Structured Securities Collateralized Mortgage Obligations (CMOs) and Other Asset Backed Securities (ABSs) BDUG October 16, 2006 Bill Hodash

CMOs and other asset backed securities pay principal and interest on various days throughout the month with most paying on the 25 th - approximately 80,000. The vast majority pay principal as a pass- through with the remainder paid as a call. CMO/ABS

$71.8 billion payable on September 25, 2006

CMO/ABS September 25, ,152

Late receipt of rate information P/D -1 Late receipt of rate information by 3:00 on P/D Significant allocation after payable day Post payable adjustments CMO/ABS Problems On average, 800+ rates are not available in time for allocation on payable day. As much as $2 billion allocated after payable date. In 2005, we processed 5,345 post payable rate adjustments. On average, 11,500 rates are not available by COB on P/D -1.

Standardized file layout Increased Automation (91% of rates are received via the new “BMA” file) Monthly report cards on top eight agents Monthly conference calls with top eight agents Standardized file layout Increased Automation (91% of rates are received via the new “BMA” file) Monthly report cards on top eight agents Monthly conference calls with top eight agents Some things we’ve done to address the problems: CMO/ABS

Root cause analysis by DTC and agents Cross functional team meets monthly to discuss needed improvements and ways to implement best practices Root cause analysis by DTC and agents Cross functional team meets monthly to discuss needed improvements and ways to implement best practices Some things we’ve done to address the problems: - Cont’d CMO/ABS

Share the monthly agent report cards with participants and others Implement a financial disincentive for failure to comply with established standards for timeliness and accuracy Revise the business practice of adjusting customers’ accounts more than one month after payable date Share the monthly agent report cards with participants and others Implement a financial disincentive for failure to comply with established standards for timeliness and accuracy Revise the business practice of adjusting customers’ accounts more than one month after payable date Plans for 2006 CMO/ABS

Continue to create awareness around this very problematic product – updated White Paper Suggest moving the payment date on future CMOs/ABS forward two business days yet keeping the same accrual period. This should allow servicers/agents to establish accurate and timely rates Continue to create awareness around this very problematic product – updated White Paper Suggest moving the payment date on future CMOs/ABS forward two business days yet keeping the same accrual period. This should allow servicers/agents to establish accurate and timely rates Plans for 2006 – Cont’d CMO/ABS

Establish a working group to map out a strategy that includes clearly defined accountability and time parameters Plans for 2006 – Cont’d CMO/ABS

Working Group Update DTC partnered with the BMA and the ASF The first meeting of the industry working group was held on June 8 Attendance in person was mandatory … no phone-ins 35 in attendance from all over the US DTC partnered with the BMA and the ASF The first meeting of the industry working group was held on June 8 Attendance in person was mandatory … no phone-ins 35 in attendance from all over the US

CMO/ABS Who Attended Citigroup Deutsche Bank JP Morgan Chase The Bank Of New York US Bank Wells Fargo La Salle National Bank Citigroup Deutsche Bank JP Morgan Chase The Bank Of New York US Bank Wells Fargo La Salle National Bank CSFB Edward Jones Nomura Securities UBS Financial Services DTCC BMA ASF CSFB Edward Jones Nomura Securities UBS Financial Services DTCC BMA ASF

CMO/ABS Meeting Summary Discussed problems outlined in the White Paper Discussed possible Action Steps Proposed three immediate action steps Discussed problems outlined in the White Paper Discussed possible Action Steps Proposed three immediate action steps

CMO/ABS Actions from meeting The establishment of a working group by DTC to perform diagnostic work and produce data and detailed structure diagrams on various deal types, asset classes, and specific deal features that affect payment processing accuracy and timeliness. The group will need to document the current practices, data elements, and timeframes for all the known (or most prevalent) structures of each security type. This project will allow for the group to address various structural issues that contribute to the accuracy/timeliness problem and thus explore methods in remedying those problems. The establishment of a working group by DTC to perform diagnostic work and produce data and detailed structure diagrams on various deal types, asset classes, and specific deal features that affect payment processing accuracy and timeliness. The group will need to document the current practices, data elements, and timeframes for all the known (or most prevalent) structures of each security type. This project will allow for the group to address various structural issues that contribute to the accuracy/timeliness problem and thus explore methods in remedying those problems.

CMO/ABS Actions from meeting – Cont’d The establishment of a working group to define the data, file format, and communication protocol standards for the information that flows between primary servicers and paying agents, to be defined by specific product types. The ensuing product may be able to bring standardization in the information/funds transfer from the primary servicers to the paying agent, thus increasing efficiency. The establishment of a working group to define the data, file format, and communication protocol standards for the information that flows between primary servicers and paying agents, to be defined by specific product types. The ensuing product may be able to bring standardization in the information/funds transfer from the primary servicers to the paying agent, thus increasing efficiency.

