Home Mortgage Loans

How Payments Flow to the Tranches

• American Pronunciation Guides for ESL Perfectionists
• How To Smash Your Mortgage
• Should You Stop Paying Your Mortgage?

Table 10.5 shows the status of the remaining tranches in the RMBS. Note that tranches M-5 through M-11 and the equity tranche have already been wiped out and there 's almost nothing left of the M- 4 tranche.

This table shows that tranche IA has been paid down from $366 million to $223 million and the IIA1 tranche has been paid down from $323 million to only $52 million—and no other tranches have been paid anything. A total of $413 million has gone to the top two tranches in this pool: $253 million from prepays plus $114 million of recovery from liquidations plus $46 million in interest payments made by performing loans.

Figure 10.4 shows why two tranches are being paid off simultaneously. When this RMBS was created, it was split into four pieces labeled 3, 4, 5, and 6. The recoveries from pieces 3 and 4 pay down tranche IA, while the recoveries from pieces 5 and 6 pay down tranche IIA1 first;

Table 10.5 Current Balances of Surviving Tranches Original (mm) Current (mm)

IIA1

IIA2

IIA3

11 A4

• 366.1 $322.8 $124.9 $236.9 $ 73.2 $ 43.5 $ 39.4 $ 24.9 $ 22.1
• 222.8 $ 51.8 $124.9 $236.9 $ 73.2 $ 43.5 $ 39.4 $ 24.9 $ 14.2

M5 and below wiped out

Source: Amherst Securities.

Mortgage Pool 3

$204.4mm

Mortgage Pool 4

$81.9mm

Mortgage Pool 5

$478.3mm

Mortgage Pool 6

$67.0mm

Figure 10.4 Structure of Long Beach Mortgage Loan Trust 2006-8 Source: Amherst Securities.

then, when it 's paid off in full, the recoveries from pieces 5 and 6 pay down tranche IIA2, and so forth. Note that losses from the entire pool impact the mezzanine tranches.

And here 's one more twist to consider: Once all of the mezzanine tranches are wiped out, the payments from pieces 5 and 6 go pari passu to the remaining IIA tranches. For example, at the point that the M1 tranche is wiped out, let 's say that half ($62 million) of the IIA2 tranche remains, plus all of the IIA3 ($237 million) and IIA4 ($73 million). In this case, the IIA2 tranche would go from receiving 100 percent of the cash coming in from pieces 5 and 6 to receiving only 16.7 percent: 62 — (62 + 237 + 73).

0 0