Slots your products to major Lenders’ actual product offerings

1. A web-enabled loan slotting and pricing tool that optimizes your secondary execution, improves reliability of valuations, and minimizes required public disclosures. • Slots your products to major Lenders’ actual product offerings • Prices these based on Lenders’ rate sheets and adjustment rules.

2. FAS No. 157 – “Fair Value is the price that would be received to sell an asset … in an orderly transaction between market participants.” • Level 1 – Quoted prices for identical assets – e.g. NYSE • Level 2 – Quoted prices for similar assets – e.g. Matrix Pricing • Level 3 -- inputs are unobservable market inputs derived • through extrapolation or interpolation that cannot be verified by • observable market data – e.g. Cash Flow Models Level 1 Loans slots & prices identical loans at the valuation date Public disclosure must be made of hierarchy level used; Level 3 valuations require discussion of inputs and source of inputs

3. Rate sheets represent market prices 60% of loans are acquired from Brokers & Correspondents

4. Valuation Methodology: Product Eligibility & Rate Sheet Pricing -- prices are published by lenders daily; base prices for every product along with risk-related adjustments appear in ‘rate sheets’ • Determine which product among those priced fits a given loan; i.e. slotting and • Determine the price based on the set of available rate sheets and each lender’s adjustment rules.

5. Slotting Lenders’ product guidelines and underwriting criteria are “scraped”, standardized & digitized for easy retrieval

6. Pricing Prices are determined by each Lender’s daily rate sheets ….. Adjusted for the Lender’s various stipulations

7. imperfect matches • Seasoned Loans • Duration Extension of Coupons • ARMs • Waterfall -- adjusted into appropriate term buckets Rate sheet prices are extrapolated up and down based on Lender’s convexity forecasts Seasoned ARMs can be priced off of current ARMs (conservative) or a price can be calculated based on known market yields

8. imperfect matches • Seasoned Loans • Duration Extension of Coupons • ARMs • Waterfall The reason for any failure to match an existing product is detailed hierarchically evaluates loan data fields in a waterfall approach until the system returns no results for a given investor. The immediately previous step in the waterfall then returns the closest match.

9. Users of the system upload the portfolio One, or many, Investors are chosen to match against “Best” or “Conservative” values can be applied A complete record of all runs is maintained Execution and/or Valuation Reports can be generated

10. See which Investors’ product needs match your portfolio

11. Optimization Optimize execution by setting minimum pool size

12. Total = $11,978,329 or 101.572 Zoom into loan level detail including PDFs of Lender’s Product & Rate sheets Each loan is assigned a Grade: Level 1 – Matched Level 2 – Extrapolated Rates Level 3- No good match See value of portfolio in total ………… See value of portfolio …….. by loan

13. Accurate • Transparent & auditable • Free of subjective elements • Validation limited to inputs and outputs Please click here to return to Level1Loans.com