TYI OFFERS A GLOBAL SOLUTION TO THE MAY 2009 EUROPEAN PARLIAMENT'S CAPITAL REQUIREMENTS DIRECTIVE MANDATING THAT INVESTORS KNOW WHAT THEY OWN AT ALL TIMES. TYI'S PATENTED SOLUTION ADDRESSES BOTH THE ISSUER AND INVESTOR SIDE OF THE MANDATE:
- IT MINIMIZES THE ISSUER'S COST WHILE ELIMINATING THE INFORMATION TECHNOLOGY COMPLEXITY OF COMPLYING WITH LOAN LEVEL DISCLOSURE REQUIREMENTS OVER THE LIFE OF EACH DEAL;
- REDUCTION IN COMPLEXITY MEANS THAT ISSUERS CAN MEET 12/31/2010 COMPLIANCE DEADLINE;
- PRIVACY OF BORROWERS IS PROTECTED;
- THE INDIVIDUAL ACCOUNT LEVEL DATA COMES FROM THE ISSUER’S AUDITED OR AUDITABLE LOAN LEVEL SYSTEMS AND IS DISCLOSED AS OF THE CLOSE OF BUSINESS YESTERDAY. THIS TIMING REFLECTS HOW CASH PAYMENTS ARE SETTLED AND IS REAL TIME PERFORMANCE DATA FOR STRUCTURED FINANCE AND COVERED BOND COLLATERAL;
- THE SOLUTION'S LOW COST RETAINS THE ISSUER'S ECONOMIC ADVANTAGES OF FUNDING THROUGH THE STRUCTURED FINANCE AND COVERED BOND MARKETS.
- IT MAXIMIZES THE VALUE OF, THE INTEGRITY OF AND THE AUDITABILITY OF THE DISCLOSED INFORMATION TO THE INVESTOR.
- ALL MATERIALLY RELEVANT DATA ON THE CREDIT QUALITY AND PERFORMANCE OF THE INDIVIDUAL UNDERLYING ASSETS AS WELL AS THE TERMS OF THE DEAL IN A STANDARDIZED FORMAT IS MADE AVAILABLE IN REAL TIME;
- INVESTORS CAN ACCESS THIS DATA AT THE LEVEL OF AGGREGATION THAT THEY WANT;
- INVESTORS CAN PERFORM COMPREHENSIVE AND WELL INFORMED VALUATIONS AND STRESS TESTS USING THIS DATA IN THE ANALYTIC MODELS OF THEIR CHOICE.
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TYI, LLC oversees and coordinates the implementation of real time transparency for participants in the structured finance market.
TYI's transparency solution was designed to handle both individual asset types (RMBS, Auto Loans, Credit Card, Medical Receivables or others) and aggregated types (e.g., CDOs) of structured finance securities. It provides the individual account level performance information that is mandated by the European Regulators and needed by market participants to value the securities with the analytic and pricing models of their choice.
Acting as an independent third party, the firm oversees and coordinates the application of its proprietary technology to bridge the gap between the actual loan level collateral systems, the distributors of investment data and the desktops of end users (Investors, Traders, Rating Services, Bond Insurers and Trustees).
TYI's solution lowers the transaction cost of providing transparency and maximizes the flexibility of the transparency transmission mechanism to meet the current and evolving needs of the structured finance industry's participants.
The ease with which the transparency solution can be implemented for most issuers will allow these Issuers doing business in Europe to comply with the new disclosure regulations by 12/31/2010 (the Y2K Scenario Date for structured finance).
For more information, please contact Richard Field at (508) 878-6717 or e-mail us at info@tyillc.com.
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Under the U.S. Administation's Financial Regulatory Reform proposal released on June 17, 2009, the plan for providing transparency into structured finance securities is to let the SEC and ASF hash out a ruling. ASF, through Project Restart, has already conceded that loan level performance data must be made available.
The only questions left to be answered are how frequently will the data be updated and when will Issuers be required to start providing this data. There are three reasons to believe that the data will have to be updated at least once per day.
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First, it is best practice when managing a loan porfolio to monitor performance on a daily basis.
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Second, on May 6th, 2009 the European Parliament passed an amendment to the Capital Requirements Directive (CRD) saying that Investors must know what they own at all times. The frequency with which loan level performance data must be updated wasn’t specified in the CRD. However, the CRD strongly suggests that Investors need to have updated loan level performance data in real time or at least once per day. The European Parliament specifically elected not to codify existing monthly disclosure practices like Reg AB.
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Third, the SEC's ruling will have to address the principle that Investors be provided with all the material information they need to make an informed investment decision. For structured finance and covered bond securities, there are two sources of material information: cash collections and changes to the underlying collateral. Since cash collections on any day can easily exceed the rule of thumb level for materiality of 5% of the total collections for the month, it is material to Investors that this information be released on the day the cash is collected. Hence, the materiality principle along with Investors' mark to market needs should drive the SEC to also require disclosure at least once per day.
Which leaves us with the question of when will Issuers start providing the data. Under the European CRD, Issuers need to comply by 12/31/2010. We currently don’t have any insight into when an SEC ruling might actually come to pass.
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Background speeches, articles, interviews and papers on TYI:
Bloomberg Column: Shadow-Banking System Next Up for De-Stressing
CNBC Closing Bell: Balance Sheet Burdens
Wall Street Journal article: Math Wizards Working on Spells to 'Cure'
ABS East 2008 Speech: Paper or Plastic? The Case for Real Time Collateral Level Transparency
Chicago Tribune article: Market Stability Depends on More Truth-Telling
Fortune article with TYI's transparency solution in "Now What" section: Chaos on Wall Street
Total Securitization Learning Curve Column: Implementing Transparency
Boston Magazine article: The Man Who Would Save the Economy
Bloomberg article: Subprime Credit Market Seizure Solution Seen in Hospital Bills
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Background on TYI, LLC's Management