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Report to the Congress on Risk Retention

Figure 1

Title: Figure 1. Example of a Securitization Structure
Series: Pass-through security and senior-subordinate structure
Horizon: Not applicable
Description: This figure is a graphical example of the difference between a pass through structure and a senior-subordinate structure.
On the left side of the figure are four equally sized vertical bars that each represent a 25 percent ownership share in a pool of loans. At the bottom of each vertical bar is a small red portion representing the loss on the pool of loans.
To the right of the vertical bars, the figure depicts the senior-subordinate structure as three equally sized stacked blue boxes labeled A, B, and C from top to bottom. Each box represents a tranche or class in the senior-subordinate structure each worth one-third of the pool of loans. The box labeled A, at the top, represents the senior tranche or class of security; the box labeled B, in the middle, represents the subordinate trance; and the box labeled C, at the bottom, is the equity tranche. Box C has both a blue portion on the top and a red portion below, equal to the size of the red portion of the vertical bars for the pass-through security.
To the right of the three stacked bars are two arrows, which are stacked: the top one labeled "payments to investors," starts from the top of the red portion in Box C and goes up through the box B and Box A and the bottom one, labeled "losses," is the size of the bottom red portion of both the vertical bars and the bottom half of Box C.

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Figure 2

Title: Figure 2. Percentage of Dollar Amount of All New Asset-Backed Issuances from 2005 to 2009
Series: Percentage of dollar amount of all new asset-backed issuances from 2005 to 2009
Horizon: 2005 to 2009
Description: Data are plotted as a pie chart. Units are the percentage, by dollar amount, of all new asset-backed issuance from 2005 to 2009.

RMBS represents 35 percent of new issuance, CMBS 15 percent, CLO 7 percent, credit card 5 percent, auto 5 percent, student loans 4 percent, floorplan 1 percent, and equipment less than 1 percent. Other issuancesrepresent the 28 percent remainder of new issuance.
Note: For the definition of "other" asset-backed securities, see text note 20. CLO is collateralized loan obligations, CMBS is commercial mortgage-backed securities, and RMBS is residential mortgage-backed securities.
Source: JPMorgan Chase, Securities Industry and Financial Markets Association, Asset-Backed Alert, and Commercial Mortgage Alert.

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Figure 3

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Figure 4

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Figure 5

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Figure 6

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Figure 7

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Figure 8

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Figure 9

Title: Figure 9. ABX.HE Index for 2006-2 Vintage Residential Mortgage-Backed Securities
Series: 2006-2 AAA and 2006-2 BBB
Horizon: July 2006 to September 2010
Description: Data are plotted as two curves. Units are index price (par = 100). The prices are quoted at a daily frequency from July 2006 to September 2010.
Over the entire data range, the prices of the AAA-rated securities are higher than the prices of the BBB-rated securities.
The AAA-rated securities are priced at par through July 2007. Subsequently, the series declines gradually to below 30 points in April 2009. It recovers near to 60 points at the close of the sample period.
The BBB-rated securities are priced near par through November 2006. Subsequently, the series falls to below 80 points by early 2007 and stabilizes at about the 80 point level for several months before falling again in June 2007. The series then drops sharply until May 2008, and trades consistently near 5 points through the remainder of the sample period.
Source: JPMorgan Chase.

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Figure 10

Title: Figure 10. Fixed-Rate Spreads over Swaps for 10-Year Commercial Mortgage-Backed Securities Rated AAA
Series: Fixed-rate spreads over swaps for 10-year commercial mortgage-backed securities rated AAA
Horizon: January 2001 to September 2010
Description: Data are plotted as one curve. Units are spreads (in basis points). The spreads are quoted at a weekly frequency from May 2005 to September 2010.

Spreads remain near constant in the range of 20 to 30 basis points until June 2007. The spreads first hit 310 basis points in March 2008 before retreating briefly to 140 basis points two months later. The spreads then widen sharply to an unprecedented level of 1,350 basis points in November 2008. Toward the end of the sample period, the spreads narrow to about 300 basis points.
Source: JPMorgan Chase.

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Figure 11

Title: Figure 11. Fixed-Rate Spreads over Swaps for 2-Year Credit Card Asset-Backed Securities Rated AAA and BBB
Series: AAA and BBB
Horizon: January 2001 to September, 2010
Description: Data are plotted as two curves. Units are spreads (in basis points). The spreads are quoted at a weekly frequency from January 2001 to September 2010. The spreads are quoted at a weekly frequency from January 2001 to September 2010.

