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Cash flow aggregation system and method

  • US 7,797,213 B2
  • Filed: 04/11/2007
  • Issued: 09/14/2010
  • Est. Priority Date: 12/30/2002
  • Status: Active Grant
First Claim
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1. A computer-implemented method of creating financial assets which accentuate different types of sub-loan level risk associated with a plurality of home mortgage loans and which are configured to operate as hedges against risks that oppose the different types of sub-loan level risk, the financial assets being sold to different investors in the capital markets, comprising:

  • (A) receiving information in a computer system concerning the plurality of home mortgage loans, each of the plurality of home mortgage loans being sensitive to the different types of sub-loan level risk, each of the plurality of home mortgage loans comprising a plurality of sub-loan level cash flows, wherein, for each of the plurality of home mortgage loans, individual sub-loan level cash flows exhibit heightened sensitivity to corresponding different types of sub-loan level risk relative to the sensitivity to the different types of sub-loan level risk exhibited by the respective home mortgage loan as a whole;

    (B) decomposing each of the plurality of home mortgage loans into the plurality of sub-loan level cash flows;

    (C) repackaging the plurality of sub-loan level cash flows to form the financial assets, including(1) selecting a sub-combination of the plurality of sub-loan level cash flows, the sub-combination of sub-loan level cash flows comprising sub-loan level cash flows from across the plurality of home mortgage loans, and the sub-combination of sub-loan level cash flows exhibiting heightened sensitivity to at least one of the different types of sub-loan level risk in accordance with the heightened sensitivity to the at least one of the different types of sub-loan level risk exhibited by the sub-loan level cash flows that form the sub-combination of sub-loan level cash flows,(2) packaging the sub-combination of sub-loan level cash flows to create one of the financial assets, the financial asset that is created accentuating the at least one of the different types of sub-loan level risk in accordance with the heightened sensitivity exhibited by the sub-combination of sub-loan level cash flows, thereby configuring the financial asset to operate as a hedge against a risk that opposes the at least one of the different types of sub-loan level risk,(3) repeating the selecting and packaging steps to create additional financial assets, the additional financial assets including different financial assets which accentuate other different types of sub-loan level risk and which exhibit heightened sensitivity to the other different types of sub-loan level risk as compared to the sensitivity to the other different types of sub-loan level risk exhibited by the plurality of home mortgage loans as a whole, thereby configuring the additional financial assets to operate as hedges against other risks that oppose the other different types of sub-loan level risk, and(4) storing information pertaining to a mapping relationship between the financial assets and the plurality of sub-loan level cash flows in a data storage system of the computer system, the mapping relationship reflecting performance of the decomposing and repackaging steps and describing a manner in which cash flows flowing into each of the financial assets are traceable back to the plurality of sub-loan level cash flows, the information pertaining to the mapping relationship being stored in the form of a plurality of data structures which respectively represent one of the financial assets, the plurality of data structures each comprising a data map which includes information on cash flows that flow into the data structure, the plurality of data structures each further comprising computer process instructions including information on cash flow processing for the cash flows that flow into the data structure;

    (D) processing loan payment information in accordance with the stored information and generating information regarding investment proceeds due to the investors in the financial assets, the processing and generating steps being performed by the computer system, and the processing and generating steps including(1) receiving information regarding a plurality of loan payments in connection with the plurality of home mortgage loans,(2) accessing the stored information that describes the mapping relationship between the financial assets and the plurality of sub-loan level cash flows, and(3) allocating, for each of the plurality of home mortgage loans, portions of the loan payments corresponding to the plurality of sub-loan level cash flows to a respective one of the financial assets based on the mapping information; and

    (E) allocating payments for the investors in the financial assets based on funds derived from the plurality of loan payments and in accordance with the allocation of the plurality of sub-loan level cash flows to the respective financial assets, thereby permitting the different investors to hedge against the risks that oppose the different types of sub-loan level risk, the allocating step being performed by the computer system.

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