7.2 Allocation engine

Single-partner allocation

When only one co-lending partner exists, every co-lent loan is split per the fixed ratio in the Master Co-Lending Agreement (typically 80:20).

For each co-lent loan:
  partner_share_pct = 80
  originator_share_pct = 20

  partner_share_amount = loan_amount * 0.80
  originator_share_amount = loan_amount * 0.20

Multi-partner allocation

Once 2+ partners are live, the engine needs to choose which partner gets each loan. Common strategies:

Capacity-aware

Each partner has a monthly funding capacity (negotiated in the agreement). The engine tracks running disbursement per partner and allocates next loan to the partner with most remaining capacity.

For each new co-lent loan:
  eligible_partners = filter by:
    - product match
    - risk-grade match
    - geographic / sector match
    - exposure-cap remaining
    - capacity remaining for current period

  if no eligible partners → OWN BOOK or DECLINE

  selected_partner = max(eligible_partners, key=remaining_capacity_pct)
  ratio = agreement(selected_partner).ratio

Round-robin (with capacity check)

Simple alternative — cycle through eligible partners. Risk: partner with lower appetite gets disproportionate share if not filtered.

Priority-driven

Each partner has a priority score (cost-of-funds-equivalent, strategic preference). Higher priority first; fall through to lower as capacity exhausts.

Capacity + priority hybrid (recommended)

eligible_partners = filter as above
sort by (priority_score DESC, remaining_capacity_pct DESC)
selected_partner = first

Waterfall (repayment allocation)

When a repayment lands, it splits between lenders per agreement. Typical waterfall:

Order	Component	Allocation to partner	Allocation to originator
1	Penal charges	per ratio (or 100% to originator per agreement)	per ratio
2	Late fees	per ratio	per ratio
3	Servicing fees	usually 100% to originator (as servicing income)	rest if any
4	Interest	per ratio	per ratio
5	Principal	per ratio	per ratio

Some agreements specify “interest first, partner first” sequencing for partner protection in stress. Pre-agreed and documented.

Allocation versioning

When the partner ratio changes (mid-relationship adjustment), allocate new loans at the new ratio; existing loans continue at their original ratio. The system records allocation_version on each loan to make the rule explicit.

Co-lending decision tree

                    Application
                          │
                          ▼
                    [Engine: run originator's policy]
                          │
                          ▼
               originator_decision = APPROVE / DECLINE / REFER
                          │
                          ▼
                    [Engine: run partner(s) policy]
                          │
                          ▼
       For each partner: partner_decision = APPROVE / DECLINE
                          │
                          ▼
            ┌──────────────────────────────────────────────┐
            │ Combined outcomes:                           │
            ├──────────────────────────────────────────────┤
            │ originator APPROVE + ≥1 partner APPROVE      │ → CO-LEND
            │ originator APPROVE + all partners DECLINE    │ → OWN BOOK
            │ originator REFER + any → manual              │ → REFER
            │ originator DECLINE                           │ → DECLINE
            └──────────────────────────────────────────────┘
                          │
                          ▼ (CO-LEND path)
            [Allocator: choose partner]
                          │
                          ▼
            [Allocator: compute split]
                          │
                          ▼
            [Booker: book on both lenders]
                          │
                          ▼
            [Disburser: escrow funding + disbursement]

Co-lending and DLG combined

If the LSP / originator provides DLG to a third-party RE (rare for inter-RE co-lending; common for LSP arrangements):

• DLG cap of 5% of the LSP’s portfolio with this RE.
• DLG monitored separately — see 7.5.
• DLG does NOT change allocation logic — it’s a contractual side arrangement.

Failure modes

• Partner approval API down at submission time → queue with retry; SLA tracked; if partner cannot approve in window, fall to own book or REFER.
• Allocation exceeded partner’s cap mid-batch → next loans go to fallback partner or own book.
• Originator policy approves but no eligible partner → own book if allowed; else REFER for manual review.

Operational state machine

LoanApplication state machine extension for co-lending:

APPLIED
  → UNDERWRITING
  → DECISION_AVAILABLE (with originator outcome + per-partner outcomes)
  → ALLOCATED (partner chosen, ratio set)
  → AGREEMENT_GENERATED (co-lending disclosure embedded)
  → AGREEMENT_EXECUTED
  → BOOKING_INSTRUCTED (partner notified)
  → PARTNER_BOOKED (ack received)
  → ESCROW_FUNDED
  → DISBURSED
  → ACTIVE (LMS)
  → ... (regular LMS lifecycle, with share-level postings)