Asset-Backed Securities Primer

AUGUST 5, 2008
INVESTING IN ASSET BACKED SECURITIES
ABS Research
Chris Flanagan AC Head, Global Structured Finance Research (1-212) 270-6515 christopher.t.flanagan@jpmorgan.com Edward Reardon (1-212) 270-0317 edward.j.reardon@jpmorgan.com Amy Sze, CFA (1-212) 270-0030 amy.sze@jpmorgan.com Brynja Sigurdardottir (1-212) 270-0967 brynja.x.sigurdardottir@jpmorgan.com
Agenda
Page
Introduction to ABS Credit Card Automobile ABS

S EC U R I T I E S
1 11 35 53 86
Student Loan ABS (FFELP) Home Equity ABS
I N V E S TI N G
I N
AS S E T
B AC K ED
ABS outstanding
Asset-backed Asset-backed Securities Securities Outstanding Outstanding ($ ($ billions) billions)
2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800
A B S
1Q08 1Q08 year year end end outstanding outstanding by by collateral collateral
2472 2480
Student Loan
2130 1955 1828 1694 1543
10%
Auto 8% Cards 14%
Equip
1281 1072 901 732 536 404
2%
Other 41% Home Eq 24% MH 1%
600 400 96
T O
98
00
02
04
06
1Q08
I N T R O D U C TI O N
As of 1Q08. Other is approximately 90% CDOs Sources: SIFMA
U.S. ABS supply: The peak is behind us.

Supply Supply ($ ($ Billions) Billions)
900 800 702 700 600 500 330 400 300 200 100 116 0 1998 2000 2002 2004 2006 YTD08 224 240 272 874 888
Credit Cards Autos Home Equity Student Loans Global RMBS Equipment
Sector Sector supply supply ($ ($ Billions) Billions)

2005 66 103 559 64 35 9 39 874 2006 66 84 555 65 69 8 40 888 2007 91 62 224 48 66 6 32 529 2.9 3.1 116.3 23.8 2008 YTD 54.6 32.6 2008 Full Year Proj 95 50 0 30 30 5 20 230
500 402
529
Other Total
Other includes Floorplan, Motorcycle, Small Business Loans, Time Share, Aircraft, Franchise, and other miscellaneous assets. As of Aug 1, 2008. Source: JPMorgan, IGM CorporateWatch, and Bloomberg.
Outstanding Outstanding ($1,552bn ($1,552bn total total as as of of year year end end 2007) 2007)
Student Loans $244 16% MH $27 Home Equity $586 37%
Sources: JPMorgan, SIFMA
Other $102 7%
Autos $199 13% Credit Cards $348 Equipment $46 3% 22%
A B S
2%
T O
Sources: JPMorgan, IGM CorporateWatch, and Bloomberg.
ABS investor base has grown dramatically

Phase I: 1985-1989
Bank portfolios Insurance companies Total return accounts Bank trust departments
Phase II: 1989-1993

State funds Asset swap investors Credit unions Corporations Govt Agencies
Phase I & II
Bank portfolios Insurance companies Total return accounts Bank trust departments State funds Credit unions Corporations Govt Agencies Asset swap investors
Phase III: 1993 - 2002

Money market funds Intl. Investor Specialty Hedge funds Central banks Credit leveraged funds SPVs Securities Lenders
Phase IV: 2002 - Present
Cash/synthetic Mezz SF CDOs HG SF CDOs Macro hedge funds Dealers
T O
A B S
Concepts of Securitization: Asset Securitization

Packaging of pools of assets for sale as debt securities Repayment of the ABS is derived from cash flow generated by the underlying assets ABS are typically issued by banks, finance companies, and corporations Assets typically securitized include: Consumer Loans: Auto Loans, Credit Card Receivables, Home Equity Loans,
Manufactured Housing Loans, or Student Loans

Business Loans: Equipment Loans, Dealer Floorplan, Small Business Loans
Issuers Issuers Investors Investors
Lower Cost of Funds Balance Sheet/Ratio Improvement

A B S
High Credit Quality Higher yield than comparable rated
Access Foreign and US Capital Markets Access Different Areas of the Yield Curve Transfer Risks to Investors
corporate and government securities

Liquidity Relatively Predictable Cash Flows Wide Variety of Maturities
T O
ABS basic structure

Monthly principal & interest payments True Sale Special Purpose Vehicle Master Trust Owner Trust REMIC Investors Issue ABS
Receivables Credit Cards Auto Loans Home Equity Student Loans
Seller / Servicer Banks Finance Companies Corporations
Represent ownership interest in a pool of receivables sold by originators into a special purpose
vehicle (the Trust)

Are typically secured by homogeneous assets with relatively predictable cash flows Assets are legally separated from the seller/servicer, limiting investor exposure to the
A B S
seller/servicer
Feature credit enhancements which lead to high credit ratings
T O
How do ABS issued get AAA Ratings?

Trust Trust Structure Structure Credit Credit Enhancement Enhancement
Bankruptcy Remote
Internal Excess Spread Subordination Reserve Fund Spread Account Overcollateralization External AAA-rated Monoline
Vehicle
Insulates Investor from
Issuer AAA Rating

Payout Payout Events Events / / Performance Triggers Performance Triggers
Insurer
Protects investors from
adverse credit developments

T O I N T R O D U C TI O N A B S
Structure and credit enhancement

Credit Enhancement
Assets (Principal Amounts)
ABS (Liabilities Principal Amounts)
AAA Loss allocation (bottom up) ($800 million) Seniority (top down)
Receivables Pool ($1,000 million)
AAA 20% = AA 9% + A 5% + BBB 3% + OC 3%
AA ($90 million) A ($50 million) BBB ($30 million) OC* ($30 million)
AA 11% = A 5% + BBB 3% + OC 3% A 6% = BBB 3% + OC 3% BBB 3% = 3%OC
A B S
T O
Excess Spread (or Excess Interest)
* OC = Overcollateralization (or Assets > Liabilities). Reserve account may be used in addition to or instead of OC.
Excess spread
Excess spread is the first line of defense against losses in ABS Gross Portfolio Yield
Charge-offs Bond Coupon Servicing Fee Excess Spread
18.00% - 4.00% - 5.50% - 2.00% 6.50%
(Revenue: interest earned on asset) (Credit losses on assets) (Liability cost of ABS debt) (Other expenses) (Net income)
T O
A B S
AAA ABS spreads recently gave up most of the years earlier gains
3 3 year year AAA AAA spreads spreads spread spread to to LIBOR LIBOR (bp) (bp)
190 170 150 130 110 90 70 50 30
A B S
Credit Card
Prime Auto
Student Loan (FFELP)
UK RMBS
AA Financial (1-3 year)
95
135
90
190
158
10 -10 4/00 10/00 4/01 10/01 4/02 10/02 4/03 10/03 4/04 10/04 4/05 10/05 4/06 10/06 4/07 10/07 4/08
T O
As of Aug 1, 2008. Source: JPMorgan.
10
Agenda
Page

S EC U R I T I E S
1 11 35 53 86
I N V E S TI N G
I N
AS S E T
B AC K ED
11
Market Overview: Type of Cards

Credit Credit Cards Cards Account Type
y Revolving, general
Retail Retail / / Private Private Label Label Credit Cards Credit Cards
y Revolving, can only
Charge Cards Cards Charge

y Non revolving, general
purpose
be used at retailer that issues card
purpose
Monthly Principal
y Holder must pay
y Holder must pay
minimum balance each payment period
minimum balance each payment period
y Holder must pay all
balances in full each payment period
Examples
y Visa
y Bloomingdales
Mastercard Discover AMEX Optima
Macys Neiman Marcus Sears
y AMEX Green
Corporate Cards
C R E D I T
C AR D
12
Market Overview: Types of Credit Cards

Affinity cards Cards marketed to a specific group to promote loyalty
(e.g. college, sports team, professional organization)

Teaser rate cards Have a low introductory APR. After the introductory period, the APR increases to
a market rate
Co-branded cards Visa / MasterCard jointly marketed with a retailer that often provide rewards at
that retailer (e.g. Nordstrom VISA card)

Secured cards Cards with credit limits backed by a cash security deposit
C R E D I T
C AR D
13
Credit Card ABS issuance

Credit Credit Card Card ABS ABS supply supply ($ ($ bn) bn)
100 91 68 69 67 80 52 52 60 43 42 43 57 51 55 66 65
2007 2007 floating-rate floating-rate supply supply by by WAL WAL ($bn) ($bn)
40 30 20 10 0 3 4 5 WAL (yr) 7 10 5 6 6 30
25
Source: JPMorgan, IGM CorporateWatch, Bloomberg.
34 40 23 21 20 20
2007 2007 fixed-rate fixed-rate by by WAL WAL ($bn) ($bn)

4.8
16
4.6 4.4 4.2
0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
C AR D
As of Aug 1, 2008 Source: JPMS, IGM CorporateWatch, Bloomberg.
4.0 3 W AL (yr) 10
C R E D I T
14
Credit Card ABS by issuer

Supply Supply by by issuer issuer
Issuer Chase Bank of America (MBNA) Citibank Capital One American Express Discover Card GE Capital Washington Mutual HSBC ADVANTA Nordstrom First National National City Turquoise Cabela's WFN (Wachovia) Conn Funding Others Total
As of Aug 1 2008 Source: JPMS, IGM CorporateWatch, Bloomberg.
Tickers CHAIT BACCT CCCIT COMET AMXCA, AEIT DCENT GEMNT WMMNT HMNT ABCMT NDCCM FNMNT NCCMT HCARD CABMT WFNMT CONN
2005 13,445 9,450 8,875 5,930 6,600 5,579 2,619 2,208 1,084 1,275
2006 9,625 17,495 10,500 9,100 3,499 3,442 973 4,250 1,000 1,915
2007 20,635 18,140 16,090 8,875 7,842 6,698 4,183 2,925 1850 1,450 850 850
2008 YTD 12,600 13,335 7,025 4,925 10,633 3,500
247
600 250
425 1,750 500 500 150
425
374 500
7,970 65,885 65,124
352 91,165 54,605
C R E D I T
C AR D
15
Structure: Structural Features of Credit Card ABS

Trust Structures Master note trust: delinked Master trust Cashflow Mechanics Revolving period Soft bullet Controlled amortization (CAM) Credit Enhancement As unsecured revolving debt obligations, credit card receivables offer limited
recovery in the event of a cardholder default.

Credit enhancement protects investors from resulting losses Typical Credit Card ABS Deal Characteristics Pricing Benchmarks Coupon Type Typical New Issue Size
C AR D
Swaps, LIBOR Fixed or Floating $1.0 billion
C R E D I T
16
Structure: Trust Structure Delinked Master Note Trust

De-links issuance and maturities of senior
and subordinate classes of notes

Allows issuers MTN-like flexibility. Can be
Master Trust
more opportunistic in issuance

Allows for issuance for block sizes of
Collateral Certificates
subordinates
Public issuance of notes allows unrestricted
transferability and ERISA eligibility for virtually all classes

Master trust issues collateral certificate
Issuance Trust
which is deposited into issuance trust

Common among Bank Card ABS issuers
Class A AAA
Class B A
Class C BBB
Subclass A1,A2,...
C AR D
Subclass B1,B2,...
Subclass C1,C2,...
C R E D I T
17
Structure: Cashflow Mechanics Revolving Period

The interest-only period, during which time bondholders receive interest payments
but no principal payments

Revolving period typically lasts from 110 years, depending on the life of the
transaction
It is followed by the controlled amortization or accumulation period Monthly principal collections are used to purchase new receivables Revolving period can be terminated early if certain early amortization events occur
C R E D I T
C AR D
18
Structure: Cashflow Mechanics Soft Bullet

Principal repayment where bondholders receive all the principal they are due on the
expected maturity date

At the completion of the revolving period, principal payments are captured in an
account during the accumulation period

Sharing of principal collections in the trust structure can drastically shorten the
accumulation period
Example Three-year expected maturity with five-year legal final
Revolving Period Months 1-33 No Yes Yes No Accumulation Period Months 34-36 No Yes After Accum Yes Principal Repaid Month 36 Paid in Full Yes After Accum Yes
Soft Bullet Cash Flow Structure Principal Payments Interest Payments Purchase of Receivables Principal Accumulation
C R E D I T
C AR D
19
Structure: Cashflow Mechanics Soft Bullet (Continued)

Investment: Investment: Credit Credit card card ABS, ABS, three-year three-year bullet bullet maturity maturity Bond cash flow ($100 MM investment) Bond cash flow ($100 MM investment)
100 80 60 40 20 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
Revolving period Accumulation period
Interest paid to investor
Principal paid to investor
Collateral: Collateral: Credit Credit card card accounts, accounts, monthly monthly principal principal and and interest interest receipts receipts
Collateral balance ($)
Excess seller interest Required seller interest Investor interest
6
Source: JPMS.
12
18
Revolving period
24
30
Accumulation period
36
C R E D I T
C AR D
20
Basic credit card securitization cash flows

