Method and apparatus for determining an optimal investment plan for distressed residential real estate loans

• US 5,930,775 A
• Filed: 01/14/1997
• Issued: 07/27/1999
• Est. Priority Date: 01/14/1997
• Status: Expired due to Term

• Current Assignee: Freddie Mac
• Original Assignee: Freddie Mac
• Inventors: McCauley, John J., Lewis, Nicole, Vella, John A., Botkin, Elizabeth M., Comeau, Phillip E.
• Primary Examiner(s): MacDonald, Allen R.
• Assistant Examiner(s): Patel, Jagdish
• Application Number:
  US08/782,643
• Time in Patent Office: 924 Days
• Field of Search: 705/38, 705/35, 705/36
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

Methods, system, and article of manufacture are provided for processing real estate loans based on loan data including personal data relating to a borrower, financial information relating to the borrower'"'"'s financial position, and loan conditions including a loan term and information on the corresponding real estate, related to a real estate loan. Such methods, system, and article of manufacture generate a comparison model including an ability-to-pay rate reflecting an interest rate on the loan reflecting the borrower'"'"'s ability to repay a loan having the loan conditions, a default rate reflecting an interest rate realizable if the loan is foreclosed and a new loan secured by the real estate originated, and a minimum rate reflecting an interest rate realizable if proceeds from a sale of the real estate before expiration of the loan term are determined to be acceptable and a new loan secured by the real estate originated. Using a relationship determined from the ability-to-pay rate, the default rate, and the minimum rate of the comparison model, as well as a predetermined current return rate, the methods, system, and article of manufacture select an acceptable return rate for the loan.

Claims

1. A method for selecting a business plan for nonperforming real estate loans comprising the steps, performed by a processor, of:

(a) receiving loan data including personal data relating to a borrower, financial information relating to the borrower'"'"'s financial position, an unpaid loan amount, and loan conditions including a loan term, a loan amount, and an interest rate, relating to a real estate;

(b) analyzing the borrower'"'"'s financial information to determine an ability-to-pay rate reflecting an interest rate indicating the borrower'"'"'s ability to repay a loan having the loan conditions;

(c) comparing the ability-to-pay rate and the interest rate of the loan conditions to determine whether the borrower can repay the unpaid loan amount;

(d) generating a repayment plan reflecting the ability to pay rate and the loan conditions if the comparison indicates that the borrower can repay the unpaid loan amount.

2. The method of claim 1, further comprising steps performed, when the comparison of the ability-to-pay rate and the interest rate of the loan conditions indicates that the borrow cannot repay the unpaid loan amount, of:

(e) determining from the loan data a default rate reflecting an interest rate realizable if the loan is foreclosed and a new loan secured by the real estate originated;

(f) determining from the requested loan data a minimum rate reflecting an interest rate realizable if proceeds from a sale of the real estate before expiration of the loan term are determined to be acceptable and a new loan secured by the real estate originated;

(g) generating in the processor a comparison model from the borrower'"'"'s financial information, the comparison model including the ability-to-pay rate, the default rate, and the minimum rate;

(h) analyzing the comparison model to determine a relationship among the ability-to-pay rate, the default rate, the minimum rate, and a predetermined current return rate;

(i) extracting lender preferences from a constraints database; and

(j) selecting an acceptable return rate for the loan based on the determined relationship, the lender preferences, and the personal data.

3. An apparatus for selecting a business plan for nonperforming real estate loans comprising:

(a) means for receiving loan data including personal data relating to a borrower, financial information relating to the borrower'"'"'s financial position, an unpaid loan amount, and loan conditions including a loan term, a loan amount, and an interest rate, relating to a real estate;

(b) means for analyzing the borrower'"'"'s financial information to determine an ability-to-pay rate reflecting an interest rate indicating the borrower'"'"'s ability to repay a loan having the loan conditions;

(c) means for comparing the ability-to-pay rate and the interest rate of the loan conditions to determine whether the borrower can repay the unpaid loan amount;

(d) means for generating a repayment plan reflecting the ability to pay rate and the loan conditions if the comparison indicates that the borrow can repay the unpaid loan amount.

