Securitization++

Cortex – Automation for Structured Finance
Tranquilmoney, Inc.

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

1.The Securitization Process and Cortex System Features.............................................. 3
2. Features of Interest – Originator....................................................................................4
2.1Loan Details - Asset Class Definition........................................................................ 4
2.2Loan Details – Schedules..........................................................................................5
2.3Pooling - Synthetic Field Definition........................................................................... 6
2.4Pooling - Covenant Definition....................................................................................7
2.5Pooling - Covenant Monitoring.................................................................................. 8
2.6Pooling - Optimizer ...................................................................................................9
2.7Pool Monitoring - Stratifications.............................................................................. 11
2.8Pool Monitoring - Static Cash Flows....................................................................... 12
2.9Pool Monitoring - Prepayment Speeds and Delinquencies.....................................13
2.10Pricing - Risk Based Pricing .................................................................................15
2.11Pricing – Cash Flow based Pricing....................................................................... 16
2.12Pricing – Online Structuring.................................................................................. 17
2.13Pricing – Liability Cash Flow................................................................................. 18
2.14Deal Structuring - Tranche Creation..................................................................... 20
2.15Deal Structuring - Cash Flow Rules...................................................................... 21
2.16Deal Structuring - DoubleHelix Scripting Language..............................................23
2.17Deal Structuring - Deal Summarization.................................................................24
3.Features of Interest – SPV........................................................................................... 25
3.1Collect Money from Asset to Account..................................................................... 26
3.2Payout to the investors............................................................................................27
3.3Deal Monitoring - Static Tranche Cash Flows.........................................................28
3.4Deal Monitoring - Trustee Reports.......................................................................... 30
3.5Deal Monitoring - DoubleHelix Scripting Language................................................ 32
4.Features of Interest – Rating Agencies........................................................................ 33
4.1Analytics.................................................................................................................. 33
4.2Online Structuring................................................................................................... 34
4.3Monitoring Deal Performance - Tranche Schedule Report..................................... 37
4.4Report on Accounts.................................................................................................38


1. The Securitization Process and Cortex System Features

Securitization Process Features

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

Integrated origination, pooling and funding
Lender Lender

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

Customized pool, loan tracking by deal
Loan Aggregator Loan Aggregator principals and investors

Compliance, risk management, dynamic pool
composition monitoring
Pool Creator

Risk based pricing and aggregation

Funder
Customized reporting

Deal structuring and analysis

Pipeline hedging

Investor Investor
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

If there are
covenants to be
complied with for
Assets that the tranche they will
comply with be shown here
these
covenants
alone will be
considered

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


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

3. Features of Interest – SPV


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

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

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.


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

Can be customized for any other Rating
Agency also

Analyze a tranche for a particular Moodys
rating Agency


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.


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


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