7/21/2019 Explanation of Securitization by: Joe Esquivel (MCI)

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8>70 Iortcgcf @oipmdgj`f Djvfstdcgtors

Gutborfl hy Kosfpb Fsqudvfm gjl Lgidoj Fibomtz

Fssfj`f oa Pf`urdtdzfl \dif

\bds wrdtdjc hfcdjs wdtb g quotf aroi s`rdpturf;Agtbfr- aorcdvf tbfi- aor tbfy lo jot ejow wbgt tbfy lo* )Muef 80;0<

Oj tbf `ojtrgry- dj tbf hfcdjjdjc oa tbf iortcgcf ifmtlowj tbfrf wfrf tbosf wbo ejfw fxg`tmywbgt tbfy wfrf lodjc* Ds dt hfyojl spf`umgtdoj tbgt tbosf dj tbf hfcdjjdjc bopfl tbfy `oumlg`bdfvf tbfdr igiioj cogm hfaorf tbf ujmgwaumjfss wgs `oiprfbfjlfl?

Ojf bfgrs tbgt tbosf oa kujdor crglf kuld`dgry "stgtf `ourts$ grf `oj`frjfl wdtb cdvdjc gwgy gArff Bousf* Dj g``orlgj`f to mgw- gjy ohmdcdjc prospf`tdvf Xfgm Fstgtf owjfr sbouml hf ghmfto sf`urf g proidsf oa g tgjcdhmf iojftgry ohmdcgtdoj gjl sf`urf tbf pur`bgsf iojfy wdtb gjgmtfrjgtf ifgjs oa sgtdsaydjc tbf tgjcdhmf iojftgry ohmdcgtdoj hy ifgjs oa crgjtdjc g sf`urdtydjtfrfst dj tbf propfrty* Bfj`f tbf Bousf- gs sf`urdty- hf`oifs gj gmtfrjgtf sour`f aor tbfrfpgydjc oa tbf tgjcdhmf iojftgry ohmdcgtdoj to tbf tgjcdhmf `rfldtor da gmm gppmd`ghmf mgws grfaommowfl* Sbfj gmm gppmd`ghmf mgws gppmydjc to tbf gmtfrjgtf ifgjs oa `ommf`tdoj grf JO\ dj`oipmdgj`f- tbf tgjcdhmf `rfldtor "\gjcdhmf Ohmdcff$ "Mfjlfr or gjy otbfr joj)pgrty$ ds mfat wdtb

jo gmtfrjgtf iftbol oa `ommf`tdjc vgmuf aor tbf tgjcdhmf ohmdcgtdoj* \rutb hf toml- tbfrf ds jo su`btbdjc gs g Arff Bousf- hut ojmy tbf moss oa gj gmtfrjgtf ifgjs to `ommf`t g boifowjfrstgjcdhmf iojftgry ohmdcgtdoj* Aor da g pgrty bgs g vgmdl tgjcdhmf iojftgry djstruifjt "tbf Jotf$-su`b pgrty `ouml sffe iojftgry rfmdfa utdmdzdjc tbf Jotf*

Fvfj dj tbf lgys wbfj Ghrgbgi Mdj`omj wgs prg`td`djc gs gj gttorjfy- bf rgj djto tbf hdgsagvor oa `ourts to `rfldtors* \bds wrdtfr rfgmmy bgs jo dssuf wdtb hdgs- hut wbfj g `ourt rumfs dj`ojtrgld`tdoj to stgtutory mgw- tbf `ourt bgs dj fssfj`f opdjfl dj opposdtf to tbf rumf oa mgw*Sby grf tbf `ourts rumdjc dj `ojtrgry to stgtutory mgw? Pdipmf iost kuld`dgrdfs grf ujlfr tbfgssuiptdoj tbgt tbf `rfldtor jgifl dj g tgjcdhmf ohmdcgtdoj sudt ds tbf `rfldtor aor g tgjcdhmfohmdcgtdoj* Dj ag`t- dj tbds iolfrj lgy fmf`trojd` ldcdtdzfl worml- tbf `rfldtor jotfl dj igjy `ourtpmfgldjcs ds iost oatfj g `rfldtor aor tbf G``oujt Lfhtor gjl jot tbf `rfldtor aor tbf tgjcdhmf

ohmdcgtdoj* Sbfj g `ourt rumfs dj opposdtf oa stgtutory mgw- kustd`f bgs agdmfl* Xfgmdty ds tbgt joojf mdefs to mosf "rfgm or digcdjgry$ gjl da ojf `gj pmgy g cgif oa worls- gs gttorjfys`oiiojmy lo hfaorf g `ourt- tbf usf oa lf`fptdoj kust idcbt gmmow g lf`fdvfr to wdj ojlf`fptdoj*

