD KY MA DC IN HI SC OK ID AK MI DE MS MO OR TN NC GA IA SD MN LA KS AZ VA UT CA MT WA TX CO WY NH RI WI OK MT IL NJ VT NE FL CO IA NY CT NM KY PA LA OH MS ME NV MD DE MA KS VA GA NC MI IN AL AZ CA HI WA MN OR DC TN UT SC MO ID WV TX 1mo LossSeverity 3mo LossSeverity Exhibited by TCW from First American CoreLogic LoanPerformance Data 44 16 14 12 10 8 6 4 2 12 10 8 6 4 2 Option Arm Loss Severity by State 1mo LossSeverity 3mo LossSeverity Subprime Loss Severity by State ME VT NJ CT NY NV FL IL NE AR OK PA DE OH RI MD WV IN MA NM IA MS LA MO AL KY MI MT WI HI DC SC MN TX NC AZ KS AK GA TN NH CA VA ND OR WA WY ID SD CO UT 1mo LossSeverity 3mo LossSeverity
70. 60. 50. 40. 30. 20. 10. 0. Historical Loss Severity - California Prime Alt-A Option Arm Subprime 48.3% 45.5% 32.5% 23.8% 120. 100. 80. 60. 40. 20. 0. Historical Loss Severity - New York Prime Alt-A Option Arm Subprime 77.5% 77.9% 78.9% 80.5% 100. 90. 80. 70. 60. 50. 40. 30. 20. 10. 0. Historical Loss Severity - Florida Prime Alt-A Option Arm Subprime 75.8% 75.1% 72.5% 54.3% 100. 90. 80. 70. 60. 50. 40. 30. 20. 10. 0. Historical Loss Severity - Nevada Prime Alt-A Option Arm Subprime 75.1% 74.4% 61.6% 68. Exhibited by TCW from First American CoreLogic LoanPerformance Data 45
III. Loss Severity by City 46
Prime Loss Severity Across Top 10 Cities by UPB Option Arm Loss Severity Across Top 10 Cities by UPB 8 7 6 5 4 3 2 1 9 8 7 6 5 4 3 2 1 1mo Loss Severity 3mo Loss Severity 1mo Loss Severity 3mo Loss Severity Alt-A Loss Severity Across Top 10 Cities by UPB Subprime Loss Severity Across Top 10 Cities by UPB 10 9 8 7 6 5 4 3 2 1 10 9 8 7 6 5 4 3 2 1 1mo Loss Severity 3mo Loss Severity 1mo Loss Severity 3mo Loss Severity Exhibited by TCW from CoreLogic LoanPerformance Data 47
IV. Loss Severity by Unpaid Principal Balance 48
Prime Loss Severity by Current Balance Option Arm Loss Severity by Current Balance 16 14 12 10 8 6 4 2 100 80 60 40 20 1Mo LossSeverity 3mo LossSeverity 1Mo LossSeverity 3mo LossSeverity Alt-A Loss Severity by Current Balance Subprime Loss Severity by Current Balance 18 16 14 12 10 8 6 4 2 14 12 10 8 6 4 2 1Mo LossSeverity 3mo LossSeverity 1Mo LossSeverity 3Mo LossSeverity Exhibited by TCW from First American CoreLogic LoanPerformance Data 49
Section E: Servicing Exhibited by TCW from CoreLogic LoanPerformance Data 50
I. Liquidation Timeline Exhibited by TCW from CoreLogic LoanPerformance Data 51
70.0 National Average Liquidation Timeline (Months) 63.3 60.0 50.0 55.7 40.0 41.4 30.0 20.0 10.0 - Combined Judicial NonJudicial Exhibited by TCW from CoreLogic LoanPerformance Data 52
35.0 30.0 25.0 20.0 15.0 10.0 5.0 - Prime Avg # Months in DQ Prior to Modification 50.0 40.0 30.0 20.0 10.0 - Option Arm Avg # Months in DQ Prior to Modification ModSpeed 3mo Avg ModSpeed ModSpeed 3mo Avg ModSpeed Alt-A Avg # Months in DQ Prior to Modification Subprime Avg # Months in DQ Prior to Modification 35.0 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 - ModSpeed 3mo Avg ModSpeed ModSpeed 3mo Avg ModSpeed Exhibited by TCW from CoreLogic LoanPerformance Data 53
II. Cash Flow Velocity 54
70. Securitized Mortgages: Cashflow Velocity (P&I Paid / P&I Due) on Delinquent Loans as of April 2018 60. 50. 40. 30. 20. 10. Prime Alt-A Option Arm Subprime 0. Exhibited by TCW from CoreLogic LoanPerformance Data 55
