ETI provides a broad range of services to support our clients in various stages of a
structured transaction. Our clients include major trustees, underwriters, servicers, and
issuers of mortgage and asset-backed securities.
Pre-closing Document and Collateral Review
For each transaction, we review the deal documents, collect information on the collateral
and the bonds, and set-up the deal in our proprietary cash flow model. At this stage, we
often work closely with the trustees, issuers, servicers, underwriters, and attorneys to
clarify ambiguous definitions in the deal documents and rectify loan characteristics that
are incomplete or inaccurate.
Monthly Bond Administration Services
ETI’s bond administration services consist generally of completing the monthly payment
calculations for the certificateholders. As such, we completely replicate the monthly bond
administration process as it would be completed by the trustee, bond administrator or
issuer. This process first includes completely modeling the deal in our proprietary
MBS/ABS securitization system. We include step-down provisions, trigger events, and
loss provisions in our models, and then tie-out our results against the tables set forth in
the prospectus or selling documents. On a monthly basis, we import loan level data and
calculate the resulting bond payments. We then generally compare our calculations
against those completed by the calculation agent and reconcile any differences.
This has proven to be an extremely valuable service to our clients for the following
reasons:
structured transaction. Our clients include major trustees, underwriters, servicers, and
issuers of mortgage and asset-backed securities.
Pre-closing Document and Collateral Review
For each transaction, we review the deal documents, collect information on the collateral
and the bonds, and set-up the deal in our proprietary cash flow model. At this stage, we
often work closely with the trustees, issuers, servicers, underwriters, and attorneys to
clarify ambiguous definitions in the deal documents and rectify loan characteristics that
are incomplete or inaccurate.
Monthly Bond Administration Services
ETI’s bond administration services consist generally of completing the monthly payment
calculations for the certificateholders. As such, we completely replicate the monthly bond
administration process as it would be completed by the trustee, bond administrator or
issuer. This process first includes completely modeling the deal in our proprietary
MBS/ABS securitization system. We include step-down provisions, trigger events, and
loss provisions in our models, and then tie-out our results against the tables set forth in
the prospectus or selling documents. On a monthly basis, we import loan level data and
calculate the resulting bond payments. We then generally compare our calculations
against those completed by the calculation agent and reconcile any differences.
This has proven to be an extremely valuable service to our clients for the following
reasons:
 | Monthly Loan Level Review: Since we run the same loan level | |
| tape as the trustee, we provide a second validation check on the accuracy and completeness of that data. We consult with our clients on loan related issues, such as payoffs, liquidations, substitutions, and recoveries. |
| Bond Payment Calculation Review: The waterfall rules for each | |
| securitization are unique and often complex. We provide our clients with the comfort of being able to check their calculations against ours, generally prior to making the payment distributions each month. This assistance has proven invaluable when transactions begin to incur loan liquidations or when trigger events occur. This service helps our clients avoid the nuisance and cost of revising payments when errors are found post- distribution. |
| Auditing and Rating Agency Satisfaction: Having ETI run the | |
| monthly bond administration process in parallel has helped satisfy internal auditing and rating agency concerns. |
| Disaster Scenario Backstop: In an operations crisis, ETI can | |
| provide an invaluable backstop, as we are able to generate the bond payment calculations for our clients. |
Tax Reporting
ETI completes the tax reporting for REMIC and non-REMIC arrangements. We have
established strategic alliances with Deloitte & Touche, KPMG and Ernst & Young in order
to provide our clients with quality work, specialists, and the national resources of a Big 4
firm. ETI and our Big 4 partners often work proactively with our clients in order to help
them reach their financial objectives by reviewing the tax and payment terms of a
transaction prior to issuance.
For REMIC arrangements, ETI completes the required quarterly tax schedules (Form
1066Q), OID factor statements, and annual tax returns (Form 1066). The Big 4 firm then
reviews each return and the accompanying schedules and workpapers, and then signs
as tax preparer. For non-REMIC transactions such as grantor trusts, owner trusts, and
partnerships, ETI either completes the appropriate returns for review by our Big 4 partner
or performs some of the underlying tax calculations to enable our Big 4 partner to
complete the returns. We have also completed the tax reporting for FASITs. This
approach provides our clients with the combination of ETI’s specialized knowledge and
the resources of a Big 4 accounting firm at competitive prices.