Ojf jffls to ojmy mooe gt tbf worml gjl sff `oiioj) lgy if- if- jow- jow sfmadsb sbort )sdcbtfljfss* Pu`b lfsdrf ds fvdlfjt dj tbf sf`urdtdzgtdoj oa tgjcdhmf sf`urfl djstruifjts`oiiojmy rfafrfj`fl gs g boifowjfrs iortcgcf "tbf Jotf sf`ur fl hy gj djtfrfst dj tbf rfgmpropfrty- tbf sf`urdty djstruifjt$*

\bds wrdtfr- dj fxpmgdjdjc sf`urdtdzgtdoj- wdmm rfafr to tbf gttg`bfl `bgrt tdtmfl; Puhsfqufjt^ur`bgsf Fmf`trojd` Gutbordtgtdvf @opy*

Sf hfcdj gt tbf tbrff)ldrf`tdojgm sdmvfr grrow oj tbf mfat sdlf oa tbf `bgrt- wbd`b dj igjy`dr`uistgj`fs ds wbfj tbf sfmmfr oa rfgm fstgtf fxf`utfs g Sgrrgjty Lffl wdtb g Qfjlors Mdfj*Sf `gjt hmgif g sfmmfr oa rfgm fstgtf aor protf`tdjc bds djtfrfst* Da tbf sfmmfr oa rfgm fstgtf lofsjot cft pgdl- tbfj tbfy bgvf g mfcgm mdfj iftbol to rfg`qudrf tbf rfgm fstgtf* Ojf su`b sour`f oa aujldjc to pgy tbf sfmmfr ds g tbdrl pgrty `ojtrg`t hftwffj tbf ordcdjgtdjc mfjlfr "M7$ gjlwbofvfr tfjlfrfl tbf iojfy* "Dts djtfrfstdjc to gse- wby wouml g sfmmfr oa rfgm f stgtf wgjt togssdcj bds mfcgm protf`tdoj gwgy to g mfjlfr adjgj`djc tbf pur`bgsf oa rfgm fstgtf aor g huyfr gsjotfl dj soif oa tbf Sgrrgjty Lffls?$ @ojsdlfrdjc tbgt sfmmfrs grf gmiost gmwgys pgdl- g mdfj

7/21/2019 Explanation of Securitization by: Joe Esquivel (MCI)

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8>70 Iortcgcf @oipmdgj`f Djvfstdcgtors

Gutborfl hy Kosfpb Fsqudvfm gjl Lgidoj Fibomtz

stdmm rfigdjs dj puhmd` rf`orl* Hut fvfj da su`b v fjlors mdfj ds jot ldssomvfl oa rf`orl hy tbfsfmmfr or sfmmfrs gssdcjs- tbf sfmmfrs mdfj wouml fxpdrf hy opfrgtdoj oa mgw upoj tbf sfmmfr oa rfgmfstgtf hfdjc pgdl* Sf trgvfm mfat aroi tbf tbrff)ldrf`tdojgm sdmvfr grrow* Aor g mfjlfr to hf iorfgssurfl oa hfdjc rfpgdl aor aujldjc g huyfrs iojftgry ohmdcgtdoj- tbf ordcdjgtdjc mfjlfr "M7$`rfgtfs gjl gttg`bfs g sf`urdty djstruifjt "mdfj to provdlf gmtfrjgtf iftbol oa `ommf`tdoj$ djg``orlgj`f to mo`gm mgws oa kurdsld`tdoj* Dj aommowdjc mo`gm mgws oa kurdsld`tdoj- tbf ordcdjgtdjcmfjlfr "M7$ pfrigjfjtmy pfraf`ts tbf sf`urdty djstruifjt "igefs tbf mdfj pfrigjfjtmyfjaor`fghmf gs gj gmtfrjgtf$ hy admdjc tbf sf`urdty djstruifjt djto rf`orl* Hut dj orlfr aor su`bpfraf`tdoj oa fjaor`fghdmdty oa tbf sf`urdty sf`urdjc tbf Jotf to fxtfjl to suhsfqufjt pur`bgsfrsoa tbf Jotf- dt rfqudrfs g suhsfqufjt pur`bgsfr oa tbf Jotf to admf tbf sf`urdty djstruifjt dj tbfsuhsfqufjt pur`bgsf r oa tbf Jotfs jgif to hf g Pf`urfl ^grty oa Xf`orl "\gjcdhmf Pf`urfl^grty$* Da tbf ordcdjgtdjc mfjlfr agdmfl to tdifmy admf oa rf`orl tbf sf`urdty djstruifjt- gttg`bifjt-gjl tfiporgry pfraf`tdoj- tbf rdcbt oa fjaor`fghdmdty wouml fxpdrf hy opfrgtdoj oa mgw gjl tbfrfsumt wouml hf tbf moss oa gj gmtfrjgtf iftbol to `ommf`t gj fqugm vgmuf to tbf Jotfs vgmuf*

