HOME APPRECIATION PARTICIPATION NOTES

• US 20100005019A1
• Filed: 05/07/2009
• Published: 01/07/2010
• Est. Priority Date: 07/01/2008
• Status: Active Grant

• Current Assignee: Habitat Economics LLC
• Original Assignee: Habitat Economics LLC
• Inventors: Yang, Tyler T., Cassidy, Henry J.
• Granted Patent: US 8,712,908 B2
• Time in Patent Office: Days
• US Class Current: 705/35
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A method, computer program product and computer system for issuing and servicing a Home Appreciation Participation Note (HAPN) for a real estate property, which includes issuing an Participation Contract (PC) for the property to PC investors, where the PC has a value derived from a sharing formula based on a change of a proxy for the value of the property relative to an initial value of the proxy, and the proxy is independent of an actual current condition of the property (after the initial valuation); and issuing a HAPN Bond for the property to HAPN Bond investors, where the HAPN Bond has an initial value set as a sum of an amount paid for the PC and an amount paid for the HAPN Bond. Both the PC and the HAPN Bond represent claims on the property, and the HAPN Bond is a performance bond for the PC if the value of the PC is negative.

Claims

1. A computer-implemented method for issuing and servicing a home appreciation participation note (HAPN) for a real estate property, comprising:

obtaining a proxy for a real estate property by running an automated valuation model (AVM) on a computer, the proxy of a time corresponding with a value of the real estate property at the time, and being independent of an actual condition of the real estate property at the time after an initial time;

issuing a participation contract (PC) for the real estate property to PC investors;

specifying in the PC the proxy and a pre-specified set of sharing formulae, the PC having a value at the time based on the proxy and the pre-specified set of sharing formulae; and

issuing a HAPN Bond for the real estate property to HAPN Bond investors, the HAPN Bond having an initial value based on a sum of an amount paid for both the PC and the HAPN Bond;

wherein both the PC and the HAPN Bond represent claims on the real estate property, and the HAPN Bond is a performance bond for the PC if the value of the PC is negative.

2. The method of claim 1, wherein the obtaining includes obtaining the proxy by running a combination of AVMs on the computer.

3. The method of claim 1, further comprising observing a select value of the PC and a select payoff amount of the HAPN Bond at a select time for monitoring, reporting or settlement.

4. The method of claim 3, wherein the select time is a current time, and the observing comprises calculating a current intrinsic value of the PC.

5. The method of claim 4, wherein the calculating includes:

obtaining an initial value of the proxy of an initial time;

obtaining a current value of the proxy of the current time; and

calculating the current value of the PC using the pre-specified set of sharing formulae based on a difference between the current value and the initial value of the proxy divided by the initial value of the proxy.

6. The method of claim 5, wherein the obtaining an initial value includes using one of an initial price of the real estate property and an appraised value of the real estate property as the initial value of the proxy, and obtaining the current value includes using an estimate from the AVM as the current value of the proxy.

7. The method of claim 5, wherein the obtaining an initial value and the obtaining a current value of the proxy include using initial attributes of the real estate property in the AVM to obtain the initial value and the current value of the proxy.

8. The method of claim 7, further comprising:

pre-storing the initial attributes in at least one of a read-only memory of a computer and a static storage device;

loading the pre-stored initial attributes into a dynamic memory;

accessing the dynamic memory with a CPU to fetch the initial attributes; and

calculating with the CPU one of the initial value and the current value of the proxy using the fetched initial attributes.

9. The method of claim 5, wherein the obtaining an initial value and the obtaining a current value include using current attributes of the real estate property in the AVM to obtain the initial value and the current value of the proxy.

10. The method of claim 9, further comprising:

loading the current attributes into a dynamic memory of a computer;

accessing the dynamic memory with a CPU to fetch the current attributes; and

calculating one of the initial value and the current value of the proxy with the CPU using the fetched current attributes.

11. The method of claim 4, wherein the select time is a time of a settlement of the HAPN, and the observing includes calculating a settlement value of the PC and a settlement payoff amount of the HAPN Bond.

12. The method of claim 11, further comprising calculating a cash flow at the settlement of the HAPN.

13. The method of claim 12, wherein the calculating a cash flow includes:

pre-storing the pre-specified set of sharing formulae in at least one of a read-only memory of a computer and a static storage device;

loading the pre-stored set of sharing formulae into a dynamic memory;

accessing the dynamic memory with a CPU to fetch the set of sharing formulae; and

calculating with the CPU the cash flow using the fetched set of sharing formulae.

14. The method of claim 11, further comprising, before the calculating, specifying a condition to trigger the settlement in a HAPN contract.

15. The method of claim 14, wherein the condition includes at least one of a change in an ownership of the real estate property, a default on the terms of the HAPN contract, an option of an issuer with a minimum payment of the nominal value of the HAPN Bond, an option of an issuer after a specified period of time including a pre-specified prepayment penalty, a prepayment of other mortgages on the real estate property, and a fixed maturity.

