Question-and-Answer Session
Operator
(Operator Instructions) The first question comes from the line of John Hecht - JMP Securities.
John Hecht - JMP Securities
I think you mentioned your expectations for the cash trapping have changed a little bit from the last time you spoke about it. Did I hear that right and if so what specifically changed in terms of your expectations for cash trapping?
Chris Choate
No. Nothing really changed. We certainly didn’t intend to communicate any change. We have been saying for some time now we expect our securitization we did in 2006 and 2007 particularly as we go through these upcoming weaker seasonal months from 2009 into 2010 to in all likelihood it hits Level One triggers at some point in time and that would for some number of months perhaps reduce some of our distribution by up to 50% and that is still really where we are.
John Hecht - JMP Securities
The way you look at those and kind of evaluate the trajectories of the metrics within those, does it look like they are going to be kind of tiered out in terms of when they trap or is this all going to take place in Q4?
Chris Choate
It happens over time. They don’t all hit within one month or one quarter. They really will come over several months, several quarters. They will hit us a little bit at a time.
John Hecht - JMP Securities
You spoke about the obvious margins, the incremental margins in this time are very positive. What do you think normalized leverage will be when all the noise is said and done?
Daniel Berce
It is certainly not where we are heading today. We believe the performance of our 2008 and 2009 vintages are tracking. Especially 2009, are tracking the best instances we ever originated which was 2003. If that performance validates through time we would expect our credit enhancement levels on securitizations to improve. How far they could improve is a bit of a wild card. In today’s environment the ratings agencies are extremely conservative. I don’t know how that will change over time. Certainly we think we are entitled to better enhancement levels. All in all Chris mentioned our leverage levels today were 4.7. Probably headed to 4. We think over time we could push them back up to 5 just as a representative number given the type of credit we are originating today.
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