SYSTEM AND METHOD OF ASSIGNING RESIDENTIAL HOME PRICE VOLATILITY

• US 20110218826A1
• Filed: 02/02/2011
• Published: 09/08/2011
• Est. Priority Date: 02/19/2010
• Status: Abandoned Application

• Current Assignee: Ryan Birtel
• Original Assignee: Lighthouse Group International, LLC
• Inventors: STARNES, JUSTIN, BIRTEL, RYAN, ANTHONY, MAX, MCCOLLUM, FRANK
• Application Number:
  US13/019,403
• Publication Number:
  US 20110218826A1
• Time in Patent Office: Days
• US Class Current: 705/4
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/08 Insurance
• CPC Class Codes: G06Q 50/16 Real estate

Abstract

A system and method for assigning loss of residential home value, due to systemic risks, through the creation and distribution of a financial instrument such as Home Value Assurance™ (“HVA™”). HVA™ is a process by which a capital market investor takes risk of a down-turn in national or regional real estate markets through a fully-funded index-linked note, while simultaneously providing contractual protection to consumers and institutions against drops in home prices due to the systemic pressures that drive home price index levels. The product may be sold to those who are exposed to the risk of a systemic downturn in residential home values, i.e. a singular home owner, an institution owning a portfolio of loans secured by liens on residential real property, etc.

Claims

1. A custodial server system for providing home value assurance (HVA), comprising:

at least one custodial server configured to;

at an HVA contract initiation, receive on behalf of an HVA contract owner a full-term, fully-funded contract premium payment corresponding to a value of the HVA contract owner'"'"'s home;

at the HVA contract initiation, receive from an HVA note investor a fully-funded investor principal corresponding to the value of the HVA contact owner'"'"'s home;

after the HVA contract initiation, provide to said HVA note investor periodic interest;

at HVA contract maturity, provide to said HVA contract owner a value corresponding to a change in one or more predetermined real estate indices; and

at HVA contract maturity, provide to said HVA note investor a value corresponding to the change in one or more predetermined real estate indices.

2. The custodial server system according to claim 1, wherein the periodic interest is provided via trust account held by a custodian.

3. The custodial server system according to claim 1, wherein, at HVA contract maturity, the HVA note investor is provided a value corresponding to the investor principal net amounts paid to said HVA contract owner at HVA contract maturity.

4. The custodial server system according to claim 1, wherein the contract premium payment corresponds to a present value of (i) substantially all upfront and ongoing transaction expenses associated with the HVA contract, and (ii) the note investor'"'"'s yield margin to a collateral securities rate of return.

5. The custodial server system according to claim 3, wherein the collateral securities rate of return corresponds to U.S. Treasury collateral securities.

6. The custodial server system according to claim 1, wherein the contract premium payment corresponds directly to the value of the HVA contact owner'"'"'s home.

7. The custodial server system according to claim 1, wherein the contract premium payment corresponds indirectly to the value of the HVA contact owner'"'"'s home.

8. The custodial server system according to claim 1, wherein the full term of the HVA contract is for a fixed, predetermined period of time.

9. The custodial server system according to claim 1, wherein the investor principal corresponds to a nominal amount of protection required by one or more HVA contract owners against declines in the one or more predetermined real estate indices.

10. The custodial server system according to claim 1, wherein the at least one custodial server is also configured to, after HVA contract initiation and before HVA contract maturity, investing (i) the contract premium payments, net expenses, and (ii) the investor principal, in collateral securities.

11. The custodial server system according to claim 9, wherein the collateral securities comprise at least one of:

U.S. Treasury obligations or other government securities.

12. The custodial server system according to claim 9, wherein the collateral securities'"'"' payment stream(s) match those required contemporaneously by the note investor and the contract owner, in aggregate, over the duration of the HVA contract.

13. The custodial server system according to claim 1, wherein the at least one custodial server is also configured to, after HVA contract initiation and before HVA contract maturity, provide to further transaction parties periodic transactional fees.

14. The custodial server system according to claim 12, wherein the further transaction parties comprise at least one of (i) the custodian, and (ii) one or more licensing agents.

15. The custodial server system according to claim 1, wherein, at HVA contract maturity, the HVA contract owner is provided a value corresponding to a drop in a price index of the one or more predetermined real estate indices, between the contract initiation and the contract maturity, and for predetermined levels of price index declines.