CMO/ABS Actions from meeting – Cont’d An investigation conducted by DTC to examine the nature of post-payable adjustments. Part of the issue will be to tackle how much of the accuracy problem can be solved by potentially modifying post payable date adjustment procedures by setting a time limit for adjustments. DTC will further categorize the adjustments it previously analyzed in its white paper by principal, interest and principal and interest adjustments and report back to the Task Force. There was discussion in the meeting of the effects of setting such a limit, especially with regard to principal adjustments. An investigation conducted by DTC to examine the nature of post-payable adjustments. Part of the issue will be to tackle how much of the accuracy problem can be solved by potentially modifying post payable date adjustment procedures by setting a time limit for adjustments. DTC will further categorize the adjustments it previously analyzed in its white paper by principal, interest and principal and interest adjustments and report back to the Task Force. There was discussion in the meeting of the effects of setting such a limit, especially with regard to principal adjustments.

CMO/ABS Next Steps Next meeting of the larger working group is scheduled for early November

Customer Metrics

Actuals TypeMetricGoal1Q062Q063Q064Q06 Quality Proceeds Ultimately Paid on Peak Payable DaysN/A98.5%98.23% Mandatory Corporate Actions Allocated100%99.8%100% Voluntary Reorg Allocations100% Reorg Cash Post-Allocation Adjustments038.7 Post Payable Adjustments - CMO0.45%0.6%0.52% Mis-deliveries to Participants00.30 Average Turnaround Time for Restricted Deposits3.9 Days Customer Service PINS Average Resolution Time - Dividends (General)1.9 Days PINS Average Resolution Time - Dividends (Announcements)2.5 Days PINS Average Resolution Time - Securities Processing1.5 Days PINS Average Resolution Time - Redemptions2.2 Days2.92 PINS Reopens3.10% % Sense of Urgency Open CMO Rates on PD-111.7%12.9%11.7% Redemption Notices Received Timely95%92.7%92.4% Partial Call Notices Created on Call Notification Date98.50%98.6%98.99% Voluntary Reorg Alerts - 4:00 PM100%83.3%93.80% Voluntary Reorg Alerts - 12:00 PM100%75.8%90.8% Customer Metrics - - Summary

% of proceeds that were payable on 1st, 15th and 25th of the month that were ultimately paid by DTC on those days. (Goal TBD)* * The historical measure for allocations is the percentage DTC was aware of and did allocate on payable date. The new measure takes into account all possible payments from paying agents whether DTC was aware of or not on the payable date. Customer Metrics - - Quality

100% of mandatory corporate actions excluding non-transferable issues should be allocated within 1 business day after first trading date in new issue (effective date). Customer Metrics - - Quality

100% of voluntary Reorg security and cash allocations made within the first available public payment date. Customer Metrics - - Quality

Zero Reorg Cash Post-Allocation Adjustments. Customer Metrics - - Quality

Decrease PPAs on CMO by 10%. Customer Metrics - - Quality

Zero mis-deliveries to Participants from Central Delivery, Interface and Transfer Operations. Customer Metrics - - Quality

Maintain 3.9 business day average turnaround time for restricted deposits. Customer Metrics - - Quality

Dividends (general) - reduce by 15% to 1.9 days. Customer Metrics - - Customer Service

Dividends (announcements) - reduce by 15% to 2.5 days. Customer Metrics - - Customer Service

Securities Processing - reduce by 15% to 1.5 days. Customer Metrics - - Customer Service

Redemptions - reduce by 15% to 2.2 days. Customer Metrics - - Customer Service

PINS reopens will not exceed 3.1%. Customer Metrics - - Customer Service

Decrease open CMO rates as of the close of business on PD-1 by 20%. Customer Metrics - - Sense of Urgency

95% of all redemption notices received 4 days before redemption date. Note: 01/ /06 levels corrected to include all redemption notice types. Customer Metrics - - Sense of Urgency

98.5% or more of partial call envelopes created on the call notification date. Customer Metrics - - Sense of Urgency

100% of voluntary Reorg anticipated payment alerts transmitted by 4:00 p.m. for next day payment of entitlements. Customer Metrics - - Sense of Urgency

100% of voluntary Reorg anticipated payment alerts transmitted by noon for same day payment of entitlements. Customer Metrics - - Sense of Urgency

Customer Metrics Questions???