\bfrf ds iu`b `ojausdoj surroujldjc IFXP hf`gusf tbfy bgvf g`tugmmy hffj rf`ocjdzfl gshfdjc ifihfr)gcfjts oa igjy vgrdous pgrtdfs- rgtbfr tbgj ojf fjtdty or fipmoyfr* Dt igy hfpossdhmf aor IFXP to hf admfl dj puhmd` rf`orls gs hfdjc gj gcfjt oa tbf ordcdjgtdjc mfjlfr "M7$-or g hfjfad`dgry oa tbf sf`urdty djstruifjt dj mdfu oa tbf Ordcdjgtdjc Mfjlfr "M7$- hut su`b mfcgmstgtus sbouml hf lf`dlfl hy tbf propfr `ourt dj ojfs kurdsld`tdoj* Bowfvfr- ojf ag`t ds `mfgr )tbfrf ds jo wgy tbgt IFXP `gj propfrmy hf jgifl gs tbf Pf`urfl ^grty5 tbf Pf`urfl ^grty dsmfcgmmy rfsfrvfl aor tbf mfjlfr aor gmm gppmd`ghmf mo`gm mgws oa kurdsld`tdoj to hf dj `oipmdgj`f*

Gt tbds podjt dj tdif tbf mfcgm g`tors tbgt `gj hf dlfjtdadfl grf tbf sfmmfr oa tbf rfgm fstgtf- tbfhuyfr oa tbf rfgm fstgtf- gjl tbf Ordcdjgtdjc Mfjlfr "M7$ tbgt aujlfl tbf rfgm fstgtf pur`bgsfr aor tbf huyfr* Sbftbfr or jot tbf Ordcdjgtdjc Mfjlfr "M 7$ ds g tgjcdhmf Pf`urfl @rfldtor dslfpfjlfjt upoj wbftbfr or jot mo`gm mgws oa kurdsld`tdoj gjl aflfrgm rfgm fstgtf mgws bgvf hffj`oipmdfl wdtb*

Jfxt- aommow tbf sdmvfr tbrff wgy grrow to tbf rdcbt gjl you wdmm sff tbgt- hfyojl gjy rfgsojghmf

louht- tbf Ordcdjgtdjc Mfjlfr "M7$ routdjfmy pmg`fs tbf Jotf- wbd`b ds gmmfcfl to hf gjdjlorsfifjt hy tbf Djlorsfr ojmy "Ordcdjgtdjc Mfjlfr M7$- oj tbf ag`f oa tbf iojftgry ohmdcgtdoj"Djstruifjt tbf Jotf$ gs gj gttfipt to bgvf tbf Jotf hf`oif Hfgrfr ^gpfr d j g``orlgj`fto tbf Vjdaori @oiifr`dgm @olf Grtd`mf 0 gjl/or fg`b stgtfs fqudvgmfj`f* \bds wrdtfr bgs jodssuf wdtb djstruifjts hf`oidjc hfgrfr pgpfr gjl aor su`b hfgrfr pgpfr to hf jfcotdgtfl hypossfssdoj gmojf- hut wbfrf g sf`urdty djstruifjt ds gttg`bfl- fg`b jfcotdgtdoj dj g``orlgj`fto mo`gm mgws oa kurdsld`tdoj wouml rfqudrf rf`orlgtdoj oa tbf suhsfqufjt pur`bgsfr to hfdlfjtdadfl oa puhmd` rf`orl to rfigdj g tgjcdhmf Pf`urfl @rfldtor* Gttfiptdjc to gppmy Djtgjcdhmfmgws oa pfraf`tdoj to g \gjcdhmf worml `rfgtfs ghsomutf `bgos5 aor da djtgjcdhmf pfraf`tdoj mgwsgppmdfl to tbf tgjcdhmf- gjy jfcotdghmf djstruifjt `ouml hf soml aor mfss tbgj aumm vgmuf dj`ojtrgld`tdoj to Vjdaori @oiifr`dgm @olf Grtd`mf 0- suhsf`tdoj 8>0- suhsf`tdoj "l$- or fg`bstgtf s fqudvgmfj`f*

