1. Real Estate Financial and Investment Analysis 1 THE STANDARD INSTRUMENT AND THE NATURE OF THE PROBLEM: AN HISTORICAL PERSPECTIVE ASSET - LIABILITY MIX PROBLEM RATE CEILING CONSTRAINTS USURY CEILINGS DE-REGULATION OF LIABILITIES AND ASSETS ACTIVITY OF OTHER FINANCIAL INTERMEDIARIES AND WALL STREET

2. Real Estate Financial and Investment Analysis 2 ALTERNATIVE MORTGAGE INSTRUMENT DESIGN INTEREST RATE RISK INFLATION / DEFLATION

3. Real Estate Financial and Investment Analysis 3 INSTRUMENT MODIFICATION TO REDUCE RISKS OF INTEREST RATE UNCERTAINTY PARTICIPATION IN EQUITY SHORTENING OF MATURITIES

4. Real Estate Financial and Investment Analysis 4 VRMs vs GPMs VRMs VARIABLE PAYMENT / FIXED TERM VARIABLE TERM / FIXED PAYMENT HYBRIDS RESTRICTED VS. UNRESTRICTED GPMs TOTAL BALLOON INTEREST ONLY PARTIAL PRINCIPLE PAYDOWN AMORTIZED LOAN GEM

5. Real Estate Financial and Investment Analysis 5 DESIGN OBJECTIVES TILT PROBLEM OF BORROWER RATE RISK OF LENDER LONG RUN “PAYMENT RISK” BURDEN TO BORROWER SHORT RUN “PROPERTY VALUE RISK” TO LENDER

6. Real Estate Financial and Investment Analysis 6 PROBLEMS INHERENT IN DESIGN OF MORTGAGES INDEX CHOICE AND REAL RETURNS SECONDARY MARKETABILITY

7. Real Estate Financial and Investment Analysis 7 RISK MANAGEMENT STRATEGIES HEDGING WITH FINANCIALS - FUTURES - OPTIONS BETTER DURATION MATCHING OF ASSETS AND LIABILITIES NO HOLD STRATEGIES - REMICs DIVERSIFICATION OF BUSINESSES RISK SHARING ALTERNATIVES THROUGH INSTRUMENT DESIGN

8. Real Estate Financial and Investment Analysis 8 RISK MANAGEMENT STRATEGIES REDUCE RISK SYNTHETIC ALTERNATIVES DEFENSIVE STRATEGYOFFENSIVE STRATEGY

9. Real Estate Financial and Investment Analysis 9 MODULE DEVELOPMENT TOOLS OF RISK MANAGEMENT PORTFOLIO BALANCE AND RISK-RETURN BALANCE DESIGN OF ALTERNATIVE MORTGAGE INSTRUMENTS HEDGING TECHNIQUES FOR “PIPELINE” ACTIVITIES LIQUIFICATION OF PORTFOLIO LIABILITY MANAGEMENT DIVERSIFICATION OF ASSETS