securitization++

Cortex – Automation for Structured FinanceTranquilmoney, Inc.

Tranquilmoney, Inc., 29 West 34th Street, 9th floor, New York, NY 10001. Phone: (212) 494-0383. Fax: (212) 656 1492Email: [email protected]. World Wide Web: http://www.tranquilmoney.com

1.The Securitization Process and Cortex System Features.............................................. 32. Features of Interest – Originator....................................................................................4

2.1Loan Details - Asset Class Definition........................................................................ 42.2Loan Details – Schedules..........................................................................................52.3Pooling - Synthetic Field Definition........................................................................... 62.4Pooling - Covenant Definition....................................................................................72.5Pooling - Covenant Monitoring.................................................................................. 82.6Pooling - Optimizer ...................................................................................................92.7Pool Monitoring - Stratifications.............................................................................. 112.8Pool Monitoring - Static Cash Flows....................................................................... 122.9Pool Monitoring - Prepayment Speeds and Delinquencies.....................................132.10Pricing - Risk Based Pricing .................................................................................152.11Pricing – Cash Flow based Pricing....................................................................... 162.12Pricing – Online Structuring.................................................................................. 172.13Pricing – Liability Cash Flow................................................................................. 182.14Deal Structuring - Tranche Creation..................................................................... 202.15Deal Structuring - Cash Flow Rules...................................................................... 212.16Deal Structuring - DoubleHelix Scripting Language..............................................232.17Deal Structuring - Deal Summarization.................................................................24

3.Features of Interest – SPV........................................................................................... 253.1Collect Money from Asset to Account..................................................................... 263.2Payout to the investors............................................................................................273.3Deal Monitoring - Static Tranche Cash Flows.........................................................283.4Deal Monitoring - Trustee Reports.......................................................................... 303.5Deal Monitoring - DoubleHelix Scripting Language................................................ 32

4.Features of Interest – Rating Agencies........................................................................ 334.1Analytics.................................................................................................................. 334.2Online Structuring................................................................................................... 344.3Monitoring Deal Performance - Tranche Schedule Report..................................... 374.4Report on Accounts.................................................................................................38


1. The Securitization Process and Cortex System Features


Pool Creator

Funder

Investor

Loan Aggregator

Investor

Lender Lender

Borrower Borrower Single platform for issuing multiple pools, funders and asset classes

FeaturesSecuritization Process

Loan Aggregator

Integrated origination, pooling and funding

Collaboration with lenders, originators, issuers, structurers, underwriters and investors

Customized pool, loan tracking by deal principals and investors

Compliance, risk management, dynamic pool composition monitoring

Risk based pricing and aggregation

Customized reporting

Deal structuring and analysis

Pipeline hedging

Funding arbitrage analysis

2. Features of Interest – Originator

2.1 Loan Details - Asset Class Definition


Users define assets and asset classes by specifying important fields

Data is loaded into the system via an XML or an Excel interface

2.2 Loan Details – Schedules


All assets have a pay down schedule that is stored period wise. This is updated with period wise

payment / non-payment information

2.3 Pooling - Synthetic Field Definition


Synthetic fields (formulae) can be defined on any asset.

After defining synthetic fields, covenants can be defined using these synthetic fields.

In this case, we have defined “Curr LTV” as a weighted average of LTV’s of all loans in the pool

2.4 Pooling - Covenant Definition


A covenant has been defined on the synthetic field “Current LTV” as “Current LTV > 50%”

2.5 Pooling - Covenant Monitoring


Current LTV is less than 50%, so it fails the covenant of Current LTV being greater than 50%.

Such failed covenants are displayed in red font to alert the user.

This happens when the pool pays down or its loan composition changes.

2.6 Pooling - Optimizer


Assets that comply with these covenants alone will be considered

If there are covenants to be complied with for the tranche they will be shown here

Optimizer will pick the assets and the liability structure that will maximize these functions


Tranche structure suggested by the optimizer

Assets selected by the optimizer are marked.

