Page 365 - 2019 6th AFIS & ASMMA

Let me give you some examples quickly. Let's say there are three
people. The first one is Mr. Kim, the second borrower Mr. Lee and the
third Mr. Park. Mr. Kim draws in month 1, month 2, month 3; he didn't
make a draw in month 4 but he draws in month 5 and 6. And he pays
off. Mr. Lee on the other hand is going to draw every month. Mr. Park
also draws every month but he prepaid much earlier, so in the month
5 is going to pay off his whole loan. In this case, what happens is that
the HMBS is going to be structured based on the first row of each three
loans. So the first three draws of Mr. Kim's, Mr. Lee's and Mr. Park's is
going to constitute one mortgage-backed securities. Next month, another
mortgage-backed securities will be structured based on their second
draws and so on.

So to account for this structure, the way that securitization works is Session III
they are using something called participation. So participation is a part
of the loan that will be separately securitized from other participation in
the loan.

What happens here is that any individual mortgage loan is going to be
represented by several mortgage-backed securities. So in a sense, HMBS
is not really pooling the reverse mortgage loans, they are actually pooling
the participation of each individual mortgage loans.

366 2019 6th AFIS & ASMMA Annual Meeting 367