Available Available finance finance charge charge collections collections Priority of of distribution distribution Priority
Servicing fee to servicer (typically 2.00%) Interest income Net recoveries on charged off assets Interchange Fee income Interest payment on Class A Notes Interest payment on Class B Notes Interest payment on Class C Notes Deposit to the spread account Excess spread to residual holder
Available Available principal principal collections collections
Priority of of distribution distribution Priority
Cover interest shortfalls on each class of Notes Cover servicing fee shortfalls Make targeted deposit to Class A principal Principal collections
funding account
Make targeted deposit to Class B principal
C AR D
funding account
Make targeted deposit to Class C principal
C R E D I T
funding account
Excess paid to residual holder
21
Structure: Credit Enhancement Credit Enhancement Type

Excess spread is first line of defense In most master trusts, excess spread is
Typical Typical Credit Credit Enhancement Enhancement Structure Structure
Share of Assets
available to be shared with other series

Seller owns the excess spread and is
Class A
Rating AAA
CE
Deal Structure
motivated to maximize excess spread

Spread account Account that traps a portion of excess
86.50% 13.50%
Class A Class B Class C Spread Acct Excess
B C Spread Account Excess Spread
A BBB N/R N/R
6.75% 6.75%
6.75%
spread typically for benefit of C Class

Subordination Represents a subordinated ownership
1.00% 6.00%
interest in the trust with payment rights subordinate to higher rated tranches
Collateral invested amount (CIA) / Class C
Gross Portfolio Yield Charge-offs Net Portfolio Yield
18.00% - 4.00% 14.00%
Generally rated BBB

Class B
Generally rated A
Principal collections will be allocated to
C AR D
Base Rate WA Bond Coupon - 5.50% Servicing Fee - 2.00% Excess Spread 6.50%
Class B only after Class A is paid and Class C only after the Class A and B are paid
Insurer wrap (rare, on subprime receivables)
C R E D I T
22
Credit enhancement by issuer

Credit Credit Card Card ABS ABS credit credit enhancement enhancement BBB BBB spread spread account account example example - CHAIT CHAIT
Issuer Advanta American Express Charge American Express - Credit Bank of America Cabela Capital One Chase CHAIT Citibank CCCIT Discover GE HSBC HSBC Private Label National City Nordstrom WaMu
Source: JPMorgan, Deal Documents.
AAA 17.00% 7.00% 12.00% 14.00% 13.50% 17.00% 11.50% 12.25% 12.50% 18.75% 20.50% 24.00% 12.50% 16.50% 27.00%
A 8.50% 4.00% 6.50% 6.50% 6.50% 8.00% 5.75% 7.00% 7.50% 9.50% 12.00% 12.50% 6.50% 8.00% 16.50%
3-month Excess Spread % 4.50% or greater 4.00 - 4.49% 3.50 3.99% 3.00 3.49% 2.50 2.99% 2.00 2.49% 0.00 1.99% < 0.00%
Spread Account Funding % 0.00% 1.00% 1.50% 2.50% 4.00% 5.00% 5.75% 5.75%
Source: Chase 8K filing March, 1, 2007 Note: The Spread Account schedule is issuer specific. Above for Chase only.
Excess spread first line of defense against losses AAA and A benefit from subordination BBB credit enhancement from spread account Funding schedule of spread account aims to be fully collateralized versus the par BBB bond
C AR D
amount before excess spread drops below zero
C R E D I T
23
Structure: Cashflow Mechanics Early Amortization Events Protect Investors

Deals are structured with early amortization triggers to protect investors from
extended exposure to deteriorating asset quality. If an early amortization event occurs, deal begins to pay out immediately.
All principal collections become allocable to investors immediately and cash on
deposit in accumulation account is paid to investors sequentially

Principal is no longer limited to controlled amortization/accumulation amount Investors get a portion of principal normally allocable to the seller Typical Early Amortization Events Seller/Servicer
Failure or inability to make required deposits or payments Failure or inability to transfer receivables to the trust when necessary False representations or warranties Certain events of default, bankruptcy, or receivership of the seller or servicer
Legal
Trust becomes classified as an investment company under the Investment Company Act of 1940
Performance
Three-month average excess spread falls below a minimum level (i.e., zero) Sellers participation falls below the required level Portfolio principal balance falls below the invested amount
C R E D I T
C AR D
24
Credit Card ABS collateral characteristics

Credit Credit Card Card ABS ABS Master Master Trust Trust composition composition comparison comparison
Master Trust Number of Accounts(million) Receivables Balance($million) Average Balance (Incl. 0 & credit balance accts)($) Average Balance (excl. 0 & credit balance accts)($) Weighted Average Credit Limit($) Weighted Average Age (months) Average Utilization Rate Outstanding Balance <$5,000 $5,000 10,000 $10,000+ Credit Limit $0 5,000 $5,000 10,000 $10,000+ Age Not more than 12 months 12 months to 24 months 24 months to 36 months 36 months to 48 months Over 48 months +
C AR D
Chase - CHAIT 3,200.0 76,407 1,902 4,050 11,421 94 16.7% 25.71% 28.40% 46.24% 7.90% 16.16% 75.86% 0.00% 12.27% 12.12% 11.59% 64.02% 12.25% 5.97% 6.87%
08-6 A Prosup, May 08
BofA (BACCT) 58.0 100,380 1,732 4,359 14,110 96 12.3% 22.10% 26.20% 51.80% 7.20% 16.10% 76.70% 0.70% 1.80% 6.70% 10.80% 70.20% 13.60% 8.30% 6.70%
08-6 A Prosup, Apr 08
Capital One 30.0 44,767 1,492 2,275 6,396 62 22.9% 49.71% 25.70% 24.67% 33.71% 18.91% 47.39% 5.92% 11.81% 11.40% 12.49% 58.38% 12.40% 6.50% 6.37%
08-4 A Prosup, Mar-08
Citi - CCCIT 38.5 77,816 2,021 3,994 11,721 17.2% 25.14% 25.87% 49.09% 7.07% 13.96% 78.97% 4.33% 5.45% 6.19% 6.89% 77.14% 14.98% 6.69% 8.05%
08-A7 Prosup, Mar-08
Discover 31.2 38,145 1,222 2,733 8,924 13.7% 37.80% 39.10% 23.20% 10.70% 33.90% 55.40% 2.60% 5.70% 5.30% 4.40% 82.00% 9.70% 6.10% 8.30%
08-4A Prosup, May-08
Geographic Concentration >5% California New York Texas

Source and As Of Date
C R E D I T
Source: Moodys, Deal Documents
25
Credit Card ABS collateral characteristics (continued)

Credit Credit Card Card ABS ABS Master Master Trust Trust composition composition comparison comparison Amex - Credit Master Trust Card
Number of Accounts(million) Receivables Balance($million) Average Balance (Incl. 0 & credit balance accts)($) Average Balance (excl. 0 & credit balance accts)($) Weighted Average Credit Limit($) Weighted Average Age (months) Average Utilization Rate Outstanding Balance <$5,000 $5,000 10,000 $10,000+ Credit Limit $0 5,000 $5,000 10,000 $10,000+ Age Not more than 12 months 12 months to 24 months 24 months to 36 months 36 months to 48 months Over 48 months +
C AR D
Amex Charge Card 6.6 7,525 1,148 2,064
HSBC (Union Plus) 4.0 5,629 1,443 7,510 105 19.2%
National City 1.2 2,111 1,795 3,054 11,402 147 15.7% 34.40% 37.50% 28.10% 8.70% 23.10% 71.80% 0.00% 0.00% 8.10% 7.30% 84.70%
WaMu 7.6 16,913 2,225 2,897 6,294 58 35.4% 41.86% 43.02% 15.17% 23.96% 41.29% 34.74% 1.92% 20.42% 10.57% 11.89% 55.20% 16.57% 7.28% 7.14%
27.7 43,845 1,584 3,902
25.70% 21.10% 53.30% 5.30% 9.80% 58.30% 1.10% 10.40% 11.60% 10.90% 66.00% 17.08% 8.73% 6.85%
08-5 Prosup, May 08
41.30% 17.10% 42.10%
26.09% 34.99% 38.93% 8.41% 20.55% 71.04%
0.00% 0.00% 0.50% 7.20% 92.20% 14.80% 9.64% 9.15%

08-1 Prosup, Feb 08
0.00% 5.81% 17.17% 56.93% 13.11% 13.38%

07-2 Prosup, Jul 07

Source and As Of Date Source: Moodys, Deal Documents
C R E D I T
08-1 Prosup, May 08
07-A5 OM, Sep -07
26
Credit Card ABS collateral characteristics (continued)

Credit Credit Card Card ABS ABS Master Master Trust Trust composition composition comparison comparison
Master Trust Number of Accounts(million) Receivables Balance($million) Average Balance (Incl. 0 & credit balance accts)($) Average Balance (excl. 0 & credit balance accts)($) Weighted Average Credit Limit($) Weighted Average Age (months) Average Utilization Rate Outstanding Balance <$5,000 $5,000 10,000 $10,000+ Credit Limit $0 5,000 $5,000 10,000 $10,000+ Age Not more than 12 months 12 months to 24 months 24 months to 36 months 36 months to 48 months Over 48 months +
C AR D
Advanta 1.6 6,004 3,643 6,665 15,818 42 23.0% 14.41% 23.10% 62.58% 5.10% 11.47% 83.43% 19.96% 24.09% 15.01% 6.78% 34.16% 15.53% 8.25% 6.16%
08-A3 Prosup, May 08
Cabelas 1.6 1,778 1,121 1,880 7,806 14.4% 58.43% 33.21% 8.50% 13.14% 64.20% 22.65% 12.15% 13.37% 11.38% 10.40% 52.70% 5.04%
GE 46.8 17,081 365 621 1,983 90 18.4% 92.59% 6.26% 1.17% 79.84% 17.11% 3.05% 14.58% 11.28% 9.75% 8.27% 56.12% 9.68% 6.76% 10.15%
HSBC Private Label 12.4 8,434 680 3,998 46 17.0% 74.25% 17.97% 7.78% 57.00% 26.97% 16.03% 38.54% 16.40% 8.90% 29.53% 13.28% 8.16%
07-1 Prosup, Dec-06
Nordstrom 4.7 1,413 298 1,106 6,436 72 4.6% 67.40% 23.74% 8.86% 42.03% 23.81% 34.16% 7.15% 8.62% 12.75% 18.87% 52.61% 36.85%

Source and As Of Date Source: Moodys, Deal Documents
C R E D I T
2008-1 OM, Sep-07
07-4 Prosup, Apr-07
07-1 OM, Jan-07
27
Credit Card ABS collateral minimum/full payment

Credit Credit Card Card ABS ABS Master Master Trust Trust comparison comparison
Chase CHAIT % of Accounts Making Min. Payment * % of Accounts Making Full Payment * % Accounts with No Payment Due % of Accounts Making Min. Payment (excl. Accounts with No Payment Due) % of Accounts Making Full Payment (excl. Accounts with No Payment Due) As Of Date
4% 18% 52% 8% 37% Mar-08
BofA (BACCT)
4% 8% 62% 9% 22% Mar-08
Capital One
7% 15% 35% 11% 22% Mar-08
Citi - CCCIT
4% 21% 49% 8% 41% Dec-07
Discover**
4% 15% 57% 10% 35% May-08
AmexCredit Card
4% 20% 60% 11% 50% May-08
National City
8% 24% 42% 15% 42% Mar-08
GE GE managed managed portfolio portfolio data data
GE % of Receivables Making Min. Payment % of Receivables Making Full Payment As Of 4% 51% Apr-07
Metrics in bold are reported, italics are derived * This metric is calculated based on all accounts in the trust, including those that have a credit balance or zero balance and therefore do not have a payment due. ** Reported payment percentages are based on averages from the beginning of the calendar year. Source: Moodys, Static Pool reports
C R E D I T
C AR D
28
Credit Card ABS collateral credit score distribution

Credit Credit Card Card ABS ABS Master Master Trust Trust credit credit score score (FICO) (FICO) comparison comparison
Master Trust No score <= 600 601-660 661-720 > 720 <=660
As Of Date
Chase CHAIT * 1% 8% 11% 25% 55% 19% Feb-08
BofA (BACCT) 1% 12% 17% 35% 35% 29% Mar-08
Capital One 1% 13% 15% 27% 43% 29% Mar-08
Citi CCCIT 1% 10% 16% 34% 39% 26% Mar-08
Discover 1% 13% 14% 32% 40% 27% May-08
HSBC (Private Label) 1% 14% 19% 27% 39% 33% Dec-06
HSBC (Union Plus 1% 11% 14% 30% 45% 25% Jul-07
National City 1% 7% 9% 27% 56% 16% Dec-07
Nordstrom 2% 11% 15% 28% 44% 26% Jan-07
WaMu 0% 20% 28% 37% 15% 48%

Sep-07
Amex Amex FICO FICO profile profile
Master Trust No score < 560 560-659 660-699 700-759 >=760 < 660 (excl. no score) As Of
* Based on sample only. Source: Moodys, Deal Documents
AMEX - Charge Card 0% 2% 10% 13% 29% 46% 12% Feb 08
AMEX - Credit Card 0% 4% 14% 17% 36% 29% 18% May 08
C R E D I T
C AR D
29
Rating agency breakeven scenarios for Credit Card ABS

