EXHIBIT 1 1
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From: FIODERIGK GAGNE '
To: “MllI/IE :[email protected]"@GWDOM1.`l“FS E ·
{late: Thu. Oct 2B, 1999 11:42 AM
Subtest: Re: Next Steps wtlh Floyal · t
Andrew, Q I · _
I wanted to ralse with you In a separate e-mall three issues that I have been thlnldng about. Q . .
Ftrst, I want the Royal to commit more formally to the $2u0,o¤0,0tl0 and may have them lssue a master F
Q policy with smaller pollcles lssued oft ct the main policy. Alternatively, I will have them Issue to you a _ § ‘
· wrltten blndlng comrnltmonl for the $200,090,0DO pollcy. _
Second, I sm not sure how you can have a tot ol cap left on the warehouslng llnes and need the new I
pcllcy. The old policy llmlt Increased for prepaid loans tor the llrst year. Thus, your warehouse llnes are __ Q -
used up at $75,0D0,0u0 unless they have been palddown lor prepaid loans andlor defaulted loans. I . l :
‘ assume that you must have had a lot ol ctetaults to have any avallablllty on the llnes and no Insurance. ls Q
t s true?
2 :
Thlrd and tlnally ls a structuring Issue. The new policy Is to have one escrow lor each Pollcy. The - Q
. problem arlses when the pools only can have loans wllhout any 30 day or more dellnquencles. What do *
we do with these loans. I see two options. One, we keep accumulating the poor performing loans until · 3
· I they are big enough to Issue a dltlsrent term securltlzatlon. The poor perlormlng loans would stlll he Q 5
subject to the Royal pcllcy. The loans should stlll get a decent rallng just not Aaa, more like the single A ; ‘
ol the Royal. Second the loans would be prloed higher slnce the llkellhood ot prepayment would he - _
greater. Probably no way you could Issue an EO strlp. The pool could have a tloatlng rate. wlth a can - _ `j I
Insurance. The other alternatlve ls to force the term seourttlzatlon tc take all ot the loans Insured hy a 1 ‘
particular pcllcy. This would ellect prlolng elnce the prepayment speedwoulcl he greater, however the g
prlnclpal would stlll be secure. I thlnlr we should think about these options sooner than later and
clcterrnlne ll there Is any market lor these bonds since we do not want to have protracted selllng perlods 5
like we are currently experiencing. Q
Finally. lclld want to comment on the prtotng ol the bonds. 25¤bps over 5 year T-Elllls. OUCH! That must
be ln the 8% range. At that level, you do not get much of an IO strip 1% It that. I guess we wlll have to e
_ welt and see what the new source and use says. '
Call me or e-mall me, whichever Ie easter. l will let you know how thlngs progress with the Royal. Q
gcgd luck wlth the selllng. Glad to see you are pushing the process along. ¥
9 .
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