4. The apparatus of claim 3, further comprising:

processor means operative when the comparison of the ability-to-pay rate and the interest rate of the loan conditions indicates that the borrow cannot repay the unpaid loan amount, including;

means for determining from the loan data a default rate reflecting an interest rate realizable if the loan is foreclosed and a new loan secured by the real estate originated;

means for determining from the requested loan data a minimum rate reflecting an interest rate realizable if proceeds from a sale of the real estate before expiration of the loan term are determined to be acceptable and a new loan secured by the real estate originated;

means for generating in the processor a comparison model from the borrower'"'"'s financial information, the comparison model including the ability-to-pay rate, the default rate, and the minimum rate;

means for analyzing the comparison model to determine a relationship among the ability-to-pay rate, the default rate, the minimum rate, and a predetermined current return rate;

means for extracting lender preferences from a constraints database; and

means for selecting an acceptable return rate for the loan based on the determined relationship, the lender preferences, and the personal data.

5. A method for determining acceptable interest rates for real estate loans comprising the steps, performed by a processor, of:

(a) receiving loan data, including personal data relating to a borrower, financial information relating to the borrower'"'"'s financial position, and loan conditions including a loan term, information on the corresponding real estate, a loan amount, and a loan rate, related to a real estate loan;

(b) analyzing the borrower'"'"'s financial information to determine an ability-to-pay rate reflecting an interest rate on the loan reflecting the borrower'"'"'s ability to repay a loan having the loan conditions;

(c) determining from the loan data a default rate reflecting an interest rate realizable if the loan is foreclosed and a new loan secured by the real estate originated;

(d) determining from the received loan data a minimum rate reflecting an interest rate realizable if proceeds from a sale of the real estate before expiration of the loan term are determined to be acceptable and a new loan secured by the real estate originated;

(e) generating a comparison model from the borrower'"'"'s financial information, the comparison model including the ability-to-pay rate, the default rate, and the minimum rate;

(f) analyzing the comparison model to determine a relationship among the ability-to-pay rate, the default rate, the minimum rate, and a predetermined current return rate;

(g) extracting lender preferences from a constraints database;

(h) selecting an acceptable return rate for the loan based on the relationship, the lender preferences, and the personal data; and

(i) modifying the loan conditions to provide the acceptable return rate.

6. The method of claim 5, wherein the modifying step includes the substep of:

iteratively performing steps (b) through (h) with the modified loan conditions.

7. An apparatus for determining acceptable interest rates for real estate loans comprising:

(a) means for receiving loan data, including personal data relating to a borrower, financial information relating to the borrower'"'"'s financial position, and loan conditions including a loan term, information on the corresponding real estate, a loan amount, and a loan rate, related to a real estate loan;

(b) means for analyzing the borrower'"'"'s financial information to determine an ability-to-pay rate reflecting an interest rate on the loan reflecting the borrower'"'"'s ability to repay a loan having the loan conditions;

(c) means for determining from the loan data a default rate reflecting an interest rate realizable if the loan is foreclosed and a new loan secured by the real estate originated;

(d) means for determining from the received loan data a minimum rate reflecting an interest rate realizable if proceeds from a sale of the real estate before expiration of the loan term are determined to be acceptable and a new loan secured by the real estate originated;

(e) means for generating a comparison model from the borrower'"'"'s financial information, the comparison model including the ability-to-pay rate, the default rate, and the minimum rate;

(f) means for analyzing the comparison model to determine a relationship among the ability-to-pay rate, the default rate, the minimum rate, and a predetermined current return rate;

(g) means for extracting lender preferences from a constraints database;

(h) means for selecting an acceptable return rate for the loan based on the relationship, the lender preferences, and the personal data; and

(i) means for modifying the loan conditions to provide the acceptable return rate.