S&P S&P BBB BBB credit credit card card breakeven breakeven prior-recession prior-recession scenario scenario (%) (%)
Yield From 18.8% to 17.4% over 6 months Charge-offs Breakeven 9.7% (from 4.5%) Payment Rate* From 20.0% to 16.0% over 6 months
S&P S&P BBB BBB credit credit card card breakeven breakeven deeper-recession deeper-recession scenario scenario (%) (%)
Yield From 18.8% to 14.1% over 15 months Charge-offs Breakeven 9.3% Payment Rate* From 20.0% to 15.0% over 15 months
* Assume an average 28 months between expected and legal final maturity Source: S&P
Note: S&P deeper-recession scenario coincides with S&P economists view of potential loses exceeding 9% by spring of 2009 in such a scenario. In this scenario, excess spread starts trapping in the fourth month and early amortization triggered due to negative excess spread in tenth month.
Over 15 years of S&P credit card performance index history, charge-offs never
exceeded 7.6%, and yield never fell below 16.8%. Payment rate never under 15% for 10 years.
Fitch Fitch credit credit card card breakeven breakeven stress stress analysis: analysis: base base case* case*
Change In Yield Monthly Payment Rate Charge-offs

*Purchase rate 100% assumed in the base case. Source: FitchRatings
AAA -35.00% -45.00% 4.50x
A -25.00% -35.00% 3.00x
BBB -20.00% -30.00% 2.25x
Timing Down One-Month Down One-Month Six-Month Ramp
C R E D I T
C AR D
30
Fitch breakeven analysis example: Chase

Chase Issuance Trust Break-Even Stress Scenarios
BASE STRESS Yield Monthly Payment Rate Chargeoffs Purchase Rate Performance (12-Month Variable Yield Monthly Payment Rate Chargeoffs Purchase Rate Average)* 17.40% 22.22% 3.50% 100.00% AAA Stress 35.00% 55.00% 10.75x 20.00% Output 11.31% 10.00% 37.63% 80.00% A Stress 25.00% 45.00% 8.39x 15.00% Output 13.05% 12.22% 29.37% 85.00% BBB Stress 20.00% 30.00% 6.65x 10.00% Output 13.92% 15.55% 23.28% 90.00% Timing Down Overnight Down Overnight Six-Month Ramp AAA 35.00% 45.00% 4.50x 0.00% A 25.00% 35.00% 3.00x 0.00% BBB 20.00% 30.00% 2.25x 0.00% Timing Down One-Month Down One-Month Six-Month Ramp
Steady State Stress Case (starting from 24-month average actual performance)
Stress Case (starting from 12-month average actual performance)
* 12-month period ended November 30, 2007 100% Purchase Rate Stress Performance (12-Month Variable Yield Monthly Payment Rate Chargeoffs Purchase Rate Average)* 17.40% 22.22% 3.50% 100.00% AAA Stress 35.00% 55.00% 5.51x 100.00% Output 11.31% 10.00% 19.29% 0.00% A Stress 25.00% 45.00% 3.18x 100.00% Output 13.05% 12.22% 11.13% 0.00% BBB Stress 20.00% 30.00% 1.53x 100.00% Output 13.92% 15.55% 5.36% 0.00% Timing Down Overnight Down Overnight Six-Month Ramp
Portfolio Wind-down Scenario (no new receivables)
* 12-month period ended November 30, 2007
C AR D
Source: Fitch Investors Service
C R E D I T
31
Bank Card ABS performance: Excess spread offers robust credit protection. Portfolio yield should stay relatively flat. Payment rate slows as home equity withdrawal declines
Charge-offs and and 3-month 3-month excess excess spread spread Charge-offs
10% 9% 8% 7% 6% 5% 4% 3% Bankcard Charge-offs Excess Spread (3-month Average)
Portfolio Portfolio yield yield

22% 21% 20% 19% 18% 17% 16% 15% Jan-97 Jul-98 Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07
Jan-97 Jul-98 Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07
Total Total delinquencies delinquencies

6% 5% 4% 3% Jan-97 Jul-98 Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07
C AR D
As of July 2008 distribution date. Source: JPMorgan, Moodys
Payment Payment rate rate

22% 20% 18% 16% 14% 12% Jan-97 Jul-98 Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07
C R E D I T
32
Case Study: Checklist for Evaluating Credit Card ABS

Seller Seller / / Servicer Servicer Portfolio Portfolio
Corporate Rating Liquidity / Cash Position Profitability Company Growth Equity Valuations / Stock Price Funding Mix Breath of Business Lines Operations and Management Competitive Position Regulators (OCC, FDIC, OTS) Senior Management Experience Servicing Platform (FDR/TSYS) Collections
C AR D
Underwriting standards Card type retail, low-price, affinity, and
co-branded, among others

Annual percentage rate Fixed / Floating Index Flexibility of issuer to adjust pricing Use of teaser rates Attrition rates Geographic and demographic diversification Interchange (bank-to-merchant fees) Convenience usage Seasoning Portfolio growth Credit Scores Secured vs. unsecured collateral
C R E D I T
33
Case Study: Checklist for Evaluating Credit Card ABS

Structure Structure Performance Performance
Structure Type Cashflow Priorities Shared Excess Seller / Servicer / Trustee Tranche sizes Currency Ratings Fixed or Floating / Benchmark Expected average life Principal payment window or bullet date Legal final maturity Credit enhancement Embedded derivatives & Counterparties Legal structure (true sale, pledge of assets) Other structural features (e.g., series-
Yield Charge-offs Lagged Charge-offs Payment Rate Delinquencies Excess Spread Pool Balance Sellers Interest Recoveries Managed Portfolio vs. Master Trust
Performance
specific triggers, discounting)

C AR D C R E D I T
34
Agenda
Page

S EC U R I T I E S
1 11 35 53 86
I N V E S TI N G
I N
AS S E T
B AC K ED
35
Market Overview: Auto Receivables

Secured consumer installment loans or leases used to finance new and used car
purchases
Receivables carry a fixed interest rate and are usually originated for 36, 48, or 60
months (and typically extend no more than 5years)

Receivables originated by Auto manufacturer finance subsidiaries (Captives)
GMAC, Ford, Daimler, Toyota, Honda, BMW

Banks
Chase, USAA
Specialty Finance Companies
AmeriCredit, Capital One, CarMax
AU T O M O BIL E
A B S
36
Market Overview: Type of Auto Loans / Leases

Prime Prime Auto Auto Loans Loans Loan Loan Type Type Near-Prime Near-Prime Auto Auto Loans Loans Subprime Subprime Auto Auto Loans Loans Auto Leases Leases Auto
Fully Amortizing Loan
Closed End Lease At termination, Lessee can return or purchase New Excellent
Car Car Type Type
Predominately New Excellent
Predominately Used Fair
Predominately Used Poor
Borrower Borrower Credit Credit
Coupon Coupon
0%-8%
8%-13%
13%-20%
8%-12%
Originators Originators
Captives, Banks
Specialty Finance Companies, Banks 3% - 10%
Specialty Finance Companies, Banks 10% - 20%
Captives, Banks
A B S
Expected Expected Losses Losses
0.75% - 3%
1.5% - 5.0%
AU T O M O BIL E
37
Market Overview: Auto ABS Issuance

2007 2007 Floating Floating Rate Rate Issuance Issuance ($BN) ($BN)
7 6 5 4 3 2 1 0 6.4 6.5 5.4
Auto Auto ABS ABS Issuance Issuance ($ ($ bn) bn)

100 90 Other Non-Prime Prime 8 8 7 70 7 23 21 50 10 40 30 5 6 5 9 12 18 18 29 20 7 28 25 9 17 8
2.0 1.2
80
Money Mkt
60
2007 2007 Fixed Fixed Rate Rate Issuance Issuance ($BN) ($BN)
25 20 15 10 5 0
A B S
14 44 26 49
59 57 44
10.4
11.9
10.5 6.1 1.1
20 10 0
10 14
54
50 35 31
20 23 2 16 18 16 19 14 12 10
Money Mkt
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Total = $__mm
Source: JPMS, IGM CorporateWatch, Bloomberg.
AU T O M O BIL E
38
Market Overview: Auto ABS Issuance

Top Top Prime Prime Auto Auto ABS ABS Issuers Issuers by by 2007 2007 Volume Volume ($ ($ bn) bn) Top Top Non-Prime Non-Prime Auto Auto ABS ABS Issuers Issuers by by 2007 2007 Volume Volume ($ ($ bn) bn)
Issuer GMAC Ford Honda USAA CarMax DaimlerChrysler Nissan World Omni AmeriCredit Capital One Hyundai Merrill Lynch Goldman Sachs Wachovia JPMorgan (JPMART) Franklin Auto Chase Other Total
A B S
2005 3.04 9.68 7.70 4.53 1.59 4.00 4.23 1.73 1.50 0.77 1.77 1.29 2.90 0.35 3.62 5.17 53.88
2006 6.05 8.94 4.08 5.24 1.27 6.58 3.41 1.84 2.25 1.88 0.85 1.30 0.56 0.36 2.33 3.15 50.09
2007 7.56 5.04 2.91 2.56 2.15 2.10 2.06 2.00 2.00 1.75 0.86 0.77 0.66 0.65 0.45 0.33
Issuer AmeriCredit Capital One Drive Wachovia Triad CPS HSBC automotive UPFC Long Beach Prestige Drive Time Credit Acceptance First Investors WFS Wells Fargo Total
2005 5.50 7.20 0.18 2.85 2.01 0.59 0.66 1.40 0.70 0.42 0.15 5.73 27.39
2006 4.70 7.00 0.19 2.70 2.84 2.83 0.62 0.91 1.60 0.95 0.49 0.20 0.24 25.27
2007 5.00 4.25 2.30 1.95 1.37 0.90 0.86 0.50 0.49 0.33 0.32 0.20
18.46
33.86
AU T O M O BIL E
39
Structure: Structural Features of Auto ABS

Trust Structures Owner Trust Cashflow Mechanics Amortizing pass through of Principal Credit & Maturity Tranching Bullet tranches rare Credit enhancement As autos are a depreciating asset, only partial recoveries are expected in the
event of default
Credit enhancement protect investors from resulting losses Typical Auto ABS Deal Characteristics Pricing Benchmarks Coupon Type Typical New Issue Size
A B S
Swaps, EDSF, LIBOR Fixed or Floating $1.5 - $2.0 billion (Prime) $0.5 - $1.0 billion (Non Prime)
AU T O M O BIL E
40
Structure: Amortizing Cashflows

Loan amortizes principal over their term-to-maturity Loan may prepay in advance of the scheduled maturity Voluntary prepayment
Refinancing or sale of vehicle

Involuntary prepayment
Repossession or loss of vehicle

When a prepayment occurs, principal is paid through to the security holders, thus
retiring that portion of principal that is attributable to the loan that has prepaid
Prepayments measured by Absolute (ABS) prepayment model
Standard measure of prepayments for automobile loan backed securities, which calculates monthly prepayments as the percent of the original dollar balance of receivables. Prime auto ABS typically prices using 1.5% ABS assumption.
The small collateral balance and relatively short maturity for the typical auto loan
contract reduces the incentive to refinance because monthly payment saving would be minimal
A B S AU T O M O BIL E
41

Bond Bond Cashflows Cashflows
Principal Paid Interest Paid
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 De al Age
Underlying Underlying Asset Asset Cashflows: Cashflows: Retail Retail auto auto installment installment contracts, contracts, 60 60 mo mo term, term, monthly monthly P&I P&I
Principal
A B S
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 De al Age
AU T O M O BIL E
42
Structure: Owner Trust

Primary structure used in Auto ABS Provides flexibility in structuring cashflows Permits multiple senior tranches: 2(a)-7 eligible money market tranches Total rate of return: tranches with
Obligors Seller/ Servicer Bankruptcy remote sale Reserve Fund Owner Trust Issuer Owner Owner Trust Trust
defined principal lockout periods

Floating rate tranches Credit enhancement to senior notes
typically provided by subordinated certificates supplemented with reserve account
Class A-1 Notes A-1+/P-1
Class A-2 Notes AAA
Class A-3 Notes AAA
Class A-4 Notes AAA
Class B Certs A
Investors
Investors
Investors
Investors
Investors / Retained
AU T O M O BIL E
A B S
43
Basic auto securitization cash flows

Available Available funds funds Priority of of distribution distribution (sequential (sequential structure) structure) Priority
Collateral payments Principal Interest Net recoveries on charged off assets Servicer advances Proceeds of repurchases of receivables by the
Servicing fee to servicer (typically 0.50%-1.00%) Interest payment on Class A Notes Interest payment on Subordinated Notes Principal payment on Class A Notes Sequentially from A-1 through A-4 Principal payment on Subordinated Notes Trustee fees Remaining funds to certificateholder (excess
servicer
Reserve fund
spread)
AU T O M O BIL E
A B S
44
Structure: Credit Enhancement Types of Enhancement

Excess spread is first line of defense Excess funds from the interest paid on the
Typical Typical Credit Credit Enhancement Enhancement Structure Structure Share of Assets Credit Enhanc ement 4.75% 0.50%
auto loans after expenses

Reserve account Cash deposited and/or captured Subordination Interest and principal that would have
A
Class
Rating
Deal Structure
AAA 95.25% A N/R N/R 4.25% 0.50%
Certificate Reserve Account Excess Spread
Class A Certificate Reserve Acc Excess
otherwise been distributed to subordinate classes is re-directed to more senior classes