Over the entire data range, the spreads of the BBB-rated securities are higher than the spreads of the AAA-rated securities. Both series stay at very low levels, about 20 and 0 basis points, respectively, until the summer of 2007 when the spreads begin to widen rapidly. The spreads hit their first peaks of 550 and 115 basis points, respectively, in early 2008 and subsequently retreat by about one-half of the increase. However, both series widen even more rapidly to unprecedented levels during the second half of 2008. By December 2008, the spreads of AAA-rated securities are over 500 basis points and the spreads of the BBB-rated securities are at 2,500 basis points. Afterward, the spreads narrow substantially. Toward the end of the sample period, the spreads of AAA-rated securities retreat to about 15 basis points, whereas the spreads of BBB-rated securities retreat near to 100 basis points.
Source: JPMorgan Chase.

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Figure 12

Title: Figure 12. Fixed-Rate Spreads over Swaps for 2-Year Credit Card Asset-Backed Securities Rated AAA and BBB
Series: AAA and A
Horizon: January 2001 to September 2010
Description: Data are plotted as two curves. Units are spreads (in basis points). The spreads are quoted at a weekly frequency and are shown from January 2001 to September 2010.

Over the entire data range, the spreads of the A-rated securities are higher than the spreads of the AAA-rated securities. Both series stay at very low levels, about 20 and 5 basis points, respectively, until the summer of 2007 when the spreads begin to widen rapidly. The spreads hit their first peaks of 550 and 185 basis points, respectively, in early 2008 and subsequently retreat by about one-half of the increase. However, both series widen even more rapidly to unprecedented levels during the second half of 2008. By December 2008, the spreads of AAA-rated securities are over 600 basis points and the spreads of the A-rated securities are over 1200 basis points. Since then, the spreads narrow substantially. Toward the end of the sample period, the spreads of AAA-rated securities retreat to about 20 basis points, whereas the spreads of BBB-rated securities retreat near to 100 basis points.
Source: JPMorgan Chase.

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Figure 13

Title: Figure 13. Floating-Rate Spreads over 3-month Libor for 3-Year FFELP and Private Student Loan Asset-Backed Securities Rated AAA
Series: FFELP and Private
Horizon: October 2002 to September 2010
Description: Data are plotted as two curves. Units are spreads (in basis points). The spreads are quoted at a weekly frequency from October 2002 to September 2010.

Over the entire data range, the spreads of the private student loan securities are higher than the spreads of the FFELP student loan securities. Both series stay at very low levels below 15 basis points until the summer of 2007 when the spreads begin to widen rapidly. By early 2009, the spreads of private student loan securities hit 1,200 basis points and the spreads of the FFELP student loan securities are more than 300 basis points. Afterward, the spreads narrow substantially. Toward the end of the sample period, the spreads of private student loan securities retreat to about 300 basis points, whereas the spreads of FFELP student loan securities retreat to about 25 basis points.
Note: Libor is the London interbank offered rate, and FFELP is the Federal Family Education Loan Program.
Source: JPMorgan Chase.

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Figure 14

Title: Figure 14. Fixed-Rate Spreads over Swaps for 3-Year Equipment Loan Asset-Backed Securities Rated AAA and BBB
Series: AAA and BBB
Horizon: January 2001 to September 2010
Description: Data are plotted as two curves. Units are spreads (in basis points). The spreads are quoted at a weekly frequency from January 2001 to September 2010.

Over the entire data range, the spreads of the BBB-rated securities are higher than the spreads of the AAA-rated securities. Before the summer of 2007, both series are relatively stable, at 75 and 15 basis points, respectively. Afterward, both spreads widen substantially. The spreads of AAA-rated securities peak at 600 basis points by the end of 2009. The spreads of BBB-rated securities peak several months later at 1,500 basis points. The spreads then narrow substantially. Toward the end of the sample period, the spreads of AAA-rated securities retreat to about 20 basis points, whereas the spreads of BBB-rated securities retreat to about 375 basis points.
Source: JPMorgan Chase.

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Figure 15

Title: Figure 15. FAS 167 Loan Consolidation by Asset Class
Series: No series indicated.
Horizon: No horizon indicated.
Description: Data are plotted as a pie chart. Units are billions of dollars.

The figure shows seven types of loans in billions of dollars that were consolidated by commercial banks:

Credit card, $326.0 billion.
Consumer loans, $29.7 billion.
Other loans, $29.5 billion.
C&I loans, $24.0 billion.
Residential mortgages, $20.9 billion.
Home equity loans, $6.0 billion.
CRE, $1.2 billion.

The pie chart is divided into seven sections and indicates the following percentage for each loan category:

Credit card, 75 percent.
Consumer loans, 7 percent.
Other loans, 7 percent.
C&I loans, 5 percent.
Residential mortgages, 5 percent.
Home equity loans, 1 percent.
CRE, 0 percent.

Source: Federal Reserve Board, Statistical Release H.8, "Assets and Liabilities of Commercial Banks in the United States."

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