support bond typically is divided into different tranches. All the tranches we have discussed earlier are available, including sequential-pay support tranches and floater and inverse floater support tranches. The sup- port bond can even be partitioned so as to create support tranches with a schedule of principal payments. That is, support tranches that are PAC bonds can be created. In a structure with a PAC bond and a support bond with a PAC schedule of principal payments, the former is called a PAC I bond or Level I PAC bond and the latter a PAC II bond or Level II PAC bond or scheduled bond. While PAC II bonds have greater prepayment pro- tection than the support tranches without a schedule of principal repay- ments, the prepayment protection is less than that provided PAC I bonds.   There is more that can be done with the PAC II bond. A series of PAC IIs can be created just as we did with the PACs in Deal 5. PAC IIs can also be used to create any other type of bond class, such as a PAC II floater and inverse floater, for example. The support bond without a principal repayment schedule can be used to create any type of bond class. In fact, a portion of the non-PAC II support bond can be given a schedule of principal repayments. This bond class would be called a PAC III bond or a Level III PAC bond. While it provides protection against prepayments for the PAC I and PAC II bonds and is therefore subject to considerable prepayment risk, such a bond class has greater protection than the support bond class without a schedule of principal repayments.       NONAGENCY CMOS   There are short-term fixed-rate bonds and floaters created in CMO deals in which the issuer is a private entity rather than Ginnie Mae, Fan- nie Mae, or Freddie Mac. These securities are called nonagency mort- gage-backed securities (referred to as nonagency securities hereafter). Other mortgage-backed products that are separately classified in the     industry as asset-backed securities are home equity loan-backed securi- ties and manufactured housing-backed securities. These products are discussed in the next chapter. Since all of these mortgage-related securi- ties expose an investor to credit risk, these securities are sometimes referred to as credit-sensitive mortgage-backed securities. For agency CMOs, the concern is with the redistribution or "tranching" of prepayment risk. For nonagency CMOs, the bonds issued are not guaran- teed by a federally related agency or a government sponsored enterprise. Consequently, there is concern with credit risk. As a result, nonagency CMOs expose the investor to both prepayment risk and credit risk. The same