Financial Guarantee Typically a surety bond issued by
3.00%
monoline insurance company which guarantees timely payment of interest and ultimate repayment of principal
A B S
Common on Non-prime Auto Yield Supplement for Subvented Loans Used to increase the yield on the
AU T O M O BIL E
underlying collateral (APR) to match the coupon required on the issued bonds
45
Structural features of Auto Loan ABS

Strict sequential: Classes in order of A1, A2, A3, A4, then subordinates Partial sequential: A1, then pro-rata senior/sub if credit enhancement at target and
passing triggers, sequential otherwise

Reserve funds Fully funded, non-declining Reserve fund step up or down based on triggers Triggers Based on delinquency and cumulative loss schedule Credit enhancement increase over the life of the deal due to: Non-declining reserve accounts, which grows as a percentage of current
outstanding balance as the ABS pool amortizes

Availability of excess spread to turbo notes Trapping excess spread within the ABS deal As a result, Auto ABS sector experiences a high number of upgrades to downgrades
A B S
148 upgrades to 0 downgrades by Moodys in 2006
AU T O M O BIL E
46
2007 Prime Auto ABS collateral characteristics

Prime Prime Auto Auto ABS ABS (as (as of of deal deal pricing pricing date) date) APART 2007-1 Pricing Date Deal Size Collateral Number of Receivables Average Principal Balance Weighted Average APR Weighted Average Original Term (mos) Weighted Average Remaining Term (mos) Seasoning (mos) Geographic Distribution Weighted Average FICO % Used
A B S
COPAR 2007-1 06/14/07 $1,250 mn 67,151 $17,491 7.54% 61 55 6 CA 18% TX 10% FL 8% 736 57% 4.25% 1.00% 3.25% 8.50%
CarMax 2007-3 09/07/07 $500 mn 40,413 $12,867 10.39% 63 58 6 TX 16% FL 12% CA 10% 679 97% 6.25% 0.50% 0.50% 7.25%
FORD 2007-A 06/19/07 $1,992 mn 102,246 $21,761 4.39% 63 60 3 TX 12% CA 11% FL 9% 705 13% 5.00% 0.50% -2.00% 3.50%
CARAT 2007-1 05/31/07 $2, mn 99,653 $20,999 4.48% 63 53 10 CA 12% TX 11% FL 7% 702 13% 5.25% 0.50% 0.25% 6.00%
HAROT 2007-1 02/21/07 $1,211 mn 69,274 $18,071 6.05% 56 50 6 CA 17% TX 8% NJ 7% 740 15% 3.25% 0.50% N/A 3.75%
NAROT 2007-A 02/15/07 $1,023 mn 55,724 $19,221 5.67% 62 53 9 CA 13% TX 13% FL 9% 750 10% 4.50% 0.50% 0.00% 5.00%
USAA 2007-1 06/11/07 $1,222 mn 64,604 $18,916 6.73% 62 58 4 TX 15% CA 9% FL 7% 723 34% 2.75% 0.80% N/A 3.55%
World Omni 2007-A 02/13/07 $1,100 mn 48,011 $19,873 7.17% 65 61 4 FL 42% GA 20% NC 18% 730 13% 2.75% 0.25% 0.00% 3.00%
05/24/07 $1,000 mn 46,539 $20,188 10.35% 78 68 10 CA 13% TX 13% FL 11% 709 56% 12.75% 1.00% 0.50% 14.25%
Initial Triple A Credit Enhancement Subordination Reserve Overcollateralization * Total

* And/Or Other
Source: JPMorgan, Deal Documents
AU T O M O BIL E
47
2007 Non-Prime Auto ABS collateral characteristics

Non-Prime Non-Prime Auto Auto ABS ABS (as (as of of deal deal pricing pricing date) date) AMCAR Pricing Date Deal Size Collateral Number of Loans Average Principal Balance WAC WAOM (Months) WARM (Months) Seasoning (Months) Geographic Distribution 80,593 $18,324.28 16.56% 70 69 1 TX 13% FL 10% CA 9% WA FICO % Used Initial AAA Credit Enhancement Wrap Subordination Reserve Account O/C, reinsurance, other
A B S
COAFT 2007-B 04/30/2007 $2,000 mn 89,253 $15,723 11.81% 67 60 6 CA 17% FL 9% IL 6 % 661 61% MBIA 0.00% 1.50% 7.50% 9.00%
HSBC 2007-1 01/23/2007 $859 mn 67,842 $17,473 14.28% 68 59 8 TX 17% CA 13% FL 12% 614 71% N/A 0.00% 1.00% 27.50% 28.50%
Long Beach 2007-A 03/13/2007 $486 mn 22,141 $18,686 12.27% 69 65 4 CA 41% FL 10% AZ 10% 635
Prestige 2007-1 07/25/2007 $325 mn 16,937 $17,344 17.44% 70 63 6 TX 25% AZ 17% UT 13% N/A 83%
Triad 2007-A 05/22/2007 $775 mn 54,169 $15,638 16.23% 70 63 7 TX 21% CA 11% FL 7% 573 80% FSA 0.00% 2.00% 8.50% 10.50%
WALOT 2007-1 05/30/2007 $1,950 mn 119,849 $16,687 12.42% 67 60 7 CA 32% AZ 5% WA 5% 638 72% N/A 14.25% 0.25% 0.00% 14.50%
2007-C-M 07/17/2007 $1,500 mn
601 72% MBIA 0.00% 2.00% 7.00% 9.00%
FSA 2.50% 0.00% 8.00% 10.50%
FSA 0.00% 1.00% 9.00% 10.00%
Total
Source: JPMorgan, Deal Documents
AU T O M O BIL E
48
Performance: Prime Auto

Prepayments Prepayments (3 (3 Mo. Mo. ABS) ABS)
2.2 2.0 1.8 1.6 1.4 1.2 1.0 1/05 7/05 1/06 7/06 1/07 7/07 1/08 7/08 2005 2006 2007 2008
Delinquencies Delinquencies (30+ (30+ Day) Day)

10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 2/05 2005 2006 2007 2008
2/06
2/07
2/08
Cumulative Losses Losses Cumulative

1.75% 1.50% 1.25% 1.00% 0.75% 0.50% 0.25% 0.00%
A B S
Recoveries Recoveries
2005 2006 2007 2008 70% 50% 30% 10% 2005 2006 2007 2008
2001
13
19
25
31
37
1/05
1/06
1/07
1/08
AU T O M O BIL E
Source: JPMorgan, Intex Solutions.
49
Performance: Non Prime Auto

Prepayments Prepayments (3 (3 Mo. Mo. ABS) ABS)
2.3 2.1 1.9 1.7 1.5 1.3 1.1 0.9 4/04 2004 2005 2006 2007 2008
Delinquencies Delinquencies (30+ (30+ Day) Day)

15% 10% 5% 0% 2004 2005 2006 2007 2008
4/05
4/06
4/07
4/08
4/04
4/05
4/06
4/07
4/08
Cumulative Losses Losses Cumulative

14% 12% 10% 8% 6% 4% 2% 0%
A B S
Recoveries Recoveries
2005 2006 2007 2008 80% 70% 60% 50% 40% 30% 20% 2004 2005 2006 2007 2008
2001
13
19
25
31
37
43
2/04 8/04 2/05 8/05 2/06 8/06 2/07 8/07 2/08
AU T O M O BIL E
Source: JPMorgan, Intex Solutions.
50
Case Study: Checklist for Evaluating Auto ABS

Company Type (Captive, Bank or Specialty Finance) Corporate Rating Liquidity / Cash Position Profitability Company Growth Equity Valuations / Stock Price Funding Mix Breath of Business Lines Operations and Management Competitive Position Market Share Use of Incentives
A B S
Borrower Credit Prime/Mid Prime/Subprime Underwriting Standards Sourcing (Indirect/Dealer/Retail) Auto Type New / Used Make / Models Loan Characteristics Simple Interest Balloon Deferred APR & Subvention Term (36-, 48-, 60- months) Seasoning Geographic/demographic diversification Portfolio growth Credit Scores
Senior Management Experience Servicing / Collections
AU T O M O BIL E
51
Case Study: Checklist for Evaluating Auto ABS

Structure Cashflow Priorities Owner vs. Grantor Trust Credit Enhancement
Charge-offs Prepayment Rate Delinquencies Recoveries Excess Spread Managed Portfolio vs. ABS Performance
Wrap vs. Senior Sub Subordinate lockouts Reserve Fund Targets / Step-ups / Floors Yield Supplement Accounts
Seller / Servicer / Trustee Tranche sizes Ratings Fixed or Floating / Benchmark Expected average life Principal payment window or bullet date
A B S
Embedded derivatives & Counterparties Legal structure (true sale, pledge of assets)
AU T O M O BIL E
52
Agenda
Page

S EC U R I T I E S
1 11 35 53 86
I N V E S TI N G
I N
AS S E T
B AC K ED
53
Higher costs and rising enrollments have led to increase in student loan financing needs
Cost Cost of of attendance attendance Constant Constant (inflation-adjusted) (inflation-adjusted) dollars dollars
$35,000
Past Past and and projected projected undergraduate undergraduate enrollments enrollments 2-year 2-year and and 4-year 4-year institutions institutions ('000) ('000)
$32,307
18,000 17,000 16,000
$30,000
$25,000
15,000 14,000 13,000 12,000
$20,000
$15,000
$13,589
(F F E L P )
$10,000
11,000 10,000
$5,000 96-97 98-99 00-01 '02-03 '04-05 '06-07
1990 1993 1996 1999 2002 2005 2008 2011 2014 Actual Projected
A B S
Private Four-Year
Source: Trends in College Pricing, The College Board
Public Four-Year
L O AN
Source: U.S. Department of Education, NCES. Digest of Education
S T U D EN T
54
Student Loan ABS issuance

Student Student Loan Loan ABS ABS supply supply ($ ($ bn) bn)
70
2007 2007 supply supply by by WAL WAL ($bn) ($bn)

12
60
10.4
15 8
10 8.3 8
9.7
50 6 40 4 30 56 41 33
(F F E L P )
6 4.7
5.0 4.0
51
48
20
4 2.4
3.1
10 2 1994 3 10 1996 13 10 9
16
19 10
24
1998 FFELP
2000
2002
2004
2006
2008
A B S
10
12
15
Private Credit
WAL (years)
L O AN
S T U D EN T
55
Student Loan ABS issuers

Supply Supply by by issuer issuer ($ ($ millions) millions)
Issuer FFELP Sallie Mae Nelnet SLC Chase (Collegiate) GCO Education Goal Access College Loan Corporation NorthStar Education Brazos Wachovia Pennsylvania Higher Education SunTrust South Carolina KeyCorp Others Total FFELP Private Credit Sallie Mae National Collegiate (First Marblehead) SLC KeyCorp NorthStar Education Total
Tickers SLMA NSLT SLC CEDLT (COELT) GCOE GOAL ACCSS COLLE NEF BRHEA WSLT PHEAA STSLT SCSLC KSLT
2005 23,690 6,865 4,350 2,700 1,230 1,000 1,324 2,700 1,020 3,544 1,800 800 700 294 3,892 55,909
2006 26,403 5,733 4,822 2,143 1,585 1,007 1,700 1,289 1,611 1,249 765 500 91 0 48,896
2007 23,438 3,936 3,092 1,222 1,213 1,200 1,179 1,100 628 303
(F F E L P )
10,312 47,623
L O AN
SLMA NCSLT SLC KSLT NEF
A B S
3,352 3,246 669 7,267
S T U D EN T
5,682 4,309 3,055 794 653 14,493
2,805 4,308
7,958
56
FFELP loan originators and holders

FY2007 FY2007 top top originators originators of of FFELP FFELP loans loans ($ ($ millions) millions)
Rank 1 2 3 4 5 6 7 8 9 10 11 12 13
(F F E L P )
FY2007 FY2007 holders holders of of FFELP FFELP loans loans ($ ($ millions) millions)
Origination Volume 9,002 4,764 3,262 3,065 2,955 2,934 1,493 1,333 1,304 1,125 1,062 1,020 948 891 839 716 662 647 624 567 12,146 51,907
Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Lender Sallie Mae Citibank Student Loan Corporation National Education Loan Network (NELNET) Brazos Group Wells Fargo Education Financial Services Pennsylvania Higher Education (PHEAA) Wachovia Education Finance JP Morgan Chase Bank College Loan Corporation Education Lending Group Goal Financial GCO-ELF Access Group Northstar Guarantee Missouri Higher Education (MOHELA) Bank of America EdAmerica/Edsouth Suntrust Bank College Foundation Inc. South Carolina Student Loan Corp Other Total Industry Holder Volume 128,088 28,038 25,770 14,391 11,996 11,984 10,964 10,250 10,242 10,130 7,541 6,413 5,562 4,959 4,544 4,541 3,334 3,170 2,870 2,653 55,079 362,518
Lender Sallie Mae Citibank Bank of America JP Morgan Chase Bank Wells Fargo Education Financial Services Wachovia College Loan Corp US Bank EdAmerica Access Group Northstar Guarantee Education Lend Group Suntrust Bank Pittsburg National Corp National Education Loan Network (NELNET) Citizens Bank Education Finance College Foundation Inc. Regions Pennsylvania Higher Education Assistance Fifth Third Others Total Industry
14 15 16 17 18 19 20
L O AN
A B S
S T U D EN T
Source: www.finaid.org
57
FFELP loan consolidators