Servicer Level Cashflow Velocity on DQ Prime Loans Servicer Level Cashflow Velocity on DQ Option Arm Loans 10 8 6 4 2 8 6 4 2 1mo Cashflow Velocity 3mo Cashflow Velocity 1mo Cashflow Velocity 3mo Cashflow Velocity Servicer Level Cashflow Velocity on DQ Alt-A Loans 10 8 6 4 2 8 7 6 5 4 3 2 1 Servicer Level Cashflow Velocity on DQ Subprime Loans 1mo Cashflow Velocity 3mo Cashflow Velocity 1mo Cashflow Velocity 3mo Cashflow Velocity Exhibited by TCW from CoreLogic LoanPerformance Data 56
III. Short Sales 57
Prime Short Sales as % of Total Defaults Option Arm Short Sales as % of Total Defaults 10 10 8 8 6 6 4 4 2 2 Short Sales REO Short Sales REO 10 9 8 7 6 5 4 3 2 1 Alt-A Short Sales as % of Total Defaults 10 9 8 7 6 5 4 3 2 1 Subprime Short Sales as % of Total Defaults Short Sales REO Short Sales REO Exhibited by TCW from First American CoreLogic LoanPerformance Data 58
Percentage Prime Defaults Liquidated via Short Sale by Servicer Percentage Option Arm Defaults Liquidated via Short Sale by Servicer 12 10 8 6 4 2 10 8 6 4 2 1mo Short Sales 3mo Short Sales 1mo Short Sales 3mo Short Sales 12 10 8 6 4 2 Percentage Alt-A Defaults Liquidated via Short Sale by Servicer 10 8 6 4 2 Percentage Subprime Defaults Liquidated via Short Sale by Servicer 1mo Short Sales 3mo Short Sales 1mo Short Sales 3mo Short Sales Exhibited by TCW from First American CoreLogic LoanPerformance Data 59
IV. California Severity by Servicer 60
Prime Average CA Severity by Servicer Option Arm Average CA Severity by Servicer 14 12 10 8 6 4 2 10 8 6 4 2 1mo Avg Severity 3mo Avg Severity 1mo Avg Severity 3mo Avg Severity 6 5 4 3 2 1 Alt-A Average CA Severity by Servicer 9 8 7 6 5 4 3 2 1 Subprime Average CA Severity by Servicer 1mo Avg Severity 3mo Avg Severity 1mo Avg Severity 3mo Avg Severity Exhibited by TCW from CoreLogic LoanPerformance Data 61
V. Advancing 62
50. Securitized Mortgages: % 60+ Loans No Longer Advanced Upon as of April 2018 45. 40. 35. Subprime OptArm AltA Prime 30. 25. 20. 15. 10. 5. 0. Exhibited by TCW from CoreLogic LoanPerformance Data 63
7 6 5 4 3 2 1 Prime Percentage 60+ Not Advanced Upon by Servicer 8 6 4 2 Option Arm Percentage 60+ Not Advanced Upon by Servicer 1mo % 60+ No Advance 3mo % 60+ No Advance 3mo % 60+ No Advance 1mo % 60+ No Advance 8 7 6 5 4 3 2 1 Alt-A Percentage 60+ Not Advanced Upon by Servicer 8 7 6 5 4 3 2 1 Subprime Percentage 60+ Not Advanced Upon by Servicer 3mo % 60+ No Advance 1mo % 60+ No Advance 1mo % 60+ No Advance 3mo % 60+ No Advance Exhibited by TCW from CoreLogic LoanPerformance Data 64
Section F: Home Prices 65
I. Home Price Indices 66
National Home Price Indices 250 230 210 190 FHFA Purchase Case Shiller 10 City Case Shiller 10 City 170 150 130 110 90 70 50 Exhibited by TCW from S&P, and FHFA Data 67
II. Case Shiller Summary 68
Geographic Area YoY Peak to Now Peak to Trough Trough to Now Months since peak Months since trough Atlanta 6.5% 4% -36% 63% 129 73 Boston 5.7% 13% -2 42% 151 109 Charlotte 6.4% 13% -2 42% 128 74 Chicago 2.6% -18% -39% 35% 139 73 Cleveland 4.1% -5% -24% 25% 141 74 Dallas 6.4% 44% -11% 62% 130 110 Denver 8.4% 48% -14% 73% 140 110 Detroit 8.4% -7% -49% 84% 148 84 Los Angeles 8.3% 1% -42% 73% 139 107 Las Vegas 11.6% -26% -61% 91% 140 73 Miami 4.6% -18% -51% 68% 136 84 Minneapolis 5.8% -4% -38% 55% 139 85 New York 6. -9% -27% 25% 142 73 Phoenix 6.4% -23% -56% 75% 142 79 Portland 6.7% 21% -31% 74% 129 73 San Diego 7.6% -42% 74% 149 108 Seattle 10.8% 22% -32% 79% 129 74 San Francisco 10.1% 17% -46% 118% 143 109 Tampa 7.1% -14% -47% 64% 141 74 Washington DC 2.4% -12% -34% 33% 143 109 10 City Aggregate 6.5% -2% -35% 51% 142 73 20 City Aggregate 6.8% -34% 51% 141 73 Exhibited by TCW from S&P 69