16. The method of claim 14, further comprising specifying in the HAPN contract that at least one of the PC and the HAPN Bond investors has the option not to allow the settlement if the real estate property is not sold.

17. The method of claim 1, further comprising:

monitoring status of the PC and the HAPN Bond; and

generating a status report for at least one of an owner of the real estate property, the PC investors and the HAPN Bond investors.

18. The method of claim 17, wherein the status report includes periodic status reports.

19. The method of claim 1, wherein the HAPN Bond has a non-negative accrual coupon and a non-negative payment coupon.

20. The method of claim 1, wherein the HAPN Bond has a zero accrual coupon and a zero payment coupon.

21. The method of claim 1, wherein the PC and the HAPN Bond are held by a same set of investors.

22. The method of claim 1, wherein at least one of the HAPN Bond and the PC are pooled and securitized.

23. The method of claim 1, further comprising:

calculating an imputed settlement value of the real estate property using the PC;

deducting an appraised value of improvements made by an owner of the real estate property during a duration of a HAPN contract from the imputed settlement value; and

using the deducted value as a settlement value of the real estate property.

24. The method of claim 1, further comprising specifying in the PC that, when a settlement value of the proxy differs from an actual selling price of the estate real property by an amount specified in PC documents, a payoff of the PC is modified as specified in the PC documents.

25. The method of claim 1, wherein the PC has a first lien position, the HAPN Bond has a second lien position, and a traditional mortgage on the real estate property has a third lien position

26. The method of claim 1, wherein a traditional mortgage on the real estate property has a first lien position, the PC has a second lien position, and the HAPN Bond has a third lien position.

27. The method of claim 1, wherein the PC and the HAPN Bond are combined into one mortgage along with the traditional mortgage, and the combined form has a first lien position.

28. A computer-implemented method for issuing and servicing a home appreciation participation note (HAPN) for a real estate property, comprising:

issuing a participation contract (PC) for the real estate property to PC investors;

specifying in the PC a proxy and a pre-specified set of sharing formulae, the PC having a value at a time based on the proxy and the pre-specified set of sharing formulae, the proxy corresponding with a value of the real estate property at the time, and being independent of an actual condition of the real estate property at the time after an initial time; and

issuing a HAPN Bond for the real estate property to HAPN Bond investors, the HAPN Bond having an initial value based on a sum of an amount paid for both the PC and the HAPN Bond;

wherein both the PC and the HAPN Bond represent claims on the real estate property, and the HAPN Bond is a performance bond for the PC if the value of the PC is negative.

29. The method of claim 28, wherein the specifying includes obtaining the proxy using a desk valuation.

30. The method of claim 29, wherein the using a desk valuation includes using one of a desk review, an automated valuation model (AVM), and a combination of AVMs.

31. The method of claim 28, wherein the specifying includes using as the proxy one of an index of area house prices and a combination of indexes of area house prices.

32. The method of claim 28, further comprising observing a select value of the PC and a select payoff amount of the HAPN Bond at a select time for monitoring, reporting or settlement.

33. The method of claim 32, wherein the select time is a current time, and the observing comprises calculating a current intrinsic value of the PC.

34. The method of claim 33, wherein the calculating includes:

obtaining an initial value of the proxy of an initial time;

obtaining a current value of the proxy of the current time; and

calculating the current value of the PC using the pre-specified set of sharing formulae based on a difference between the current value and the initial value of the proxy divided by the initial value of the proxy.

35. The method of claim 34, wherein the obtaining an initial value includes using one of an initial price of the real estate property, an appraised value of the real estate property and an estimate from an AVM as the initial value of the proxy.

36. The method of claim 34, wherein the specifying includes using an AVM to obtain the proxy, and the obtaining an initial value and the obtaining a current value of the proxy include using initial attributes of the real estate property in the AVM to obtain the initial value and the current value of the proxy.

37. The method of claim 36, further comprising:

pre-storing the initial attributes in at least one of a read-only memory of a computer and a static storage device;

loading the pre-stored initial attributes into a dynamic memory;

accessing the dynamic memory with a CPU to fetch the initial attributes; and

calculating with the CPU one of the initial value and the current value of the proxy using the fetched initial attributes.

38. The method of claim 34, wherein the specifying includes using an AVM to obtain the proxy, and the obtaining an initial value and the obtaining a current value include using current attributes of the real estate property in the AVM to obtain the initial value and the current value of the proxy.

39. The method of claim 38, further comprising:

loading the current attributes into a dynamic memory of a computer;

accessing the dynamic memory with a CPU to fetch the current attributes; and

calculating one of the initial value and the current value of the proxy with the CPU using the fetched current attributes.