FY2007 FY2007 top top consolidators consolidators of of FFELP FFELP loans loans ($ ($ millions) millions)
Rank Lender 1 2 3 4 5 6 7 8 9 10 11 12 13
(F F E L P )
Sallie Mae National Education Loan Network (NELNET) Next Student Affinity Direct JP Morgan Chase Bank Education Lending Group Citibank Student Loan Corporation Wells Fargo Education Financial Services College Loan Corporation PA Higher Education (PHEAA) Graduate Leverage Pacific Loan Proc Goal Financial Erie Processing Missouri Higher Education (MOHELA) Wachovia Education Finance Academic Loan Group FinanSure Student Loan Brazos Group EdAmerica/EdSouth Others Total Industry
Consolidation Volume 12,554 4,529 3,021 2,108 1,825 1,731 1,586 1,428 1,269 1,258 1,095 1,090 743 675 674 654 630 628 622 557 8,614 47,290
Consolidation volume dropped to $47.3bn in FY2007 from $72.4bn in FY2006, a 35% decline
14 15 16 17 18 19 20
L O AN
A B S
S T U D EN T
Source: www.finaid.org
58
Ensuring Continued Access to Student Loans Act of 2008

Signed into law by the President on May 7th Key provisions ED (Dept of Education) to serve as secondary market for FFELP loans until July
2009 (Prohibits such loan purchases from resulting in any cost to the federal government)
Clarify EDs authority as lender of last resort with capital
Authorizes Secretary of Education to advance funds to guaranty agencies acting as lender of last resort Include parent borrowers in lender-of-last-resort program for those unable to obtain loans
Allow deferment of PLUS loans until 6 months after graduation
(F F E L P )
Increase annual loan limit by $2k and aggregate limit to $31k/$57.5k for
dependent/independent undergraduates
Authorizes lenders, for loans made from July 2008 through June 2009, to
A B S
S T U D EN T
determine that borrowers of PLUS, who are no more than 180 days delinquent on their home mortgages, and no more than 89 days delinquent on the repayment of any other debt, meet a specified extenuating circumstances requirement which makes them eligible for such loans despite having an adverse credit history
59
L O AN
Reductions to lenders in the FFELP program (College Cost Reduction and Access Act of 2007)
Eliminate the "Exceptional Performer" status that allows lenders that meet certain
requirements established by the Secretary of Education to receive higher insurance rates on defaulted loans
Reduce the insurance paid by the federal government to lenders on defaulted loans from 97
percent to 95 percent of unpaid principal balances on October 1, 2012

Reduce the amount that guarantors may keep through collections on defaulted loans from 23
percent to 16 percent
Reduce the special allowance payments (SAP) from the Department to lenders based on their
(F F E L P )
tax status. For-profit lenders would receive a 55 basis point SAP reduction and non-for-profit lenders would receive a 40 basis point SAP reduction. To ensure that only nonprofit lenders benefit from the increased subsidization, nonprofit lenders that are owned in-whole or in-part by a for-profit entity would not be eligible for the reduced subsidy reductions. Nonprofit lenders that are purchased by for-profit entities would also lose their higher subsidization rates on the date of the sale
Increase the loan fee paid to the Department by lenders - that cannot be passed on to
borrowers - from 0.5 percent to 1 percent of the principal amount of each newly originated loan made on or after October 1, 2007
Decrease the account maintenance fees paid by the Department to guarantors from .10 percent
L O AN
A B S
to .06 percent on newly originated loans
S T U D EN T
60
Since 1993, securitization has been a cost effective alternative to secondary market financing
With the explosive growth of ABS market and the recognition of student loans as high quality
assets, lenders increasingly securitize their portfolios

The relatively low credit enhancement required in student loan ABS has attracted a number of
institutions to pursue securitization

In 1993, Society Bank (now KeyCorp) became the first issuer of public student loan ABS and
many other issuers have followed suit

Sallie Maes emergence in the ABS market, however, redefined student loan securitization. The
company is the largest Student Loan ABS issuer (accounting for roughly half of supply)
Student Student Loan Loan ABS ABS Outstanding Outstanding ($bn) ($bn)
200
(F F E L P )
184 153 127 99 41 52 70 72
199
150 100 50 0 1999 2000 2001 2002
A B S
2003
2004
2005
2006
2007
L O AN
S T U D EN T
61
FFELP overview
Established in 1965, the Family Federal Education Loan Program (FFELP) has helped
make higher education affordable by providing access to guaranteed student loans

FFELP loans are financed by private lenders, serviced and administrated by the
private sector
FFELP volume nationwide total approximately $85bn in fiscal year 2006 FFELP loan benefit from U.S. Government guarantee 97% (initial loan disbursement 7/06 and after), 98% (10/93 to 6/06) or 100% (pre
10/93), guaranteed for principal and accrued interest

Will decline to 95% on October 1, 2012 Borrower benefits Long term financing (up to 30 years if consolidated)
(F F E L P )
Interest subsidies during in school period on some loans Deferment/forbearance allows borrower to temporarily stop payments if they
return to school or experience financial hardship

FFELP loans are not dischargeable in bankruptcy
S T U D EN T
L O AN
A B S
62
FFELP loan types

FFELP provides the following types of loans Stafford loans
Subsidized: To students demonstrating financial need Unsubsidized: To students who either do not demonstrate need or require supplement to Subsidized loan
PLUS: To graduate and professional students and or parents of undergraduates (in excess of
Stafford
Consolidation loans: Consolidation multiple loans under FFELP into one for the borrower
S T U D EN T
L O AN
A B S
(F F E L P )
63
Collateral: FFELP student loan types

Stafford Stafford Loans Loans Interest Interest Rate Rate PLUS PLUS Loans Loans Consolidation Consolidation Loans Loans
Variable interest rate, reset annually, capped at 8.25% 91-day T-bill + 1.7% during in-school, grace and deferment periods; 91-day T-bill + 2.3% during repayment 10 years Year 1: Year 2: Years 3/4: Graduate: $2,625 $3,500 $5,500 $8,500
Variable interest rate, reset annually, capped at 9.00% 91-day T-bill + 3.1%
Fixed interest rate for life of loan, capped at 8.25% Weighted average of interest rates of loans consolidated, rounded up to nearest 1/8th of one percent
Formula Formula
(F F E L P )
Max Max Repayment Repayment Period Period Max Max Annual Annual Loan Loan
10 years Up to cost of education, less other aid received
30 years Not applicable
L O AN
A B S
For loans distributed after July 1, 1998 and before July 1, 2006 , subject to a maximum interest rate of 8.25%. The cap is offset by Special Allowance Payments (SAP) by the ED to lenders.
S T U D EN T
64
Stafford student loan rates

Stafford Stafford loan loan rates rates
Trigger Date <10/1/81 1/1/81-9/12/83 9/13/83-6/30/88 7/1/88-9/30/92 10/1/92-6/30/94 7/1/94-6/30/95 7/1/95-6/30/98 7/1/98 6/30/98 7/1/06 - 9/30/07 >10/1/07 Borrower Rate 7% 9% 8% 8% for 48 months; then, 91-day Treasury + Margin 91-day Treasury + Margin 91-day Treasury + Margin 91-day Treasury + Margin 91-day Treasury + Margin Fixed 6.8% Decline to fixed 3.4% by 7/1/2011 Maximum Borrower Rate 7% 9% 8% 8% for 48 months, then 10% 9% 8.25% 8.25% 8.25% Interest Rate Margin N/A N/A N/A 3.25% 3.10% 3.10% 2.50% (in school, grace, or deferment), 3.10% (repayment) 1.70% (in school, grace, or deferment), 2.30% (repayment) N/A N/A
S T U D EN T
L O AN
A B S
(F F E L P )
65
PLUS student loan rates

PLUS PLUS loan loan rates rates
Trigger Date Before 10/01/81 From 10/01/81 through 10/30/82 From 11/01/82 through 06/30/87 From 07/01/87 through 09/30/92 From 10/01/92 through 06/30/94 From 07/01/94 through 06/30/98 From 07/01/98 through 06/30/06 From 07/01/06 Borrower Rate 9% 14% 12% 1-year Index + Interest Rate Margin 1-year Index + Interest Rate Margin 1-year Index + Interest Rate Margin 91-day Treasury + Interest Rate Margin 8.5% Maximum Borrower Rate N/A N/A N/A 12% PLUS 10%, SLS Loans 11% 9% 9% 8.5% Interest Rate Margin N/A N/A N/A 3.25% 3.10% 3.10% 3.10% N/A
S T U D EN T
L O AN
A B S
(F F E L P )
66
Consolidation loans
Consolidation Consolidation loan loan benefits benefits Maximum Maximum term term by by debt debt burden burden
Total Educational Debt < $7,500 $7,500-$9,999.99 $10,000-$19,999.99 $20,000-$39,999 $40,000-$59,999 > $60,000 Max Term (years) 10 12 15 20 25 30
Extends loan term from 10 years up to 30, thereby
reducing their monthly payments, albeit at a higher total interest cost.

Converts adjustable-rate loans to a fixed-rate,
locking in the interest rate for the life of the loan. Interest rate is the weighted average of the rates on the student loans, rounded to the nearest 1/8th.
For borrowers with multiple lenders, allows the
borrower to make only one single payment to one lender. Payment to the single lender begins 60 days after disbursement. There is no grace period.
S T U D EN T
L O AN
A B S
(F F E L P )
67
Interest Subsidy Payments and Special Allowance Payments
Borrower
Principal and Interest
Dept of Education (ED)
SAP and ISP Paid quarterly
Lender
Interest Subsidy Payment (ISP)

(F F E L P )
Special Allowance Payment (SAP)

Provides lenders with minimum returns
Federal government pays for in-school,
grace and deferment interest on subsidized loans

Available for Stafford Subsized and
to either the 91-day T-Bill or 90-day CP plus a spread

Available for Stafford and
A B S
L O AN
Subsidized Consolidation Loans
Consolidation Loans
Available for PLUS loans when
S T U D EN T
borrower hits a cap
68
Special Allowance Payment (SAP)

SAP SAP calculation calculation
Date of first disbursement From 10/1/92 through 6/30/95 From 7-1/98 through 6/30/98 From 7/1/98 through 12/31/99
Special Allowance Margin 3.10% 2.50% for Stafford loans that are In-School, Grace or Deferment 3.10% for Stafford Loans that are in Repayment and all other loans 2.20% for Stafford Loans that are In-School, Grace or Deferment 2.80% for Stafford Loans that are in Repayment 3.10% for PLUS, SLS and Consolidation Loans
From 1/1/00
1.74% for Stafford Loans that are In-School, Grace or Deferment 2.34% for Stafford Loans that are in Repayment 2.64% for PLUS and Consolidation Loans
Under legislation effective 10/1/07
55bp cut for Stafford and PLUS (not-for-profit 40bp cut)
S T U D EN T
L O AN
A B S
(F F E L P )
69
Guarantors
Private non-profit corporations Act as middle men between lenders and
the federal government agency

Monitor the compliance of schools that
Student Pays Yes No Yes Guarantor Pays No Rejected Claim
participate in FFELP
Receive fees for insurance, default aversion,
account maintenance, etc.

Are reinsured by the Department of
Education for amounts paid on defaulted claims

Make recoveries on defaulted loans
(currently 50% to 75%) on behalf of federal government

(F F E L P )
Yes US Dept of Education pays claim or reassigns guarantor Claim cured No Credit enhancement absorbs losses
Guarantee timeline Lender must submit default claim after at
S T U D EN T
least 270 day delinquent Guarantor must review and pay claim within 90 days after the lender filed it Guarantor will pay the lender accrued interest for up to 450 days delinquent Guarantor must file reimbursement claim with Dept of Ed within 30 days of paying default claim to lender
L O AN
A B S
70
Capable servicing: a key component in ensuring the Department of Education (ED) guarantee
Adherence to ED servicing guidelines is critical to maintain guarantee Servicers are audited regularly by an independent firm to verify servicing quality and
compliance with ED procedures

Rating agencies also review servicers ability to meet all compliance requirements Assuming quality servicing, the predominant risk is liquidity timing of claim filing
and receipt of guaranty

ED guaranty remains valid in event of Guarantor failure
Claim Package
Reinsurance claim
Servicer
(F F E L P )
Guarantor
98% reimbursement Reinsurance $
US Department of Education
Collect payments Process deferments
Apply for ISP Apply for SAP
Collection on delinquent loans Submit claim package to guarantor
S T U D EN T
L O AN
A B S
71
Cash flow dynamics of FFELP student loans

Department of Education
ED reinsurance of 95-100% of principal and accrued interest Defaulted loan claim package Loan payments Claim $$$
State and private guarantee agencies
Servicer
Originator/ holder of loan
Securitization trust
$$$
(F F E L P )
Student borrower
Normal payment scenario Student default scenario
ABS investors
Interest subsidy payments are paid on qualifying loans to the loan holders while students
A B S
are in school
L O AN
Special Allowance Payments are paid to holders of student loans to ensure they receive a
market interest rate of return guidelines
S T U D EN T
Loans remain eligible for ED guaranty so long as servicers follow specified diligence
72
Most issuers utilize similar senior-subordinate structures

