Equity protection

• US 7,917,431 B2
• Filed: 05/18/2007
• Issued: 03/29/2011
• Est. Priority Date: 05/18/2007
• Status: Active Grant

• Current Assignee: Bank of America Corp.
• Original Assignee: Bank of America Corp.
• Inventors: Turner, Frank B., Trainor, Christopher James, Eshleman, Robert H., Ghosh, Debashis, Upchurch, William Michael, Banerjee, Sudeshna
• Primary Examiner(s): Colbert; Ella
• Assistant Examiner(s): Shaikh; Mohammad Z
• Application Number:
  US11/750,808
• Publication Number:
  US 20080288415A1
• Time in Patent Office: 1,411 Days
• Field of Search: 705 35- 42
• US Class Current: 705/38
• 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 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

Systems and methods are illustrated for providing an equity protection product to a borrower of a loan. Aspects of the equity protection product may be implemented using an equity protection agreement. The equity protection product may be used to safeguard a borrower'"'"'s investment in the event of a housing market downturn. In some examples, once the equity protection is purchased, the borrower'"'"'s equity can only increase or remain stable (i.e., flat) regardless of market conditions. The payoff amount of the borrower'"'"'s loan may be reduced to compensate for a change in the market value of the borrower'"'"'s home. The equity protection product may be provided by a lending institution, bank, or any other comparable entity/person. A trading desk may also be used to hedge against the risk created by the equity protection product. In addition, an appraiser may also be used to evaluate and provide current market values of the relevant property.

Claims

1. A computer-assisted method, comprising:

(a) receiving loan information at a computerized system corresponding to a loan of a borrower, the loan information comprising a unique identifier of a property corresponding to the loan, the borrower'"'"'s equity in the property, and a payoff amount of the loan;

(b) determining terms of an equity protection agreement, the terms including the property'"'"'s initial market value and a fee;

(c) receiving acceptance from the borrower of the equity protection agreement associated with the borrower'"'"'s loan;

(d) trading at a trading terminal a financial instrument of an index including at least the property to hedge against risk; and

(e) recording terms of the equity protection agreement in the computerized system, the computerized system configured to receive the property'"'"'s market value as an input and to adjust the loan information at a predetermined interval of time based on at least the input.

2. The method of claim 1, the property comprising real property, the loan including a mortgage on the real property, and the unique identifier of the real property comprising a street address.

3. The method of claim 2, where the determining terms of the equity agreement includes evaluating the property using an automated valuation model.

4. The method of claim 2, where the determining terms of the equity agreement includes evaluating the property based on at least a value of a housing index associated with a region containing the real property.

5. The method of claim 2, comprising:

sending the borrower a report at a predetermined interval, the report comprising the property'"'"'s market value at a particular time.

6. The method of claim 5, the report including a payoff amount output from the computerized system, the computerized system configured to adjust the payoff amount based on a change in the property'"'"'s market value.

7. The method of claim 6, the payoff amount being adjusted to zero if the property'"'"'s market value has decreased by more than the payoff amount.

8. The method of claim 2, the fee of the equity protection agreement being calculated based on a multivariate model using internal data and external data.

9. The method of claim 2, where the trading the financial instrument includes:

trading an option on a housing index associated with a region containing the real property to hedge against risk associated with the equity protection agreement.

10. The method of claim 1, the borrower entering into the loan and accepting the equity protection agreement on a same day.

11. The method of claim 1, the fee of the equity protection agreement is due at closing.

12. The method of claim 1, the fee of the equity protection agreement is divided and a portion of the fee is due monthly with loan payments, and where the fee is returned to the borrower if the borrower does not receive a payoff amount reduction within a predetermined time after accepting the equity protection agreement.

13. The method of claim 1, the fee of the equity protection agreement is paid through a predetermined increase in an annual percentage rate of the loan.

