Knowledge Decision Securities, LLC.

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3. On Demand Services Mortgage POD/DOD: Prepayment/Default On Demand A portal service provides slice and dice of Agency prepayment data for MBS analytics VOD: Valuation On Demand A portal service provides all asset classes Monte Carlo Simulations (MCS) OAS and Scenarios valuations SOD: SCW On Demand A portal service for Structured Cashflow Waterfall (SCW) product issuance, analytics, and surveillance Equity EOD: Equity On Demand A portal service for equity derivatives Monte Carlo Simulation valuations 3

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8. Structured Assets Valuation EngineSAVE integrates the following 5 subsystems: Three-factor LIBOR market interest rate model Prepayment, Delinquency, Default & Loss model Stochastic macro-econometric model Structured Cashflow Waterfalls (SCW) model Monte Carlo Simulations (MCS) OAS model 8 Three factor LMM key features - Construction is arbitrage free No yield curve calibration Intuitive volatility and correlation calibration Accommodate arbitrary number of factors No need to mean-reversion parameters in LMM (no true economic meaning) Better than Hull-White methodologies Monte Carlo/OAS Pricing Model Precision and speed of convergence for pricing Based on 3x360high dimensional quasi-random sequence generator Proprietary moment matching algorithms and controlled variable techniques to achieve faster convergence Parallel processing of large portfolio implemented by application distributed on CPU farm in San Jose Back-end system Patented �Virtual Pocket Sorter� with all fields indexing we achieve 7x floating point calculation 5x integer calculation 3x character strings Parallel modeling application on Monte Carlo simulation � an effective architecture pipeline Flexibility and open source componentsThree factor LMM key features - Construction is arbitrage free No yield curve calibration Intuitive volatility and correlation calibration Accommodate arbitrary number of factors No need to mean-reversion parameters in LMM (no true economic meaning) Better than Hull-White methodologies Monte Carlo/OAS Pricing Model Precision and speed of convergence for pricing Based on 3x360high dimensional quasi-random sequence generator Proprietary moment matching algorithms and controlled variable techniques to achieve faster convergence Parallel processing of large portfolio implemented by application distributed on CPU farm in San Jose Back-end system Patented �Virtual Pocket Sorter� with all fields indexing we achieve 7x floating point calculation 5x integer calculation 3x character strings Parallel modeling application on Monte Carlo simulation � an effective architecture pipeline Flexibility and open source components

9. Structured Assets Valuation Engine 9

10. Collateral Data ETL 10

11. Collateral Data Management 11

12. SCW Deal Structuring Collateral CF Engine Period based (amortization, scheduled payment/coupon, calendar, fee, OPT/ARM, Strips, Interest Reserve, Tax, etc..) Scripting Engine Python based waterfall programming with Customizable and Modulated Script Command Call Y/H/SEQ/ProRata/OC/Shifting-Interest Credit Enhancement Bond/Pool Insurance Policies Surety Bond Guarantee Derivatives (SWAP, Cap/Floor) Reserve Account Triggers Modules � DLQ, Loss NAS/PAC/TAC RE-REMIC Pricing/Update/Payment Modes 12

13. SCW Deal Structuring Application Valuation On Demand MCS_OAS Econ Scenarios Payment and performance surveillance & verification Risk Management Market Risk Hedging MSR REMIC (Projected) Tax 13

14. 14 SCW Structuring Scripting Module SetDealParameters(('strike_rate', 5.05), ('index_name', 'LIBOR_1MO'), ('cuc_level_pct', 10), ('sen_enhance_threshold_pct', 40.20), ('stepdown_month', 37), ('oc_floor_pct', 0.50), ('oc_target_pct', 4.25), ('dlq_trigger_threashold_pct', 39.80), ('loss_trigger_threashold_pct', 1.35) SetTrancheParameters(('A1A','A1B','A2','A3','A4','A5') ('target_paydown_pct',59.80) ) SetTrancheParameters('A1A', ('cuc_multiplier', 2), ('coupon_spread', 0.17) ) SetTrancheParameters('M1', ('cuc_multiplier', 1.5), ('coupon_spread', 0.30), ('target_paydown_pct',66.20)