Senior and subordinate notes backed by government guaranteed student loans Class A notes and Class B notes are rated Aaa/AAA/AAA and Aa1/AA/AA+ or greater by
Moodys/S&P/Fitch, respectively 10% clean-up calls and auction calls are used
SLM SLM 2005-3 2005-3

Capped AAA Class A-1 to A-6 Notes
Investors
SLM SLM 2005-1 2005-1

Uncapped AAA Class A-1 Note
Student Loan Trust
Student Loan Trust
Uncapped AAA Class A-2 Note Uncapped AA Class B Note
Investors
Capped AA Class B Note Swap
(F F E L P )
100% consolidation collateral Underlying collateral indexed to 90-day CP (98.6%)
100% FFELP collateral Underlying collateral indexed to 90-day CP (90.2%)
S T U D EN T
or 91-day T-Bills (1.3%) Interest rate is capped at 6%. The cap matures in 1 year Credit enhancements include: 3.00% subordination 0.25% reserve fund Capitalized interest account of $10 million Excess spread available
or 91-day T-Bills (9.8%) The securities were not subject to a cap, and as a result of the underlying CP collateral, the uncapping was achieved structurally Credit enhancements include: 3.0% subordination 0.25% reserve fund Excess spread available
L O AN
A B S
73
Basic credit card securitization cash flows

Available Available finance finance charge charge collections collections Priority Priority of of distribution distribution
Servicing fee to servicer (typically 2.00%) Interest income Net recoveries on charged off assets Interchange Fee income Interest payment on Class A Notes Interest payment on Class B Notes Interest payment on Class C Notes Deposit to the spread account Excess spread to residual holder
Available Available principal principal collections collections
Priority Priority of of distribution distribution
(F F E L P )
Cover interest shortfalls on each class of Notes Cover servicing fee shortfalls Make targeted deposit to Class A principal Principal collections
A B S
funding account
Make targeted deposit to Class B principal
L O AN
funding account
Make targeted deposit to Class C principal
S T U D EN T
funding account
Excess paid to residual holder
74
Credit Enhancement
Government guaranty FFELP loans benefit from a 95-100%
Share of Assets 97.00% 2.75% 0.25% 0.75% Credit Enhanc ement 3.00% 0.25%
guaranty ultimately backed by the DOE.

Excess spread available to cover losses not
Class A Certificate Reserve Fund Excess Spread Rating AAA A N/R N/R
Deal Structure
covered by guaranty
Excess funds from the interest paid on the
Class A Class B Reserve Excess
student loans after expenses

Ranges from 75-125bp. Reserve account Cash deposited and/or captured Subordination Interest and principal that would have
(F F E L P )

Overissuance, driven by the rating agencies,
A B S
S T U D EN T
L O AN
is further evidence of the superior collateral quality.
75
Credit Enhancement: Excess spread examples

FFELP deal deal excess excess spread spread example example (7/07) (7/07) FFELP
Spread over index Servicing fee Administration fee Estimated losses CP-LIBOR differential Weighted spread on SLABS Excess spread
2.37 (0.90) (0.02) (0.03) 1.43 (0.08) (0.17) 1.18
SAP margin cut by legislation
February February 2008 2008
Spread over index Servicing fee Administration fee Estimated losses CP-LIBOR differential Weighted spread on SLABS Excess spread
1.79 (0.90) (0.02) (0.03) 0.84 (0.08) (0.75) 0.01
Cost of funding higher
College Cost Reduction and Access Act of 2007 decreased lender profitability.
Examples of changes that took effect October 1, 2007 include

(F F E L P )
Reduced the special allowance payment (SAP) margin to lenders based (for-
profit lenders 55bp and non-for-profit 40bp cut).

Increase the loan fee paid by lenders from 0.5% to 1% Lenders cannot pass on these higher cost to borrowers under FFELP Term ABS market dislocation started mid-2007; funding costs continue to increase
S T U D EN T
L O AN
A B S
76
FFELP SLABS under-collateralized deal structure

Historically, deals under-collateralized at closing Deal parity: Student Loan assets / note liabilities < 100% Excess spread used to build parity Deals with large amounts of ARS will build parity more slowly than expected due to
higher funding costs; some deals will be unable to build parity if ARS market does not recover
College College Loan Loan Corp Corp 2007-1 2007-1 (low (low initial initial parity parity of of 97.4%, 97.4%, high high ARS ARS funding of 59% ) funding of 59% )
Parity Parity example example
Initial Parity 97% Asset

(F F E L P )
End of Year 1 parity 98% Asset 94 94 Liability 93 AAA 3A 96
Liability 97 AAA 3A 100
98.0% 97.8% 97.6% 97.4% 97.2% 97.51% 97.66% 97.60% 97.57%
97 97
A B S
S T U D EN T
Asset spread Funding cost Servicing = Excess spread
97.0% Apr-07 Jul-07 Oct-07 Jan-08
L O AN
Note: Term ABS 41% at weighted average spread of +6bp Source: Deal documents
77
Recent changes in deal structure

Recent developments No more consolidation loans Issuance at parity or above ARS market closed Slower pricing speed assumed
NelNet NelNet Student Student Loan Loan Trust Trust
2008-1 Assets Initial Parity Senior Total Pricing Speed (CPR) Liabilities Initial Estimated Excess Spread
Source: JPMorgan, Deal documents
2007-2 Stafford & Plus; 35% Consolidation
All Stafford & Plus
103.09% 100% 12% for Stafford & Plus
103.60% 98.40% 22% for Stafford & Plus; 2-10% over 10 years for Consolidation 88% Term ABS; 12% Auction Rate 115bp
(less consolidation activity)

Lower excess spread
100% Term ABS 55bp
S T U D EN T
L O AN
A B S
(F F E L P )
78
Rating Agency Considerations

Cash flow scenarios
Servicing Servicing factors factors
Collateral Collateral factors factors
Transaction Transaction structure structure factors factors
S T U D EN T
L O AN
Defaults Claim rejects Claim cures Loan documentation Servicing infrastructure Collections Disaster recovery Proper guarantee documentation Servicer audits
A B S
Repayment mix School concentrations Loan type Delinquencies, losses, & prepayments Seasoning Applicable margin ED guarantee level
(F F E L P )
Payment structure Legal structure Tranching and turboing Maturity, legal final Reserve fund Interest carryover Overissuance
79
Rating Agency Stress Tests

All scenarios are designed to test the transactions liquidity rather than credit
Triple-A Triple-A Stress Stress Scenario Scenario Defaults Defaults Application Application Single-A Single-A Stress Stress Scenario Scenario
30% 75.0% yr. 1 12.5% yr. 2 12.5% yr. 3 95% on 98% loans 97% on 100% loans 2x historical 3x historical Capitalize all interest on balance 100 bps in year 1 6 month spikes up to 300 bps for 5 years, reverting back to 100 bps 60 days 60 days
19% 75.0% yr. 1 12.5% yr. 2 12.5% yr. 3 97% on 98% loans 99% on 100% loans Historical Historical Capitalize all interest on balance 75 bps in year 1 6 month spikes up to 120 bps for 5 years, reverting back to 75 bps 60 days 60 days
Reimbursements Reimbursements
Deferrals Deferrals Forebearance Forebearance

(F F E L P )
Unsubsidized Unsubsidized loans loans TED TED Spread Spread
L O AN
A B S
Payment Payment Lags Lags Student Student SAP SAP & & ISP ISP
S T U D EN T
80
Structure: Factors affecting prepayments

Student loan prepayment may be broken down to three main segments Voluntary prepayment Loan consolidation prepayment Involuntary prepayment (default) Loan type (e.g., Stafford, PLUS, consolidation) and payment status (e.g., in-school,
deferral/forbearance, in re-payment) also affect speeds for each segment

For example, a Stafford loan just entering into re-payment will exhibit higher
initial prepayments than other loan types. This would be the case of a student graduating and choosing to prepay/consolidate his/her loan or cannot find a job and defaults
School type (e.g., vocational, 2-year, 4-year), borrower age/indebtedness and
seasonality (the school year) are some other factors

(F F E L P ) S T U D EN T L O AN A B S
81
Student Loan prepayments

A
FFELP FFELP Stafford Stafford Student Student Loan Loan Rates Rates (%) (%)
9.0 7/1/98 - 6/30/06 School, grace, deferment 7/1/98 to 6/30/06 Repayment 7/1/06 and after (fixed rate)
Sallie Sallie Mae Mae life-to-date life-to-date prepayment prepayment speeds speeds for for FFELP FFELP (LTD (LTD CPR) CPR)
40% 1995-1 1997-1 35% 1999-1 2001-3 30% 2004-4 2006-1 25% 1996-1 1998-1 2000-4 2002-1 2005-1 2007-2
8.0
7.0
6.0
20%
5.0
15%
4.0
(F F E L P )
10%
3.0
5%
A B S
2.0 Jul-93 Jul-95 Jul-97 Jul-99 Jul-01 Jul-03 Jul-05 Jul-07

Source: Bloomberg, U.S. Department of Education.
0% Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08
L O AN
Note: Non-consolidation Source: Sallie Mae.
S T U D EN T
82
Performance: FFELP student loan collateral minimal credit risk

>210 >210 days days delinquencies delinquencies (SLM (SLM ABS) ABS) % % of of current current total total principal principal balance balance
7% 2002-1 2006-1 6% 2004-4 2007-2 2005-1
Cumulative Cumulative defaults* defaults* (SLM (SLM ABS) ABS) % % of of original original balance balance
10% 9% 8% 7% 6% 2002-1 2006-1 2004-4 2007-2 2005-1
5%
4%
5% 4% 3%
3%
2%
(F F E L P )
2% 1% 0%
1%
A B S
0% Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07

Source: Sallie Mae Static Pool Data
14
20
26
32
38
44
50
56
62
68
Deal Age (M onths)

* Sum of claims paid, claims rejected (by Dept of Education) and risk sharing losses Source: Sallie Mae Static Pool Data
S T U D EN T
L O AN
83
Relative Value Checklist for Evaluating Student Loan ABS

Company Type Private Enterprise/State/Non-profit Servicer: Exceptional Performance
Loan Type FFELP (e.g., Consolidation, Stafford,
Plus)
Underwriting Standards Appraisal & Compliance Review Process Loan Characteristics Credit Grade FICO School Type Term Rate Margin/Index/Caps Co-signers Repayment Status Loan Type Balance Guarantor Disbursement Date Portfolio growth
Designation
Corporate Rating Liquidity / Cash Position / Profitability Growth / Equity Valuations / Stock Price Funding Mix Breath of Business Lines Operations and Management
(F F E L P )
Competitive Position Legal/Regulatory Oversight / Compliance HEA Reauthorization Senior Management Experience Servicing / Collections
S T U D EN T
L O AN
A B S
84
Relative Value Checklist for Evaluating Student Loan ABS

Structure Cashflow Priorities Triggers Caps Credit Enhancement
Losses Claim rejection rate Prepayment Rate Delinquencies Forbearance/deferral Excess Spread
Reserves Subordination Overcollateralization/Parity

Seller / Servicer / Trustee Tranche sizes Ratings Fixed or Floating / Benchmark
(F F E L P )
Expected average life Principal payment window Embedded derivatives & Counterparties Legal structure (true sale, pledge of assets)
S T U D EN T
L O AN
A B S
85
Agenda
Page

S EC U R I T I E S
1 11 35 53 86
I N V E S TI N G
I N
AS S E T
B AC K ED
86
Types of home equity loans

Types Types of of Mortgage Mortgage Loans Loans
2nd Lien 2nd Lien/ High LTV

Borrower
1st Lien Subprime B&C Credit Impaired 1st 80%-85% 7%-8% 600-625 Ameriquest Countrywide Option One RFC Alt-B Near Prime Alt-A Prime Documentation Property Type 1st 75% 6.5% 715 Countrywide IndyMac RFC (RALI) PrimeJumbo A Prime
Home Equity Line of Credit Prime
Prime Near Prime 2nd 2nd: 90% HLTV: 115% 2nd: 8%-10% HLTV: 12% 690-715 Countrywide CSFB (HEMT) GMAC RFC (RFMS2)
Lien LTV WAC FICO Originators
2nd 90%-100% 6% 715 Countrywide RFC (RFMS2) Wachovia
1st 80%-85% 6.5%-7.5% 650-700 Ameriquest Impac RFC (RAMP)
1st 70% 6.25% 725 Chase Countrywide Wells Fargo WaMu
E Q U I T Y
AB S
Asset Backed Home Equity
Mortgage Backed
HO M E
87
Home Equity ABS issuance

Supply Supply ($bn) ($bn)
600 500 400 300 200 100 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 B&C HELOC 2nd Lien HIL/125
2007 2007 issuance issuance by by rating rating
AA 10%
A 5% BBB 3% BB 0%
AAA 82%
2007 2007 fixed-rate fixed-rate ($bn) ($bn)

5 4 3 2 1 0
AB S
2007 2007 floating-rate floating-rate ($bn) ($bn)

60 50 47 24 15 23 9 0.7 10
2.9 1.9
3.2 2.4 0.5 2.0 0.2 5 7 10

40 20 0
4 WAL Bucket
4 WAL Bucket
E Q U I T Y
HO M E
88
HEL ABS dominated by large players including dealer conduits

