Glossary of Consumer Asset Backed Securities Terminology

The following definitions may be used in reading the listing of Ambac's Consumer Asset Backed Securities Guarantee Portfolio.

Auto Rental Fleet: Auto rental companies finance their fleets under lease transactions. The securitization borrows to finance the purchase of cars from major manufacturers, and the rental company makes monthly payments under leases. The monthly payments are sized to cover interest and depreciation on the vehicles. The majority of the vehicles are purchased subject to repurchase agreements with the manufacturers, under which the manufacturers agree to repurchase the automobiles at future dates according to a predetermined pricing schedule. The bonds issued in these securitizations are secured by the lease payments and the proceeds of disposition of the automobiles, whether under manufacturer repurchase agreements or through other sales. Auto Rental Fleet sucurtizations typically have scheduled terms of three to seven years, and are repaid during the last twelve months.

Auto Loans: Auto loans are made to borrowers to finance the purchase of new or used automobiles. Borrowers make monthly payments of principal and interest, which typically amortise the loans in five to six years or less. The loans are secured by liens on the automobiles being financed. The balance of an auto loan securitization will amortise as borrowers make payments on their loans.

Clean up call: Most securitizations permit the issuer to call the bonds when a certain pool factor is attained. This allows the issuer to manage costs of administration of the securities. Clean up calls are not generally present in auto rental fleet securitizations or in credit card receivables transactions.

Collateral type: Pools of individual loans are pledged as collateral for the securities. Ambac's consumer asset backed securities portfolio includes several different types of mortgage-related and other consumer debt collateral , which may have different performance characteristics. These collateral types are separately defined, and include Auto Loans, Auto Rental Fleets, Credit Card Receivables, Home Equity Loans, Home Equity Lines of Credit, High LTV Loans, Manufactured Housing, and Residential Mortgages.

Credit Card Receivables: Consumers use credit cards to purchase goods and services, and they may also be able to borrow under so-called "cash advance" lines of credit available on many credit cards. The receivables included in a securitization may consist of both principal and interest receivables created under these revolving credit card accounts, and are generally unsecured. Borrowers must make minimum monthly payments on their accounts, and both the principal and interest components of these payments are pledged as collateral to the securitization transaction. Credit Card Receivables transactions typically allow the substitution of new loans for repaid loans, and therefore do not amortise as borrowers repay their loans. Credit Card Receivables securitizations typically have scheduled maturties of three to seven years, and are repayable in a single "bullet" installment at maturity.

Current Ambac Rating: Ambac rates, on an internal scale, the quality of the risks to which it is exposed on its insured transactions. This rating is updated periodically as a part of Ambac's surveillance process.

HELOCs: HELOCs, or Home Equity Lines of Credit, are revolving credit loans made to homeowners, and are secured by a mortgage on the property. Typically the liens of HELOCs are in a second position, that is, they are subordinated to the first mortgage on the property, which may be held by a different institution. HELOCs typically have a revolving credit feature which allows the borrower to borrow additional amounts over time, or to repay and reborrow. A securitization of HELOCs is likely to amortise more slowly than a securitization of home equity loans or residential mortgages.

High LTV: So called "High LTV" mortgages are home equity loans made to borrowers secured by a mortgage on the property. Typically the liens of these mortgages are in a second position, that is, they are subordinated to the first mortgage on the property, which may be held by a different institution. Unlike home equity loans or HELOCs, in a High LTV loan, the balance of the combined loans (i.e., the first and second mortgages) exceeds the value of the property. In some cases the loan to value ratio of the combined loans may be up to 125%.

Home Equity Loans: Home equity loans are made to homeowners and are secured by a mortgage on the property. The lien of the mortgage may be in a first or second position, and may bear interest at fixed or adjustable rates. Many of the home equity loans in Ambac's securitizations are first lien mortgages. Many home equity loans constitute refinancing by borrowers of their previous mortgages. Borrowers under these loans may have impaired credit histories. These loans are often charactarized as "sub-prime". These loans have balances which amortise over a specified number of years, and require the regular payment of interest and principal. The balance of a securitization of home equity loans will amortise as loans are repaid, whether on schedule or by prepayment.

Manufactured Housing: Manufactured Housing transactions consist of pools of installment sale contracts and/or installment loan agreements (either or both are referred to in this glossary as "contracts"). The contracts bear interest and borrowers make monthly payments of principal and interest which are expected to fully amortise the contract over periods of up to 30 years. The contracts are secured by liens on the manufactured home and, in some instances, the underlying land as well. The balance of a manufactured housing securitization will amortise as the loans are repaid, whether by scheduled paymements or prepayments.

Issue: The specific transaction insured by Ambac. For mortgage related, manufactured housing and auto loan securitizations, each transaction typically comprises a special purpose corporation or trust which owns the loans or other assets pledged as collateral for the securities insured. For Auto Rental Fleeet and Credit Card securitizations, the transactions typically consist of a master trust which issues several series of bonds or certificates over time. Ambac may insure one or more tranches of a securitization or one or more series issued by a master trust.

Issue date: The date on which the sale of the transaction closed.

Issuer: A financial institution or other seller of the assets which comprise the collateral for the asset backed securities insured by Ambac. The listed Issuer may be the parent company of one or more subsidiary companies which actually originated the collateral or sold it to the securitization.

Net par exposure: The amortised balance outstanding of the insured securities, net of any reinsurance. The securities amortise periodically, typically monthly, from the collection of scheduled interest and principal and from prepayments of principal on the underlying collateral.

Original Insured Amount: The amount of securities of a particular issue originally insured by Ambac on the issue date. Ambac may insure one or more tranches of a securitization, and the amount of the collateral may be less than, equal to, or in excess of the amount insured.

Pool factor: The current principal balance of the loans outstanding in the entire collateral pool of a transaction, divided by the original balance of such loans, expressed as a percentage.

Residential Mortgages: Residential mortgages are loans made to borrowers, secured by a first mortgage on the property. These mortgages may be made for purchase of a residence or for refinancing of an existing mortgage. These loans require regular scheduled payments of principal and interest. Some of the loans in residential mortgage pools may have an interest only period prior to the beginning of principal amortisation. The balance of a securitization of residential mortgage loans will amortise as the loans are repaid, whether on schedule or by prepayment.