Residual Valuation and Analysis
ETI and our Big 4 Partners answer any questions the regular or residual interest holders
may have with regard to the tax reports. Furthermore, we also help the residual owners
understand the phantom income effects of their securities or determine the value of their
residual interests by completing analyses of residual interests on an after-tax basis.
FDIC Assisted Acquisition Services
ETI is in the process of formalizing a strategic alliance with Ernst & Young LLP to provide
a software solution to help banks meet their tax reporting requirements following
acquisitions of failed institutions where FDIC assistance is involved. In these
transactions, the US tax rules require buyers to allocate basis to any acquired loan or
security that is different than the basis assigned to those loans for US GAAP purposes.
Furthermore, the US tax rules require loan-by-loan accounting for any discount and
impose limitations on bad debt deductions and mark-to-market losses. For US GAAP
accounting purposes, loans are grouped into pools and discount is accreted on a pooled
basis. Therefore, buyers of troubled institutions cannot simply "follow books" in
preparing tax returns. ETI and Ernst & Young LLP's co-developed software solution will
provide the tools necessary for banks (and other buyers) to compute tax basis loan-by-
loan, to compute market discount on a monthly, quarterly and annual basis, to compute
gains and losses when a bank receives loss guarantee payments from the FDIC, and to
compute bad debt losses and recoveries and any applicable limitations. ETI can provide
this software solution on a service basis (where reports are run monthly or quarterly) or
customize the software for clients who choose to operate the software internally.
Other Analytical Services
ETI also provides other analytical related services to our clients. We have developed
software and models to help our clients meet their reporting needs and enhance the
efficiency of their operations. We have also developed models to help with the collateral
administration of CDOs.
ETI completes the tax reporting for REMIC and non-REMIC arrangements. We have
established strategic alliances with Deloitte & Touche, KPMG and Ernst & Young in order
to provide our clients with quality work, specialists, and the national resources of a Big 4
firm. ETI and our Big 4 partners often work proactively with our clients in order to help
them reach their financial objectives by reviewing the tax and payment terms of a
transaction prior to issuance.
For REMIC arrangements, ETI completes the required quarterly tax schedules (Form
1066Q), OID factor statements, and annual tax returns (Form 1066). The Big 4 firm then
reviews each return and the accompanying schedules and workpapers, and then signs
as tax preparer. For non-REMIC transactions such as grantor trusts, owner trusts, and
partnerships, ETI either completes the appropriate returns for review by our Big 4 partner
or performs some of the underlying tax calculations to enable our Big 4 partner to
complete the returns. We have also completed the tax reporting for FASITs. This
approach provides our clients with the combination of ETI’s specialized knowledge and
the resources of a Big 4 accounting firm at competitive prices.
Residual Valuation and Analysis
ETI and our Big 4 Partners answer any questions the regular or residual interest holders
may have with regard to the tax reports. Furthermore, we also help the residual owners
understand the phantom income effects of their securities or determine the value of their
residual interests by completing analyses of residual interests on an after-tax basis.
FDIC Assisted Acquisition Services
ETI is in the process of formalizing a strategic alliance with Ernst & Young LLP to provide
a software solution to help banks meet their tax reporting requirements following
acquisitions of failed institutions where FDIC assistance is involved. In these
transactions, the US tax rules require buyers to allocate basis to any acquired loan or
security that is different than the basis assigned to those loans for US GAAP purposes.
Furthermore, the US tax rules require loan-by-loan accounting for any discount and
impose limitations on bad debt deductions and mark-to-market losses. For US GAAP
accounting purposes, loans are grouped into pools and discount is accreted on a pooled
basis. Therefore, buyers of troubled institutions cannot simply "follow books" in
preparing tax returns. ETI and Ernst & Young LLP's co-developed software solution will
provide the tools necessary for banks (and other buyers) to compute tax basis loan-by-
loan, to compute market discount on a monthly, quarterly and annual basis, to compute
gains and losses when a bank receives loss guarantee payments from the FDIC, and to
compute bad debt losses and recoveries and any applicable limitations. ETI can provide
this software solution on a service basis (where reports are run monthly or quarterly) or
customize the software for clients who choose to operate the software internally.
Other Analytical Services
ETI also provides other analytical related services to our clients. We have developed
software and models to help our clients meet their reporting needs and enhance the
efficiency of their operations. We have also developed models to help with the collateral
administration of CDOs.
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Client Services