16. The custodial server system according to claim 1, wherein the one or more predetermined real estate indices comprises a real estate index having substantially no inflation component.

17. The custodial server system according to claim 1, wherein the one or more predetermined real estate indices comprises a paired-sale index.

18. The custodial server system according to claim 1, wherein one or more predetermined real estate indices comprises the Case-Shiller Index.

19. The custodial server system according to claim 1, wherein the fully-funded contract premium payment received from the HVA contract owner corresponds to a cash value required to cover HVA note investor yield requirements.

20. The custodial server system according to claim 18, wherein the requirements comprise at least one of:

upfront transaction expenses;

ongoing transaction expenses; and

/or licensing fees.

21. The custodial server system according to claim 1, wherein the fully-funded investor principal received from the HVA note investor corresponds to a cash value required to cover the potential liability of HVA contract losses.

22. The custodial server system according to claim 21, wherein the HVA contract losses comprise at least one of:

HVA Protection Amount or HVA Coverage.

23. The custodial server system according to claim 1, wherein the at least one custodial server provides to the HVA note investor an HVA financial instrument having a potential value at maturity corresponding the HVA contract'"'"'s maximum protection amount.

24. The custodial server system according to claim 22, wherein the HVA financial instrument comprises real estate value risk and substantially no counterparty-credit risk.

25. A method for providing home value assurance (HVA), comprising:

providing at least one custodial server configured to perform the steps;

at an HVA contract initiation, a custodian who holds the trust account receives on behalf of an HVA contract owner a full-term, fully-funded contract premium payment corresponding to a value of the HVA contract owner'"'"'s desired protection coverage;

at the HVA contract initiation, a custodian who holds the trust account receives from an HVA note investor a fully-funded investor principal corresponding to the value of the HVA contract owner'"'"'s desired protection coverage and other predefined parameters;

after the HVA contract initiation, a custodian who holds the trust account provides to said HVA note investor predefined contractual payments;

at HVA contract maturity, a custodian who holds the trust account provides to said HVA contract owner a value corresponding to a change according to the predefined contract parameters in one or more predetermined real estate indices; and

at HVA contract maturity, provides to said HVA note investor a value corresponding to the change in one or more predetermined real estate indices.

26. The method according to claim 25, wherein the predefined contractual payments include periodic interest.

27. The method according to claim 25, wherein the other predefined parameters comprise at least one of term and index.

28. A method for creating and trading a fully-funded home-value security contract for real estate property, comprising:

one or more note investors selling a fully-funded home-value security contract to a contract owner who is seeking protection from a decrease in real estate value;

a custodian holding in a trust account and disbursing funds between one or more contract owners and the one or more note investors, wherein fully-funded upfront premium payments come from the one or more contract note owners, either directly or indirectly; and

an exchange marketplace trading the home-value security contracts.

29. The method of claim 28, wherein only real estate value risk is sold to the one or more contract investors, and not counterparty credit risk.

30. The method of claim 28, wherein home-value security contract parameters are configured such that the contract price is at or below a predetermined budget amount.

31. The method of claim 28, wherein a decrease in real estate value is determined using the Case-Shiller Index.

32. The method of claim 28, wherein the contract owner is also the direct or indirect owner of the real estate.

33. The method of claim 28, wherein the note owner is a party who has purchased a home-value security note either directly or indirectly from the owner of the real estate.

34. The method of claim 28, wherein the Contract Owner purchases a home-value contract either directly or indirectly from a Note Investor.

35. The method of claim 28, wherein the home-value security contract has a fixed maturity date.

36. The method of claim 28, wherein the real estate property comprises residential real estate.

37. A method for providing a real estate financial instrument, comprising the steps of:

accessing at least one real estate index that provides one or more values of one or more real estate properties;

establishing a real estate instrument having a first value at a first time and another value at a fixed expiration date of said real estate instrument;

defining a cash-settled payout of said real estate instrument, based upon a change in the value of the index between the first time and the fixed maturity date;

indentifying a seller of the real estate instrument;

indentifying a buyer of the real estate instrument;

marketing the real estate instrument to the seller and the buyer;

selling the real estate instrument through a distribution channel;

clearing and executing the transaction for the real estate instrument through a marketplace structure; and

settling the real estate instrument by making the cash-settled payout to the buyer based upon any change that has occurred in at least one real estate index between two dates, the first of which is on or around the transaction issuance date, the second of which is on or around the transaction maturity date.