Real Estate HW Help: Anyone know the answer to this?
&amp;#x200B;

The worst performing groups of mortgages during the GFC had default rates of 70  
percent, with losses conditional on default of 70 percent.  AAA bonds are supposed to  
be able to survive worst-case economic scenarios.  Given what you know about  
tranching, how much subordination is necessary for a tranche to deserve a AAA rating.
[{"id": "hk59ncj", "text": "It\u2019s usually like 50% thru the AJs but depends ultimately on the rating agencies which in turn depends on the collateral pool diversification size and sponsors and structure of the RR (although Ls and Vs have fallen out of favor despite being the new hotness for a while it\u2019s back to all HRRs, but the size of the vertical strip wasn\u2019t that big to begin with anyways so not that material). \n\nETA for what it\u2019s worth just looked at the matrix for a ~1bn low diversification SASB I looked at a few months ago and the AAA cut off was ~41% in an HRR structure. Also worth considering if the float is K series or \u201ctraditional\u201d CMBS, cut off varies a bit between the K-KJ-KF-KC and just changed with the decrease in the HRR from 7.5 to 5 for all of the recent issuances", "replies": [], "depth": 1}]