The Monetization & Securitization of Credit Scores Schyller Hall

BORROWERSMALL BUSINESS OWNER Poor credit Wants lower rate Good credit Needs liquidity Wants some cash for startup (monthly income or lump sum) My Company provides both

650 FICO SCORE Qualifies for $100,000 10% 780 FICO SCORE Qualifies for $100,000 5% (If she so desired) Borrower Entrepreneur With Entrepreneur As Cosignatory: Borrower qualifies for: $100,000 7%

Borrower & Entrepreneur Together Borrower Qualifies for $100,000 7% Bank Loans My Company 7% My Company Borrower My Company Lends Borrower 8.5%

Savings And Payouts Borrower 10%, 30-Year Loan, PMT= 8.5%, 30-Year Loan, PMT= $ What Borrower Would Have Paid What Borrower Actually Pays Over Life Of Loan: $39, My Company 8.5%, receiving $ Per Month 7.0%, paying $ Per Month PV of PMTs ( discounted 5% for 30 years ) : $8, My Company My Company gets a percentage of the spread Entrepreneur gets a percentage

Alternatively… Entrepreneur My Company 8.5%, receiving $ Per Month NPV of PMTs My Company My Company gets a percentage of the spread Sell the PV of This Stream of Cash Flows as some kind of ABS: Entrepreneur gets a percentage of the spread 7.0%, paying $ Per Month From here, I can transfer the obligation: Transferring the monthly payments of $ to another in exchange for a lump sum, say, $45,000 to $50,000.

From Previous Page… My Company NPV of PMTs Entrepreneur My Company’s monthly incoming cash flows of $ are sold as an ABS for $64, My Company’s monthly obligations of $ are transferred another borrower who receives a sum of $50,000.

Other Options There are many other varieties in which the payments and cash flows could be structured, listed in the preceding slides are only a few of the possibilities.

Entrepreneur My Company Receives $10,000 – My Company’s fee (TBD) Ideally, cosignatory will successfully petition to remove him/herself from Loan after 2-3 years of consistent payments from Borrower. Rather than taking out a business loan on their own, this solution is advantageous because its essentially free money. Cosignatory receives financing without the requisite monthly payments. In Conclusion Borrower Homeowner receives a lower interest rate on his home mortgage. This is an easy sale, even if fees are assessed on a % loan value or a straight, fee, say $1,000. Paying $1000 now to save nearly $40,000 over the life of the loan Even for those who plan on moving within a few years, it the structure will pay for itself within a year. (in this example)

Additional Considerations  Contingencies for re-financing situations either for existing borrowers or first- time borrowers.  The potential for “entrepreneur” customers to use the process to accrue multiple lump sums of cash acting as cosignatory for multiple deals  Borrowers who require/request more than one cosignatory (possible?)  Many others that will doubtless merit further examination Again, this is a brief overview of the overall business process.

OR… Entrepreneur 8.5%, receiving $ Per Month NPV of PMTs My Company Sell the PV of This Stream of Cash Flows as some kind of ABS: Entrepreneur gets a percentage of the spread

650 FICO SCORE Qualifies for $100,000 10% Lends From Its Own Pocket 8.5%, brokering a mortgage for 7% and pocketing the difference. Borrower Borrower receives better interest on his loan, I still make a profit, no need to sell any product to Entrepreneur…but returns are smaller, potentially less lucrative for investors. My Company OR…