2015-08-13 Technical Meeting notes

Date

13 Aug 2015

Attendees

Decisions:

Discussion items:

20150813 FIBO-Loans FCT Technical meeting

Michael has worked on the diagrams to incorporate tehcnical meeting comments from last week as well as business meeting comments from this morning.

Michael Uschold shows slides.

The big arrows indicate superclass/class relationships. See the key for legend to the meaning of colors. Gray is categories of things. There were changes made on the contract terms slide -- do show an updated relationship between the contract term and document. Might there be an electronic form of a document as well as a paper one?

Liju Fan: What is the relationship(s) that distinguishes Contract from LoanContract?

The current framework is intended to reflect formats in general and not reflecting all of the separate media types that may be used. In Legacy FIBO, there is a thing called a "Common Information Construct" that is used to detail such things. In Legacy FIBO, there is a concept that is reflected alongside the contract that describes the commitment.

Liju Fan: Are we obligated to abide by the legacy FIBO? This may be different from different points of record, or a delineation of "point of business record" or "system of record" distinctions. Jiju, we use it as a guide but can definitely make alterations.

MISMO handles data and documents, and might be a good "side show" to see how one standard represents data and documents in tandem. Contracts and documents constructs would fall under the Foundations purview.

Action: Mike Bennett to add this to his list of topics.

A Document as evidence versus the substance of the terms are two different concepts, each with their own value. The purple boxes on the contract terms slide indicate references to the substance of the contract or agreement; the white bubble indicates the evidence of the agreement--the "paper" agreement. On Obligations slide, has been adjusted since last week to show interest versus principal payment streams. Used "giver" and "getter" terms as generics. That will be made to align with upper FIBO ontologies. Just note -- forgiveness of principal can occur, or be a term of the contract, or some other mechanism that causes the commitment to cease to exist. So Obligation to Repay can be non-mandatory. Forgiveness can have "Rules" for how to drive adjustment to the obligation. Perpetual notes can also be used in Germany or Switzerland.

Action: Jeff to find info on perpetual notes.

Jeff Braswell may be able to provide some examples or material regarding perpetual notes. Identification of parts of the obligation--making them all parallel elements might make things confusing. Sometimes the obligations have a hierarchy within the contract construct. "building blocks"

What is the difference between an arrangement and a commitment?

FIBO says that a commitment is a specific thing between two parties--the actual swap or transaction (both sides). An Obligation reflects one side of the transaction. A "Right" versus "Obligation" -- one person's right is the other's obligation. An obligation to deliver versus a right to receive, for example.

Are each obligations commitments? The commitment is the "Thing." Each obligation is exchanged (a bundle) to become a commitment. This is a clear way to establish credit risk, or payment flows. Funding and Collateral slideLoan Contracts may have a CollateralAgreement. The Mortgage is actually the collateral agreement.

We should be careful when using the word Mortgage. Mortgage is a common term that obscures the fact that we have a loan. Someone funds you in return from some set of commitments. If you default, your house belongs to the mortgage holder. A loan can be secured and guaranteed.

Credit enhancement reduces the credit exposure in exchange for a payment stream.

Would real estate loan work as a label? It might if we can distinguish from there commercial, residential, REIT, etc.

Mike Bennett: There are some terms from WG11 (modeled for securities) relating to credit enhancement, many of which may be applicable to loan. I've looked but so far only found the Guaranties model, with about half a dozen kinds of guaranty.

Max: Mortgage and collateral agreement are synonymous. The documents can vary by jurisdiction--a mortgage versus a deed, for example can be both collateral agreements.

Mike Bennett: Or a Lien. A Deed is a one sided contract. The ontology should be self defining. The naming conventions used by different jurisdictions would be considered labels.

Look to distinguish commercial versus residential mortgages.....the collateral and arrangements look very different, Project financing is a complicated sort of lending agreement used in commercial lending--related to the credit facility and the fulfillment of the loan.

Mike Bennett: Project Finance is more like a Committed CreditFacility, with the draw-downs being the actual "Loan" or Loan Drawdown (corresponding to the definition we have for Loan in these slides). Will need a deep dive on commercial arrangements to distinguish between terms that would be used in one circumstance versus the other.

Liju Fan: Do we have text definitions for all terms?

GREAT IDEA from MU just now to do a mock FIBO-Loans release as practice for OMG submission.

Cooper, James Dean: In underwriting, there is the concept of the 3 C's (or 4 C's) - Credit, Collateral, Capacity (and Capital). You have Credit and Collateral covered, may need more on Capacity.

Action items

Tahoe Blue Jeff to find info on perpetual notes
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Mike Bennett Mike Bennett to add this to his list of topics. Unable to locate Jira server for this macro. It may be due to Application Link configuration.