The final interest rate for a Mortgage Financing through a given Real Estate Note is determined through a Dutch auction.

For example, suppose a broker is seeking to finance $1 million mortgage secured by a real estate. Based on a mortgage risk profile, IRESE suggests a score of 900 out of 1000 – not a high risk loan. At this risk level a Real Estate Note might be listed at 7% for 30 years, $100 face value.

Based on investors individual risk assessment, investors can bid a risk premium spread up or down with an amount and a minimum interest rate as follows:

• $100,000 at 5.5%
• $250,000 at 5.75%
• $350,000 at 5.85%
• $450,000 at 6.25%
• $375,000 at 6.5%
• $275,000 at 6.75%
• $150,000 at 7%

In this example, the bid-to-cover ratio is 1.95; therefore, not every bidder will receive notes. Bids will be filled from the lowest yield until the entire $1 million has been financed. This auction will clear at a yield of 6.25% and all bidders will get the yield. This feature of the Dutch auction format leads to more aggressive bidding as those who in this case bid 5.85% will receive the note at the higher yield of 6.25%.