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

• US 6,067,533 A
• Filed: 01/26/1999
• Issued: 05/23/2000
• 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): Stamber, Eric W.
• Assistant Examiner(s): Patel, Jagdish
• Application Number:
  US09/237,239
• Time in Patent Office: 483 Days
• Field of Search: 705/38, 705/26, 705/35
• US Class Current: 705/38
• 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 protocols 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 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 and information on the corresponding real estate, 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 based on the borrower'"'"'s ability to repay a loan in accordance with 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 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; and

(e) selecting an acceptable return rate reflecting lender preferences based on the ability-to-pay rate, the default rate, the minimum rate, and a predetermined current return rate.

2. The method of claim 1, wherein the loan conditions include a loan amount and a loan rate, and wherein the selecting step includes the substep of:

modifying the loan conditions to provide the acceptable return rate.

3. The method of claim 2, wherein the modifying step includes the substep of:

iteratively performing steps (b) though (e) with the modified loan conditions.

4. The method of claim 1, further comprising the step of:

displaying a form reflecting the acceptable return rate such that it advises an investor of possible investment strategies.

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

a memory having program instructions; and

a processor responsive to the program instructions and configured to;

receive 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,

analyze the borrower'"'"'s financial information to determine an ability-to-pay rate reflecting an interest rate on the loan based on the borrower'"'"'s ability to repay a loan in accordance with the loan conditions,

determine 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,

determine 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, and

select an acceptable return rate reflecting lender preferences based on the ability-to-pay rate, the default rate, the minimum rate, and a predetermined current return rate.

6. The apparatus of claim 5, wherein the loan conditions include a loan amount and a loan rate, and wherein the apparatus further comprises:

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

7. The method of claim 5, further comprising:

means for displaying a form reflecting the acceptable return rate such that it advises an investor of possible investment strategies.

8. 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 and information on the corresponding real estate, 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 based on the borrower'"'"'s ability to repay a loan in accordance with 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 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; and

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

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

a memory having program instructions; and

a processor responsive to the program instructions and configured 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 and information on the corresponding real estate, related to a real estate loan,

analyzing the borrower'"'"'s financial information to determine an ability-to-pay rate reflecting an interest rate on the loan based on the borrower'"'"'s ability to repay a loan in accordance with the loan conditions,

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,

determining from the 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,

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,

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,

extracting lender preferences from a constraints database, and

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