15. Example I: GNMA 2010-054 Diagram and KDS Waterfall Programming

16. 16 Example II: FNMA 07082 Structuring Diagram

17. 17 Example III:JP MORGAN MORTGAGE TRUST 2007-CH3 Closing Date 5/15/2007 Collateral Type Subprime Home Equity Capital Structure: Overcollateralization SEN/MEZZ/JUN Y Structure Net SWAP cover OC Deficiency, Interest Shortfall, Realized Loss, NetWAC Carryover Cross-Collateralization Triggers in Enhancement Delinquency Cumulative Loss Sequential Trigger OC and Subs Test

18. 18 Example IV:NEW CENTURY HEL TRUST 2006-2 Closing Date 06/29/2006 Collateral Subprime Home Equity Capital Structure: Overcollateralization SEN/JUN Sequential Net SWAP cover OC Deficiency, Interest Shortfall, Realized Loss, NetWAC Carryover Cross-Collateralization (on Group I & I Notes Sen) Triggers in Enhancement Delinquency Cumulative Loss Sequential Trigger OC and Subs Test

19. Prepay, Default, Severity, Delinquency Modeling Approach Delinquency Transitions Prepay/Default Competing Risks Agency and Non-Agency Collateral: Prime Jumbo Alt-A Option ARM Subprime HELOC Fannie/Freddie FHA/VA 19

20. Prepay, Default, Timing of Default, Severity, Extension Key Inputs: Property Type, LTV, DSCR, NOI, Underwriting, MSA, Cap Rate, Refi Threshold, Call Protection, Tenant Attributes Subsystems APOLLO: NOI Generator, Scenario/Monte Carlo Simulation HELIOS: Loan Level Prepay/Default Generator Market Calibration CMBX, TRX Conversion from TRX to OAS 20

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22. Index Derivative Analytics Complete coverage in PRIMEX, ABX, CMBX, MBX/IOS/PO Calculate Market Implied Spread(OAS) based on Economic Scenarios and 3000 paths Monte Carlo Simulation Monte Carlo Simulation based risk measures in Mode Skewness (Pearson's first) Mean Sigma Var 1-dVar Risk Score Daily and Weekly Reports based on Market Close Price 22

23. Index Derivative Analytics 23

24. Prepay/Default/Severity Overview Projects monthly prepayment, delinquency, default and loss severity rates of new (at purchase) or seasoned (portfolio) loans. Takes into account of loan, borrower and collateral risk characteristics as well as macro economic variables on rates and home prices. Based on a hybrid delinquency transition rate and competing risks survivorship model where the prepay & default risk parameters are estimated from historical loan-level data. 24

25. Based on a proprietary highly non-linear non-parametric methodology with parameters estimated from non-agency loan-level data. Prepay and default are jointly estimated in a competing risk framework. 25

26. Model Inputs Collateral type (e.g., alt-a, non-conforming balance, no prepay penalty). Age, Note rate, Mortgage rates, Yield curve slope. Home price (zip/CBSA-level if used at loan-level, otherwise state- or national-level) Unemployment rate Loan size, Documentation, Occupancy, Purpose, State, FICO, LTV, Channel. Delinquency history and status (past due, bankruptcy, REO) Negative amortization limit (recast) for option ARM Modification type, size, and timing Servicer 26

27. Model Outputs Prepayment and default probabilities at each time step Delinquency rates Loss severity 27

28. Equity Valuation 28

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39. 39 Competitor I Interest Rate Models

40. 40 Competitor II Interest Rate Models

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42. KDS Interest Rate Model 42

43. Interest Rate Model Summary 43

44. Home Price Model 44

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