2.7 Pool Monitoring - Stratifications


Loans are organized into different buckets, which can be custom specified

User can choose the columns reported on for each bucket

2.8 Pool Monitoring - Static Cash Flows


Pool performance is monitored vis-à-vis prepayments, delinquencies and defaults.

User can drill down to loan-level detail

2.9 Pool Monitoring - Prepayment Speeds and Delinquencies


Special statistics such as prepayment speeds can be monitored period-wise for each loan


Loans can be bucketed by delinquency

Drilling down on a bucket gives loan-level detail for that bucket

2.10Pricing - Risk Based Pricing


Price adjustment and loan acceptance criteria are specified via a matrix of rules

Eligible loans are priced based on the price adjustment matrix

2.11Pricing – Cash Flow based Pricing


Net yield on Assets – Net Effective Yield on Liabilities + Deal Fees gives the P&L from the securitization.

Users can iterate on asset price / yield to optimize the resulting profit for a given capital structure

2.12Pricing – Online Structuring


Users can create different capital structures to determine optimal funding for a given asset profile

2.13Pricing – Liability Cash Flow


Liability cash flow for the initial capital structure size of $ 6 million.


User can view the effect of increasing the size of the capital structure from $ 6 to $ 7 million in this report

2.14Deal Structuring - Tranche Creation


User can create cash flow waterfall via a visual, interactive interface

In this case, we have created 4 tranches in a sequential pay waterfall

Details of each tranche in the waterfall can be captured

2.15Deal Structuring - Cash Flow Rules


Waterfall description is captured under the “covers” via DoubleHelix

Summary of deal structure


Additional details describing cash flows and payment priorities can be specified.

Tests capturing shortfalls and overcollateralization can be set.

2.16Deal Structuring - DoubleHelix Scripting Language


System configuration / customization is done via an XML based language, DoubleHelix.

These XML scripts can be stored in a hierarchical library

2.17Deal Structuring - Deal Summarization


The system produces a summary of salient deal parameters

3. Features of Interest – SPV


For example, all reports defined for the deal are listed and made accessible

3.1 Collect Money from Asset to Account


SPV should just click the “Execute” button to collect money from the Assets to Account

3.2 Payout to the investors


To Pay to the tranches the SPV can execute the already defined cash flow by specifying the Pay Out Date and clicking “Execute””

3.3 Deal Monitoring - Static Tranche Cash Flows


Real performance (paydowns, cash allocation) can be monitored for each tranche in a deal.

These reports can be customized and triggers set to notify a user on occurrence of events such as defaults.

The user can drill down on any tranche to get details for that tranche

Drill down


Users can drill down to a period wise level of detail on paydowns, cash allocations.

This permits bond administration.

3.4 Deal Monitoring - Trustee Reports


Can capture the current status of all accounts and fees associated with an SPV

3.5 Deal Monitoring - DoubleHelix Scripting Language


System configuration / customization is done via an XML based language, DoubleHelix.

These XML scripts can be stored in a hierarchical library

4. Features of Interest – Rating Agencies

4.1 Analytics


Analyze a tranche for a particular Moodys rating Agency

Can be customized for any other Rating Agency also

4.2 Online Structuring


Users can create different capital structures to determine optimal funding for a given asset profile


Liability cash flow for the initial capital structure size of $ 6 million.


User can view the effect of increasing the size of the capital structure from $ 6 to $ 7 million in this report

4.3 Monitoring Deal Performance - Tranche Schedule Report


Rating Agency can view the Schedules and Payments to tranche

4.4 Report on Accounts


Rating Agency can view audit trail of the amount that is taken from the Reserve Account (if any) and judge the performance of the deal

Rating Agency can confirm the compliance with the Terms of Issue

securitization++

Business

pricing online structuring

pricing risk

pricing cash flow

pooling covenant monitoring

world wide web

new york

pricing liability cash

loan tracking