10 YEAR DEFAULT RATES ON NEWLY ORIGINATED MORTGAGES

Origination LTVOFHEO Worst

Region*1983–1984

OFHEO Weights

GSEs2006–2007

GSE Weights

<60 2.2% 15%8.0% 35%

61 to 70 3.5% 20%

71 to 75 7.9% 10%12.4% 45%

76 to 80 9.4% 35%

81 to 90 16.4% 10% 18.8% 10%

>90 26.4% 10% 19.9% 10%

Weighted Average 9.4% 12.3%

* Arkansas, Louisiana, Mississippi, Oklahoma originations

• Vintage effects and channel effects• Seasoning• Loss Given Default – Severity Model• Stress test income and short dated

swaptions