40. The method of claim 32, wherein the select time is a time of a settlement of the HAPN, and the observing includes calculating a settlement value of the PC and a settlement payoff amount of the HAPN Bond.

41. The method of claim 40, further comprising calculating a cash flow at the settlement of the HAPN.

42. The method of claim 41, wherein the calculating a cash flow includes:

pre-storing the pre-specified set of sharing formulae in at least one of a read-only memory of a computer and a static storage device;

loading the pre-stored set of sharing formulae into a dynamic memory;

accessing the dynamic memory with a CPU to fetch the set of sharing formulae; and

calculating with the CPU the cash flow using the fetched set of sharing formulae.

43. The method of claim 40, further comprising, before the calculating, specifying a condition to trigger the settlement in a HAPN contract.

44. The method of claim 43, wherein the condition includes at least one of a change in an ownership of the real estate property, a default on the terms of the HAPN contract, an option of an issuer with a minimum payment of the nominal value of the HAPN Bond, an option of an issuer after a specified period of time including a pre-specified prepayment penalty, a prepayment of other mortgages on the real estate property, and a fixed maturity.

45. The method of claim 43, further comprising specifying in the HAPN contract that at least one of the PC and the HAPN Bond investors has the option not to allow the settlement if the real estate property is not sold.

46. The method of claim 28, further comprising:

monitoring status of the PC and the HAPN Bond; and

generating a status report for at least one of an owner of the real estate property, the PC investors and the HAPN Bond investors.

47. The method of claim 46, wherein the status report includes periodic status reports.

48. The method of claim 46, wherein the status report is based on an AVM when a settlement value of the PC is based on a desk appraisal.

49. The method of claim 28, wherein the HAPN Bond has a non-negative accrual coupon and a non-negative payment coupon.

50. The method of claim 28, wherein the HAPN Bond has a zero accrual coupon and a zero payment coupon.

51. The method of claim 28, wherein the PC and the HAPN Bond are held by a same set of investors.

52. The method of claim 28, wherein at least one of the HAPN Bond and the PC are pooled and securitized.

53. The method of claim 28, further comprising:

calculating an imputed settlement value of the real estate property using the PC;

deducting an appraised value of improvements made by an owner of the real estate property during a duration of a HAPN contract from the imputed settlement value; and

using the deducted value as a settlement value of the real estate property.

54. The method of claim 28, further comprising specifying in the PC that, when a settlement value of the proxy differs from an actual selling price of the estate real property by an amount specified in PC documents, a payoff of the PC is modified as specified in the PC documents.

55. The method of claim 28, wherein the PC has a first lien position, the HAPN Bond has a second lien position, and a traditional mortgage on the real estate property has a third lien position.

56. The method of claim 28, wherein a traditional mortgage on the real estate property has a first lien position, the PC has a second lien position, and the HAPN Bond has a third lien position.

57. The method of claim 28, wherein the PC and the HAPN Bond are combined into one mortgage along with the traditional mortgage, and the combined form has a first lien position.

58. A computer program product for issuing and servicing a home appreciation participation note (HAPN) for a real estate property, the computer program product comprising:

a computer usable medium having computer usable program code embodied therewith, the computer usable program code comprising;

instructions to issue a participation contract (PC) for the real estate property to PC investors;

instructions to specify in the PC a proxy and a pre-specified set of sharing formulae, the PC having a value at a time based on the proxy and the pre-specified set of sharing formulae, the proxy corresponding with a value of the real estate property at the time, and being independent of an actual condition of the real estate property at the time after an initial time; and

instructions to issue a HAPN Bond for the real estate property to HAPN Bond investors, the HAPN Bond having an initial value based on a sum of an amount paid for both the PC and the HAPN Bond;

wherein both the PC and the HAPN Bond represent claims on the real estate property, and the HAPN Bond is a performance bond for the PC if the value of the PC is negative.

59. A computer system comprising:

a processor;

a memory operatively coupled with the processor;

a storage device operatively coupled with the processor and the memory; and

a computer program product for issuing and servicing a home appreciation participation note (HAPN) for a real estate property, the computer program product comprising;

a computer usable medium having computer usable program code embodied therewith, the computer usable program code comprising;

instructions to issue a participation contract (PC) for the real estate property to PC investors;

instructions to specify in the PC a proxy and a pre-specified set of sharing formulae, the PC having a value at a time based on the proxy and the pre-specified set of sharing formulae, the proxy corresponding with a value of the real estate property at the time, and being independent of an actual condition of the real estate property at the time after an initial time; and

instructions to issue a HAPN Bond for the real estate property to HAPN Bond investors, the HAPN Bond having an initial value based on a sum of an amount paid for the PC and an amount paid for the HAPN Bond;

wherein both the PC and the HAPN Bond represent claims on the real estate property, and the HAPN Bond is a performance bond for the PC if the value of the PC is negative.