Single-seller Single-seller conduits conduits by by loan loan originator originator 2006 2006
Ameriquest New Century First Franklin 8% Option One 21% 19% WMC 5% Other 28% 11% Long Beach 6% W ells Fargo 2%
Morgan Stanley Citibank
Top Top HEL HEL ABS ABS issuers issuers by by Volume Volume ($ ($ mn) mn)
Parent Countrywide Merrill Lynch Ticker CWL MLMI FFMER FFML SURF MSAC SAST CMLTI CRMSI Lehman Brothers SASC BNCMT SAIL 28,684 6,541 12,705 8,470 9,619 13,127 5,745 9,292 3,843 2,859 13,224 14,438 2,172 11,281 17,951 4,470 18,847 3,508 7,120 23,597 6,164 20,273 2,558 11,352 2,031 16,328 1,636 11,950 5,935 17,633 11,983 16,410 8,810 17,632 11,904 6,567 2,539 12,675 10,010 8,259 10,180 7,619 7,428 7,364 7,210 6,477 6,233 4,495 367 3,577 1,187 4,658 4,180 2005 40,165 15,047 2006 36,031 31,459 2007 26,576 4,832 8,462 6,195 1,499 12,203 2,739 11,327 1,535 7,733 2,811
Total = $77 bn
Conduit Conduit issuers issuers 2006 2006

Barclays BofA UBS 7% 0% GS 4% 6% Greenwich CSFB 4% 7% DB 7% ML BS 10% MS 9% LB 8% Citi 11% FBR 0% JPMAC 6% Other 11%
Option One Deutsche Barclays Greenwhi ch Bear Stearns JPMorgan Goldman Sachs C-Bass GMAC RFC
OOMLT ACE SABR SVHE BSABS JPMAC GSAMP CBASS FMIC RASC RAMP WMHE HASC
AB S
10%
Total = $107 bn
WaMu HSBC
HO M E
E Q U I T Y
89
Subprime mortgage lending and servicing

Top Top 20 20 subprime subprime lenders lenders in in 2006 2006 by by volume volume ($mn) ($mn) Top Top 20 20 subprime subprime servicers servicers by by volume volume ($mn) ($mn)
AB S
Organization Name Wells Fargo Home Mortgage HSBC (Household) New Century Financial Corp. Countrywide Financial Corp. WMC Mortgage Corp. Fremont Investment & Loan Option One Mortgage Corp. First Franklin Financial Washington Mutual Ameriquest Mortgage Corp. CitiFinancial Homecomings (GMAC-RFC ) Accredited Home Lenders BNC Mortgage, Inc. Chase Home Finance NovaStar Mortgage, Inc. Mortgage Lenders Network Ownit EMC Mortgage ResMAE Estimated Industry
Source: National Mortgage News, JPMorgan.
2005 40,013 47,339 56,096 44,637 31,795 36,016 39,093 29,511 34,491 60,635 20,509 27,535 16,583 16,079 9,655 9,267 4,082 8,297 8,952 6,858 804,900
2006 74,249 55,886 51,600 40,596 32,146 31,838 29,811 27,725 26,837 25,578 23,500 18,144 15,603 13,725 11,548 10,968 10,221 9,376 8,763 7,438 722,260
Organization Name Countrywide Chase ResCap (GMAC) Option One CitiFinancial Ameriquest Ocwen Wells Fargo National City Litton (C-Bass) WaMu HSBC Homeq New Century (Carrington) Morgan Stanley/Saxon Select Portfolio Servicing Fremont EMC (Bear Stearns) NovaStar Wilshire Estimated Industry
3/31/07 125,137 83,130 82,092 67,262 65,000 58,000 55,200 52,386 49,955 47,918 47,402 46,659 45,494 40,000 33,045 30,795 27,000 22,959 16,164 15,000 $1.3 trillion
3/31/06 117,847 75,445 72,381 75,695 60,278 113,500 42,151 45,509 39,913 44,670 41,940 48,925 44,824 36,800 26,615 24,557 23,200 23,338 15,062 12,900
E Q U I T Y
Subprime loan originations in first three quarters of 2007 was approximately $170bn and
servicing volume estimated at $1.1trillion as of Sept 31, 2007
HO M E
90
Servicer ratings
Subprime Subprime primary primary servicer servicer ratings ratings
Moodys Accredited AMC (Ameriquest) Aurora Chase CitiMortgage Countrywide EMC Fremont GreenTree HomeComings (GMAC) HomeEq (Wachovia) IndyMac SQ3+ SQ1 SQ2 SQ1SQ1SQ4 SQ3 SQ2Average Strong Above Average Strong Above Average Average Above Average Strong Strong Strong SQ4+ S&P Fitch RPS3RPS3+ RPS2 RPS1 RPS1RPS1 RPS1 RPS4 RPS3+ RPS2+ RPS1 RPS2+ Litton National City New Century NovaStar Ocwen Option One Popular Saxon Select Portfolio WaMu Wells Fargo Wilshire SQ2SQ2 SQ3+ SQ2+ SQ2SQ2 SQ1 SQ1Above Average Strong Strong Strong Strong Above Average Average Above Average Strong Strong Moodys SQ2 S&P Strong Fitch RPS4 RPS3+ RPS2 RPS1 RPS2RPS2+ RPS2+ RPS2+ RPS1 RPS1 RPS4 RPS3+
As of Dec 2007 Source: Moodys (SQ1 to SQ5), S&P (Strong, Above Average, Average, Below Average, Weak), Fitch (RPS1 to RPS5)
HO M E
E Q U I T Y
AB S
91
Collateral: Summary HEL ABS pool data

HEL HEL ABS ABS collateral collateral summary summary
Vintage 2000 2001 2002 2003 2004 2005 2006 2007 Pool Balance 37,050,607,243 57,121,702,491 109,790,592,724 166,243,398,632 348,337,978,218 447,221,087,693 435,500,641,387 Avg Loan Balance 119,418 128,445 143,514 166,584 184,282 194,674 193,815 190,634 75,231 86,799 93,154 140,378 165,095 164,037 169,118 181,282 WAC 10.17% 9.75% 8.72% 7.62% 7.09% 7.22% 8.16% 8.33% 10.92% 10.34% 9.45% 7.71% 7.06% 7.35% 8.03% 8.28% WAM 349 346 347 350 352 353 355 355 278 285 299 321 332 333 336 344 LTV 78.61% 79.62% 80.30% 81.58% 81.26% 81.40% 81.24% 81.53% 79.19% 81.83% 82.52% 81.51% 80.05% 79.74% 80.44% 77.82% FICO 600 601 611 619 628 630 627 625 605 619 634 652 660 642 647 634 Cashout 43% 51% 54% 55% 55% 52% 50% 56% 55% 52% 58% 58% 59% 66% 58% 64% 4% 8% 8% 10% 7% 17% 25% 33% 23% Simult 2nd Stated Doc 15% 20% 24% 28% 31% 36% 37% 33% 12% 11% 13% 15% 12% 24% 37% 20% 7% 8% 16% 5% 1% 1% 0% 1% 3% 15% 28% 20% 16% 2% 23% 31% IO 40 Year % Fixed 6% 8% 14% 20% 19% 14% 14% 18% 73% 83% 86% 91% 97% 97% 87% 73%
Floater (back by majority ARMs)
179,757,299,673 Fixed (back by majority FRMs) 2000 2001 2002 2003 2004 2005 2006 2007
AB S
19,313,339,844 26,515,853,738 46,636,397,175 45,865,248,374 30,576,054,338 23,851,645,005 18,839,830,813 6,222,763,236
Source: JPMorgan, Company Reports
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E Q U I T Y
92
Credit enhancement: Types of credit enhancement

Excess spread is first line of defense Excess funds from the interest paid on the
Share of Assets 88.25% 5.00% 2.25% 2.50% 2.00% Credit Enhanc ement 11.75% 6.75% 4.50% 2.00%
home equity loans after expenses

Overcollateralization Utilization of excess spread to accelerate
Class Class A Class M-1 Class M-2 Class B OC
Rating AAA AA A BBB NR
Deal Structure
Class A Class M-1 Class M-2 Class B OC Excess
principal payments to bondholders

Subordination Interest and principal that would have

Financial Guarantee Typically a surety bond issued by monoline
Credit Credit Enhancement Enhancement Types Types (2007) (2007)

S/ S & M I 15% Guarant ee 10 %
insurance company or Fannie/Freddie which guarantees timely payment of interest and ultimate repayment of principal
Mortgage Insurance (Lender Paid)
AB S
Senio r/ Sub 75%
Use of deep mortgage insurance to cover
E Q U I T Y
losses up to a specified LTV
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Credit enhancement levels have increased across the capital structure

HEL HEL ABS ABS floaters floaters credit credit enhancement enhancement
AAA 2000 2001 2002 2003 2004 2005 2006 2007 19.49% 17.10% 18.22% 18.54% 19.50% 21.50% 21.36% 21.10% 14.40% 16.18% 17.75% 16.94% 18.35% AA+ AA 12.63% 10.91% 11.72% 12.40% 13.13% 14.57% 13.98% 14.42% AA15.99% 12.11% 11.78% 11.37% 11.13% 12.45% 12.18% 12.57% 9.30% 10.65% 10.39% 10.87% A+ A 7.28% 5.81% 6.56% 7.27% 7.81% 9.12% 8.77% 8.93% A7.09% 5.00% 5.50% 5.91% 6.47% 7.63% 7.23% 7.67% BBB+ 6.73% 0.75% 3.19% 4.33% 5.26% 6.22% 5.84% 6.21% BBB 2.59% 1.69% 2.29% 3.16% 4.04% 4.94% 4.67% 5.06% BBB2.06% 2.04% 1.58% 2.05% 3.02% 3.96% 3.63% 3.89% 0.71% 2.02% 2.24% 3.17% 2.79% 2.88% 0.50% 1.69% 1.64% 1.92% 2.55% 2.05% 2.22% BB+ BB
*Senior/subordinate only, no MI, Moody's rated only. Enhancement based on lowest of three agencies Source: JPMorgan, deal documents.
HO M E
E Q U I T Y
AB S
94

Loans typically amortize principal over their term-to-maturity. Some loans require balloon
payments.
Loans may prepay in advance of the scheduled maturity Voluntary prepayment
Refinancing or sale of home Involuntary prepayment Repossession or loss of home When a prepayment occurs, principal is paid through to the security holders, thus retiring that portion of principal that is attributable to the loan that has prepaid Prepayment measured by Constant prepayment model (CPR)
Home Equity loans exhibit much less negative convexity as compared to Conforming and Jumbo
MBS.
Typical HEL ABS Deal Characteristics Pricing Benchmarks
HO M E
E Q U I T Y
AB S
Swaps, EDSF, LIBOR Coupon Type Fixed or Floating Typical New Issue Size $750 million - $2 billion Tranched by credit rating and maturity
95
Structure: Prepayment pricing assumptions

Most ABS issues are priced using a
Prepayment Prepayment Pricing Pricing Curves Curves (PPC) (PPC)
60 50
CPR (%)
prepayment assumption (PPC) which varies for FRM and ARM loans. For example
FRM: 100% PPC (4.00% - 20.00% CPR over
ARM 100% PPC FRM 100% PPC FRM 125% PPC
40 30 20 10 0 0 2 4 6
12 months, 12% thereafter)

ARM: 100% PPC (2-30% over 12 months,
30% 13-22, 50% 23-27, 35% thereafter)

Prepayment rates are expressed in terms of
8 10 12 14 16 18 20 22 24 26 28 30
Constant Prepayment Rate (CPR), which measures monthly prepayments as a percentage of the previous months outstanding principal balance.
Variation in prepayments from those
Pool Pool Factor Factor

100% 80% 60% 40% 20% A: Faster Prepayment B: Expected Prepayment C: Slower Prepayment
expected at pricing can lengthen or shorten the bonds life

AB S
0%
Source: JPMS.
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Structure: Factors affecting prepayments

Interest rates Incentive is a function of interest rates, shape of the curve, and loan rate. Higher
quality borrowers tend to be more sensitive than lower quality borrowers due to the increased quantity of refinancing options.
Home Price Appreciation Housing Market: Price appreciation may allow borrowers to take additional equity
out or trade up their houses.

Credit quality An improvement in credit history provides incentive for lower quality borrowers to
refinance as their improved status makes possible substantial savings.

