Table 1

The baseline default and loss severity vectors that we applied in our analysis are presented in Figure 1.0 on the following page. We assume that baseline defaults ramp over thirty months to a peak of 5 CDR and remain constant thereafter. We also assume a constant loss severity of 40%. We then scale the baseline default and loss severity for each scenario by the multiples presented in Table 2.0. The default multiples range from zero to 10, while loss severity multiples range from zero to 1.5 the base case. Notice that the prepayment multiples decline as default multiples rise, reflecting a more limited opportunity for borrowers to prepay as defaults increase and visa versa.

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