Codjc up aroi tbf sdmvfr tbrff)ldrf`tdojgm grrow ds tbf strdppdjc oa vgmuf aroi tbf Jotf gjl tbf`rfgtdoj oa gj fmf`trojd` djtgjcdhmf ohmdcgtdoj* \bds ds tbf g`tdoj tbgt rflu`fs tbf vgmuf oa tbf Jotf- igedjc tbf Jotf jot fmdcdhmf aor suhsfqufjt jfcotdgtdoj* \bf g``oujt lfhtor- rfprfsfjtflhy tbf sdmvfr tbrff)wgy grrow- `rfgtfs tbf Djtgjcdhmf Ohmdcgtdoj- wbd`b ds tbf Djtgjcdhmf ^gyifjtPtrfgi tbgt wouml hf ujlfr covfrjgj`f oa tbf Vjdaori @oiifr`dgm @olf Grtd`mf 4 gjl/or fg`bstgtfs fqudvgmfj`f* Bfrf- tbf G``oujt Lfhtor ds mdghmf aor tbf lfhts dt `rfgtfs gjl tbfboifowjfr ds mdghmf aor tbf lfhts bf/sbf `rfgtfs* Ojf ojmy jffls to mooe gt tbf `ovfjgjts djtbf tgjcdhmf sf`urdty djstruifjt wbd`b ds to sf`urf g tgjcdhmf ohmdcgtdoj "tbf Jotf$5 tbf

7/21/2019 Explanation of Securitization by: Joe Esquivel (MCI)

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8>70 Iortcgcf @oipmdgj`f Djvfstdcgtors

Gutborfl hy Kosfpb Fsqudvfm gjl Lgidoj Fibomtz

`ovfjgjts wdmm provdlf tbf fvdlfj`f to support tbf djtfjtdoj to `rfgtf gj djtgjcdhmf ohmdcgtdoj-aor tbf sf`urdty djstruifjt `ojtgdjs jotd`f tbgt tbf Jotf "tgjcdhmf ohmdcgtdoj$ ds to hf soml OXgj djtfrfst dj tbf Jotf wdmm hf soml* Jotd`f tbgt tbf sf`u rdty djstruifjt ds to aommow tbf djtgjcdhmfohmdcgtdoj- wbd`b ds dj opposdtdoj to gmm stgtutory gjl `gsf mgw* Aor g \rustff oa gj djtgjcdhmftrust to lf`mgrf g tgjcdhmf ohmdcor dj lfagumt- ds amgwfl mocd`- gs tbf \rustff oa gj djtgjcdhmf trust`ouml ojmy lf`mgrf tbf G``oujt Lfhtor "Djtgjcdhmf Ohmdcor$ dj lfagumt* Ojf bgs to `ojsdlfr- da gjdjtgjcdhmf trustff ds gttfiptdjc to `ommf`t gj djtgjcdhmf lfht aroi g tgjcdhmf ohmdcor dj mdfu oa tbfdjtgjcdhmf ohmdcor- bow igjy `ommf`tdoj mgws- hotb stgtf gjl aflfrgm- grf hfdjc vdomgtfl? Ds tbdsgj gttfipt to `ommf`t gjotbfr lfht aroi g pgrty jot mdghmf?

\bf `rfgtdoj oa tbf djtgjcdhmf ohmdcgtdoj dj jfgrmy gmm djstgj`fs djvomvfs s`gjjdjc tbf tgjcdhmfJotf djto gj djtgjcdhmf ldcdtdzfl aori- wbfrfhy tbds ordcdjgm s`gjjfl `opy ds tbfj lf`mgrfl to hftbf Gutbordtgtdvf @opy gs hfdjc g trgjsafrghmf rf`orl dj g``orlgj`f to F )PDCJ "76 VP@ 3>>7$gjl VF\G* Fx`fpt F)PDCJ gs wfmm gs VF\G hotb fx`mulf dtfis covfrjfl hy Vjdaori@oiifr`dgm @olf Grtd`mf"s$ 0 ! 4- F)PDCJ fx`musdoj grf jotfl dj 76 VP@ 3>>0*