Prepayment penalties Dramatically reduce the incentive to refinance while penalty is in effect. Typical prepayment penalty is 6 months interest on 80% of the loan.
HO M E
E Q U I T Y
AB S
97
Structure: Sample capital structures

Y Y structure structure
Class AF-1 AF-2 AF-3 AF-4 AF-5 AF-6 WAL (Yrs) 1 2 3 5 7 6 Rating AAA AAA AAA AAA AAA AAA Collateral FRM group FRM group FRM group FRM group FRM group FRM group M-1 M-2 B-1 B-2 Type Sequential Sequential Sequential Sequential Sequential NAS 6 6 6 6 AA A BBB BB Fx/Fl FX FX FX FX FX FX All groups All groups All groups All groups Subordinate Subordinate Subordinate Subordinate FL FL FL FL Class 1AV-1 2AV-1 2AV-2 2AV-3 WAL (Yrs) 2.5 1 3 7 Ratin g AAA AAA AAA AAA Collateral ARM conforming ARM non-conf ARM non-conf ARM non-conf Type Pass-through Sequential Sequential Sequential Fx/Fl FL FL FL FL
Y structure: two separate groups backing separate senior tranches; both groups backing subordinated tranches
H H structure structure WAL Class (Yrs)
AF-1 AF-2 AF-3 AF-4
AB S
Rating AAA AAA AAA AAA AAA AAA AA A
Collateral FRM group FRM group FRM group FRM group FRM group FRM group FRM group FRM group
Type Sequential Sequential Sequential Sequential Sequential NAS Sequential Sub Sequential Sub
FX/ FL FX FX FX FX FX FX FX FX
Class 1AV-1 2AV-1 2AV-2 2AV-3 MV-1 MV-2 BV
WAL (Yrs) 2.5 1 3 7 6 6 6
Ratin g AAA AAA AAA AAA AA A BBB
Collateral ARM conforming ARM non-conf ARM non-conf ARM non-conf ARM groups ARM groups ARM groups
Type Pass-through Sequential Sequential Sequential Sequential Sub Sequential Sub Sequential Sub
FX/FL FL FL FL FL FL FL FL
1 2 3 5 7 6 6 6
AF-5 AF-6 MF-1 MF-2
E Q U I T Y
BF 6 BBB FRM group Sequential Sub FX H structure: two groups each with its own senior/subordinated structure
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Structure: Stepdown
Sample Sample target target credit credit support support percentages percentages
Initial Credit support Senior Certificates (AAA) M-1 (AA+) M-2 (AA) M-3 (AA-) M-4 (A+) M-5 (A) M-6 (A-) M-7 (BBB+) M-8 (BBB) M-9 (BBB-) M-10 (BB+) 17.90% 14.80% 12.85% 11.05% 9.40% 7.85% 6.45% 5.20% 4.20% 3.15% 2.00% After Stepdown Date Target Credit Support 35.80% 29.60% 25.70% 22.10% 18.80% 15.70% 12.90% 10.40% 8.40% 6.30% 4.00%
Subordinated bonds locked out (i.e., do not receive principal) prior to the stepdown date Stepdown date typically set at the earlier of 1) AAAs paid off or 2) the latter of
i) 36 months from deal closing and ii) when senior credit enhancement reaches target
On or after the stepdown, subordinated bonds receive principal only is the triggers are passing
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AB S
99
Structure: Triggers
Performance triggers are embedded in the transaction typically to increase credit enhancement
in the face of weaker than expected credit performance If performance triggers fail, principal that would have otherwise have gone to pay down the overcollateralization, mezzanine and subordinate bonds are redirected to pay senior bonds. Bonds revert to sequential pay. Trigger typically will shorten senior bonds and extend subordinate bonds
Usually compares credit enhancement with delinquencies or based on life-to-date cumulative
losses (can be static or dynamic).
Sample Sample Cumulative Cumulative Loss Loss Trigger Trigger
Sample Sample Delinquency Delinquency Trigger Trigger
Sample Sample Trigger Trigger Effect Effect
Distribution Date
July 2007 June 2008 3.00% July 2008 June 2009 4.75% July 2009 June 2010 6.00% July 2010 6.75%
AB S
60+ Delinquent loans including loans in foreclosure, bankruptcy and REO > 40% * credit enhancement for prior distribution date
OC target will not step
down
Deal will pay sequentially Sub bonds extend, OC
release delayed until cured
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Structure: Impact of triggers on cashflow

Home Home Equity Equity Principal Principal Cashflow Cashflow Pass Pass Triggers Triggers
AAA pass through AAA 1yr AAA 3yr AAA 7yr AA A BBB BB+ 0 20 40 60 80 M onths 100 120 140 160 180
Home Equity Equity Principal Principal Cashflow Cashflow Fail Fail Triggers Triggers Home
AAA pass through AAA 1yr AAA 3yr AAA 7yr AA A BBB BB+
AB S
20
40
60
80 M onths
100
120
140
160
180
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Structure: Cap risk in Home Equity ABS

Available funds cap Cap limits the bond coupon to the WA loan rate less servicing fees and other costs Underlying mortgages subject to initial, periodic and lifetime caps (typically 3%/1%/6%) Lifetime caps are generally quite high and unlikely to be a limiting factor On most deals a shortfall reimbursement feature covers any interest payment shortfalls by
drawing on future excess spread

Transactions may also purchase LIBOR caps or enter into corridors/swaps to mitigate risk
HO M E
E Q U I T Y
AB S
102
Structure: Interest rate hedging instruments caps and swaps

Primary function is to mitigate basis risk (mismatch in asset and liability interest rates) Collateral
Predominantly pays fixed interest for first 2-3 years (due to fixed and hybrid ARM loans) Floating interest typically references 6-mo LIBOR Bonds typically pay floating interest referencing 1-mo LIBOR
Interest Rate Caps and Swaps Reference 1-mo LIBOR Amortizing notional amounts Constant or changing strike rates Interest Rate Caps Require an initial cash outlay at deal closing Protect from rise in interest rates above strike Interest Rate Swaps Alter cashflow characteristics to match those of the assets and liabilities Counterparties agree to swap periodic payments (trust pays fixed, receives floating)
AB S
Payments received usually flow through cashflow waterfall
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HEL ABS performance

HEL HEL ABS ABS ARM ARM prepayments prepayments by by loan loan age age (CPR) (CPR)
70% 2000 2004 60% 2001 2005 2002 2006 2003 2007
HEL HEL ABS ABS ARM ARM delinquencies delinquencies by by loan loan age age (60+ (60+ delinquencies) delinquencies)
25% 2000 2004 20% 2001 2005 2002 2006 2003 2007
50%
40%
15%
30%
10%
20%
5%
10%
AB S
0% 3 5 7 9 11 13 15 17 19 21 23
0% 1 3 5 7 9 11 13 15 17 19 21 23
HO M E
E Q U I T Y
Source: JPMorgan, Intex.
104
Relative Value Checklist for Evaluating HEL ABS

Company Type (Bank or Specialty Finance) Corporate Rating Liquidity / Cash Position Profitability Company Growth Equity Valuations / Stock Price Funding Mix Breath of Business Lines Operations and Management Competitive Position Regulatory Oversight / Compliance Predatory Lending/HUD/FTC/OCC/OTS
AB S
Loan Type Subprime/HELOC/2nd/High LTV Underwriting Standards Appraisal & Compliance Review Process Sourcing (Broker/Retail/Correspondent) Loan Characteristics Credit Grade LTV Rate Lien Property Type Prepay Penalty DTI Geographic Portfolio growth
FICO Term Margin/Index/Caps Documentation Occupancy Loan Purpose Seasoning
Senior Management Experience Servicing / Collections
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Relative Value Checklist for Evaluating HEL ABS

Structure Structure Structure Structure (cont) (cont)
Structure Cashflow Priorities Triggers Caps Cross Collateralization Mortgage Insurance Interest Only Strips Prepayment Penalty Cashflow Credit Enhancement
Fixed or Floating / Benchmark Expected average life Principal payment window Embedded derivatives & Counterparties Legal structure (true sale, pledge of assets)
Wrap vs. Senior Sub Company Guaranty Cross-over date Overcollateralization Spread Holidays / Fully funded Target / Step-up / Step-down
Performance Performance
Charge-offs Prepayment Rate Delinquencies Recoveries Excess Spread Roll Rates Time to Liquidation
Seller / Servicer / Trustee

AB S
Tranche sizes Ratings
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Analyst Certification The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this research accurately reflect my personal views about any and all of the subject securities or issuers; and (2) no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed herein.
Copyright 2008 J.P. Morgan Chase & Co. All rights reserved. JPMorgan is the marketing name for J.P. Morgan Chase & Co., and its subsidiaries and affiliates worldwide. J.P. Morgan Securities Inc. is a member of NYSE and SIPC. JPMorgan Chase Bank is a member of FDIC. J.P. Morgan Futures Inc., is a member of the NFA. J.P. Morgan Securities Ltd. (JPMorganL), J.P. Morgan Europe Limited and J.P. Morgan plc are authorized by the FSA. J.P. Morgan Equities Limited is a member of the Johannesburg Securities Exchange and is regulated by the FSB. J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority. J.P. Morgan Securities Singapore Private Limited is a member of Singapore Exchange Securities Trading Limited and is regulated by the Monetary Authority of Singapore (MAS). J.P. Morgan Securities Asia Private Limited is regulated by the MAS and the Financial Services Agency in Japan. J.P.Morgan Australia Limited (ABN 52 002 888 011) is a licensed securities dealer. Additional information is available upon request. Information herein is believed to be reliable but JPMorgan does not warrant its completeness or accuracy. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results. The investments and strategies discussed here may not be suitable for all investors; if you have any doubts you should consult your investment advisor. The investments discussed may fluctuate in price or value. Changes in rates of exchange may have an adverse effect on the value of investments. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. JPMorgan and/or its affiliates and employees may hold a position, may undertake or have already undertaken an own account transaction or act as market maker in the financial instruments of any issuer discussed herein or any related financial instruments, or act as underwriter, placement agent, advisor or lender to such issuer. Clients should contact analysts at and execute transactions through a JPMorgan entity in their home jurisdiction unless governing law permits otherwise. This report should not be distributed to others or replicated in any form without prior consent of JPMorgan. This report has been issued, in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (all such persons being referred to as relevant persons). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. In other European Economic Area countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction. JPMorgan uses the following recommendation system: Overweight. Over the next six to twelve months, we expect this bond to outperform the average total return of the bonds in the analysts (or analysts teams) coverage universe. Neutral. Over the next six to twelve months, we expect this bond to perform in line with the average total return of the bonds in the analysts (or analysts teams) coverage universe. Underweight. Over the next six to twelve months, we expect this bond to underperform the average total return of the bonds in the analysts (or analysts teams) coverage universe. JPMorgan uses the following rating system: Improving (I) The issuers long-term credit rating likely improves over the next six to twelve months. Stable (S) The issuers long-term credit rating likely remains the same over the next six to twelve months. Deteriorating (D) The issuers long-term credit rating likely falls over the next six to twelve months. Deteriorating+ (D+) The issuers long-term credit rating likely falls to junk over the next six to twelve months. Defaulting (F) There is some likelihood that the issuer defaults over the next six to twelve months.
This report should not be distributed to others or replicated without prior consent of JPMorgan. 107

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AUGUST 5, 2008

INVESTING IN ASSET BACKED SECURITIES

Introduction to ABS Credit Card Automobile ABS

Student Loan ABS (FFELP) Home Equity ABS

Auto 8% Cards 14%

Other 41% Home Eq 24% MH 1%

As of 1Q08. Other is approximately 90% CDOs Sources: SIFMA

U.S. ABS supply: The peak is behind us.

Sector Sector supply supply ($ ($ Billions) Billions)

Autos $199 13% Credit Cards $348 Equipment $46 3% 22%

Sources: JPMorgan, IGM CorporateWatch, and Bloomberg.

ABS investor base has grown dramatically

Phase II: 1989-1993

Phase III: 1993 - 2002

Phase IV: 2002 - Present

Cash/synthetic Mezz SF CDOs HG SF CDOs Macro hedge funds Dealers

Concepts of Securitization: Asset Securitization

Manufactured Housing Loans, or Student Loans

Lower Cost of Funds Balance Sheet/Ratio Improvement

High Credit Quality Higher yield than comparable rated

corporate and government securities

ABS basic structure

Receivables Credit Cards Auto Loans Home Equity Student Loans

Seller / Servicer Banks Finance Companies Corporations

vehicle (the Trust)

How do ABS issued get AAA Ratings?

Issuer AAA Rating

Protects investors from

adverse credit developments

Structure and credit enhancement

Assets (Principal Amounts)

ABS (Liabilities Principal Amounts)

Receivables Pool ($1,000 million)

AAA 20% = AA 9% + A 5% + BBB 3% + OC 3%

AA 11% = A 5% + BBB 3% + OC 3% A 6% = BBB 3% + OC 3% BBB 3% = 3%OC

Excess Spread (or Excess Interest)

Charge-offs Bond Coupon Servicing Fee Excess Spread

18.00% - 4.00% - 5.50% - 2.00% 6.50%

Student Loan (FFELP)

AA Financial (1-3 year)

As of Aug 1, 2008. Source: JPMorgan.

Introduction to ABS Credit Card Automobile ABS

Student Loan ABS (FFELP) Home Equity ABS

Market Overview: Type of Cards

Charge Cards Cards Charge

be used at retailer that issues card

y Holder must pay

y Holder must pay

minimum balance each payment period

minimum balance each payment period

y Holder must pay all

balances in full each payment period

Mastercard Discover AMEX Optima

Macys Neiman Marcus Sears

Market Overview: Types of Credit Cards

(e.g. college, sports team, professional organization)

that retailer (e.g. Nordstrom VISA card)

Credit Card ABS issuance

Source: JPMorgan, IGM CorporateWatch, Bloomberg.

2007 2007 fixed-rate fixed-rate by by WAL WAL ($bn) ($bn)

4.6 4.4 4.2

Source: JPMorgan, IGM CorporateWatch, Bloomberg.

Credit Card ABS by issuer

2008 YTD 12,600 13,335 7,025 4,925 10,633 3,500