14. The method of claim 1, where the predetermined interval of time is one year.

15. The method of claim 1, the terms of the equity protection agreement including a plurality of events, the computerized system configured to not adjust the loan information based on change in the property'"'"'s market value if the change is substantially caused by an event of the plurality of events.

16. The method of claim 15, the plurality of events comprising acts of God, the acts of God including a hurricane, an earthquake, a flood, a typhoon, a tornado, and a storm.

17. The method of claim 1, the property comprising real property to be used for commercial purposes, and where the determining terms of the equity agreement includes evaluating the property based on at least one of a sales comparison approach, cost approach, and income approach.

18. The method of claim 1, wherein the computerized system is configured to provide a website, further comprising:

receiving, through the website at the computerized system, a request from the borrower that an appraisal be performed on the property and any change in the property'"'"'s market value be identified to the borrower.

19. A computer-assisted system comprising:

a borrower of a loan including a mortgage on real property;

a computing device including an automated valuation model to provide a market value of the real property using predetermined criteria;

a banking center offering the borrower an equity protection agreement associated with the loan, the equity protection agreement being recorded in a computerized system and guaranteeing the borrower'"'"'s equity in the real property in exchange for a fee, and where a payoff amount of the loan is reduced by the computerized system to maintain the borrower'"'"'s equity if the automated valuation model determines the market value of the real property has decreased; and

a trading desk to hedge against risk associated with the equity protection agreement, the trading desk comprising a trading terminal configured to trade a derivative based on a housing index associated with a region containing the real property.

20. The system of claim 19, the banking center comprising a computing device configured to receive the property'"'"'s market value as an input and to adjust the loan information based on at least the input.

21. The system of claim 19, the computing device of the banking center being accessible to a borrower through the Internet and outputting a payoff amount for display to the borrower, the payoff amount adjusted based on a change in the real property'"'"'s market value.

22. The system of claim 19, wherein the computing device is configured to provide a website, and is configured to receive, through the website, a request from the borrower that an appraisal be performed on the real property and any change in the market value of the real property be identified to the borrower.

23. An apparatus, comprising:

a memory storing computer-executable instructions;

a processor configured to execute the computer-executable instructions to perform a method comprising;

(a) receiving information corresponding to a mortgage of a property;

(b) receiving terms of an equity protection agreement associated with the mortgage, where the terms include the property'"'"'s market value and the property'"'"'s market value is obtained using an automated valuation model;

(c) recording the information corresponding to the mortgage and terms of the equity protection agreement in memory, the terms of the equity protection agreement include a fee;

(d) trading a financial instrument of a housing index covering the region where the property is located to hedge against risk; and

(e) at a predetermined interval of time, adjusting the payoff amount of the loan according to a decrease in the property'"'"'s market value; and

(f) outputting the payoff amount of the loan for display to the borrower.

24. The apparatus of claim 23, wherein the processor is configured to execute the computer-executable instructions to further perform:

receiving, through a website provided by the apparatus, a request from the borrower that an appraisal be performed on the property and any change in the property'"'"'s market value be identified to the borrower.

25. A computer-assisted method, comprising:

(a) receiving, at a computerized system, information corresponding to a mortgage of a borrower on a property, the information comprising a payoff amount of the loan;

(b) receiving, at the computerized system, terms of an equity protection agreement associated with the mortgage, where the terms include the property'"'"'s initial market value determined using an automated valuation model;

(c) receiving acceptance from the borrower of the equity protection agreement associated with the mortgage;

(d) trading, at a trading terminal, a financial instrument of a housing index covering the region where the property is located to hedge against risk;

(e) recording terms of the equity protection agreement in the computerized system;

(f) adjusting the payoff amount of the loan, using the computerized system, at a predetermined interval of time, according to a decrease in the property'"'"'s market value; and

(f) receiving, through a website provided by the computerized system, a request from the borrower that an appraisal be performed on the property and any change in the property'"'"'s market value be identified to the borrower.