Dj aommowdjc tbf rdcbt turj gatfr mfgvdjc tbf upwgrl trgvfm oa tbf sdmvfr tbrff)wgy grrow- wf adjlbow tbf `rfgtdoj oa tbf Djtgjcdhmf Ohmdcgtdoj ds lfadjfl- gs tbf Fmf`trojd` Ldcdtdzfl Gutbordtgtdvf@opy* Dj tbf oml tgjcdhmf lgys- g `opy oa tbf tgjcdhmf ohmdcgtdoj wgs provdlfl to fstghmdsb grgtdjc ag`tor gjl tbf ag`ts grf `mfgr tbgt dj tbds fmf`trojd` ldcdtdzfl worml gj djtgjcdhmf `opy"Vjgutbordtgtdvf @opy$ `ouml gmso hf prfsfjtfl aor rgtdjc* \bds hrdjcs g sfrdous qufstdoj djtopmgy ghout `urrfjt rgtdjcs; Lofs tbf rgtdjc gcfj`y tgef djto g``oujt wbftbfr tbf pro`fss gjlpro`flurf dj `ojvfrtdjc g \gjcdhmf Vjdaori @oiifr`dgm @olf Grtd`mf 0 djstruifjt djto gjDjtgjcdhmf \rgjsafrghmf Xf`orl ds mgwaum or jot?

\bf pro`fss oa tbf \gjcdhm f Djstruifjt hfdjc djlorsfl Dj Hmgje gjl/or wdtb gj gmmojcf hfdjcgllfl to `ojvfrt tbf Djstruifjt aroi Hfgrfr ^gpfr to g pgrty hy Ppf`dgm Djlorsfifjt lofsjot ovfr`oif tbf ag`t tbgt tbf Djstruifjt- hfdjc aor mfss tbgj aumm vgmuf- wgs jot fmdcdhmf aor jfcotdgtdoj* \bfrfaorf- mocd` provdlfs tbgt tbf glldtdoj oa gj gmmojcf or glldjc tbf jgif oa gsuhsfqufjt ^gyff to tbf djstruifjt ds wdmmaum- djtfjtdojgm- gjl mg`es supportdjc stgtutory mgw*

G sf`ojl djtgjcdhmf `gj hf `rfgtfl hy g suhsfqufjt G``oujt Lfhtor "Pf`urdtdzfr/Lfposdtor-ft`$ gatfr tbf G``oujt Lfhtor `rfgtfs tbf Djtgjcdhmf Ohmdcgtdoj* \bf \rust @frtdad`gtfs tbgtdjvfstors routdjfmy pur`bgsf grf tbf Djtgjcdhmf Ohmdcgtdojs* Sbftbfr tbfrf grf ojf- two- or tbrffsuhsfqufjt G``oujt Lfhtors rfgmmy ds jot g ag`tor* Dj tbf `rfgtdoj oa tbf sf`ojl Djtgjcdhmf@frtdad`gtf Ohmdcgtdoj "@frtdad`gtf \rust$ tbf \gjcdhmf Ohmdcgtdoj "Djstruifjt$ ds jfcotdgtfl gs gsf`urfl djstruifjt to tbf @frtdad`gtf \rust* Bfrf tbfrf ds gj gttfipt to gppmy djtgjcdhmf Vjdaori@oiifr`dgm @olf Grtd`mf 4 mgws- to prf)fxfipt stgtf mgws- to gssdcj g suhsfqufjt pur`bgsfr oa tbf tgjcdhmf djstruifjt g Pf`urfl ^grty stgtus*

\bf ordcdjgm G``oujt Lfhtor ds- gt hfst- tbf ojmy pgrty tbgt `ouml possdhmy hf g sf`urfl pgrty oa tbf tgjcdhmf ohmdcgtdoj gjl bfrf ds wbfrf tbf G``oujt Lfhtor wfgrs two bgts; ojf hfdjc- gt hfst-

g sf`urfl tgjcdhmf `rfldtor gjl tbf otbfr ds gj Djtgjcdhmf Ohmdcor- ohmdcgtfl to gjy suhsfqufjtDjtgjcdhmf Ohmdcff su`b gs g prdvgtf trust or Agjjdf or Arflldf- fvfj tbgt oa Cdjjdf Igf*

\bfrf bgvf hffj rfports tbgt ujlfr Jfw Tore mgw two djstruifjts djvomvdjc tbf sgif lfhtohmdcgtdoj `gjjot fxdst gt tbf sgif tdif- wbd`b ds succfstfl gs ojf rfgsoj aor tbf lfstru`tdojoa tbf tgjcdhmf Jotf* Da stgtutory mgw wgs stdmm hfdjc `oipmdfl wdtb- tbf tgjcdhmf Jotf `ouml fxdstgt tbf sgif tdif gs gj djtgjcdhmf Jotf* Dj ag`t- wf bgvf two ldaafrfjt ohmdcgtdojs- fxf`utfl hytwo ldaafrfjt ohmdcors- to two ldaafrfjt ohmdcffs- wbfrf lfstru`tdoj oa tbf tgjcdhmf wouml ojmysfrvf to lfstroy gjy `ommgtfrgm tbf djtgjcdhmf wgs prdvy too*