Index-based liquidity system and method

• US 8,468,079 B2
• Filed: 05/05/2008
• Issued: 06/18/2013
• Est. Priority Date: 03/07/2003
• Status: Active Grant

• Current Assignee: Hippo Exchange, LLC
• Original Assignee: Market Shield Capital, LLC
• Inventors: Weiss, Allan N., Gordon, Neil R.
• Primary Examiner(s): Hamilton, Lalita M
• Application Number:
  US12/115,287
• Publication Number:
  US 20080288418A1
• Time in Patent Office: 1,870 Days
• Field of Search: 705/35, 705/36.R, 705/37, 705/38
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A system and method for creating liquidity relative to one or more small businesses or assets provides liquidity to the small business or asset holder in return for a payment stream that comprises at least one payment that is adjustable relative to at least one relevant index.

Claims

1. A method of creating liquidity in one or more assets of one or more borrowers, the method including steps executed by at least one computer processor coupled to at least one non-transitory computer storage medium having stored computer instructions used in performing such steps, the method comprising:

establishing a current market value for at least one asset of a borrower and electronically storing the current market value in the at least one non-transitory computer storage medium;

generating an index having at least one component related to a market to which the at least one asset belongs by the at least one computer processor and electronically storing the index in the at least one non-transitory computer storage medium;

providing an upfront initial payout from a lender to the borrower as a holder of the at least one asset and electronically recording the initial payout in the at least one non-transitory computer storage medium;

defining a payment stream as a repayment obligation by the borrower of the initial payout, using the at least one computer processor, the payment stream having one or more payments from the borrower to the lender;

electronically determining a change in the index, using the at least one processor; and

adjusting the payment stream as a function of the change in the index, using the at least one computer processor, wherein changes in the payment stream reflect changes in the market to which the at least one asset belongs.

2. The method of claim 1 wherein the payment stream includes one or more payments having a fixed portion and an adjustable portion.

3. The method of claim 1 wherein the payment stream includes one or more payments having a principal portion and an interest portion used to define a payment amount, and adjusting the payment stream includes adjusting the payment amount by applying an index-based adjustment factor to the payment amount, using the at least one computer processor.

4. The method of claim 1 wherein the index represents values or prices of comparable assets in the same or a comparable market.

5. The method of claim 1 wherein the at least one asset includes real estate assets and the holder is a real estate investment trust (REIT), a fund, a corporate entity or a small business.

6. The method of claim 5 wherein the real assets include at least one commercial real estate property.

7. The method of claim 1 wherein the method further comprises creating a fund representing the at least one asset and defining shares representing claims against the fund, using the at least one computer processor.

8. The method of claim 1 further comprising defining a term and adjusting a final payment in the payment stream at the end of the term, using the at least one computer processor.

9. The method of claim 1 further comprising determining the index by predicting a future market value of the at least one asset using market-based trend data, using the at least one computer processor.

10. The method of claim 9 wherein predicting the future market value includes projecting the current value based on the market-based trend data to at least one point in time, using the at least one computer processor.

11. The method of claim 10 wherein the future market value is established by at least one of:

i) weighting the current market value using the market-based trend data; and

ii) weighting the current market value using an economic indicator, using the at least one computer processor.

12. A method for providing liquidity in a small business, the method including steps executed by at least one computer processor coupled to at least one non-transitory computer storage medium having stored computer instructions used in performing such steps, the method comprising:

defining a fund representing a financial stake in a real estate small business;

determining an initial payout by the fund to the real estate small business and electronically recording the initial payout in the at least one non-transitory computer storage medium;

generating at least one index related to real estate by the at least one processor and electronically storing the index in the at least one non-transitory computer storage medium;

defining a future payment stream to be made by the real estate small business to the fund corresponding to the initial payout, using the at least one computer processor;

electronically determining a change in the index, using the at least one computer processor; and

adjusting at least one payment in the future payment stream in response to a change in the index, using the at least one computer processor.

13. The method of claim 12, wherein the real estate is commercial real estate, the real estate small business is an owner of the commercial real estate, and the index is derived, at least in part, from commercial real estate rental rates.

14. The method of claim 13, wherein the commercial real estate rentals rates are determined for a specific geographic area.

15. The method of claim 12, wherein the real estate is residential real estate, the real estate small business is an owner of the residential real estate, and the index is derived, at least in part, from residential real estate property values.

16. The method of claim 15, wherein the residential real estate property values are determined for a specific geographic area.

17. The method of claim 15, wherein the residential real estate property values are determined for a specific type of real estate property.

18. The method of claim 15, wherein the residential real estate property values are determined for a specific size of real estate property.

19. The method of claim 15, wherein the residential real estate property values are determined for a specific class of real estate property.

20. The method of claim 12, wherein the real estate is commercial real estate, the real estate small business is an owner of the commercial real estate, and the index is derived, at least in part, from commercial real estate property values.

21. The method of claim 20, wherein the commercial real estate property values are determined for a specific geographic area.

22. The method of claim 20, wherein the commercial real estate property values are determined for a specific type of real estate property.

23. The method of claim 20, wherein the commercial real estate property values are determined for a specific size of real estate property.

24. The method of claim 20, wherein the commercial real estate property values are determined for a specific class of real estate property.

25. The method of claim 12, wherein the index is a composite index that includes one or more components not related to real estate.

26. The method of claim 12, wherein the index is a composite index that includes multiple components related to real estate.

27. The method of claim 12, wherein the index includes one or more components comprising or derived from earnings of the real estate owner.

28. The method of claim 12, wherein the fund further comprises at least one entity that is not a real estate small business.

29. The method of claim 12, wherein the payment stream includes a set of fixed payments and at least one adjustable payment.

30. The method of claim 12, wherein the payment stream represents a set of payment obligations to be determined at predetermined times during a term of the fund, the method further comprising:

identifying a set of fixed payments to be made by the small business to the fund at the predetermined times during the term; and

when a fixed payment and a payment obligation are determined at a predetermined time, determining a difference between the fixed payment and the payment obligation, using the at least one computer processor.

31. The method of claim 30, further comprising, when the fixed payment is greater than the payment obligation, applying the difference to a principal amount owed by the small business to the fund as part of the payment stream, using the at least one computer processor.

32. The method of claim 30, further comprising, when the fixed payment is greater than the payment obligation, banking the difference in an interest bearing account, using the at least one computer processor.

33. The method of claim 30, further comprising, when the fixed payment is less than the payment obligation, adding the difference to a principal amount owed by the small business to the fund as part of the payment stream, using the at least one computer processor.

34. The method of claim 12, wherein the fund is managed by a bank or other lender, or an agent or proxy therefore.

35. A method of determining a payoff of a loan, the method including steps executed by at least one computer processor coupled to at least one non-transitory computer storage medium having stored computer instructions used in performing such steps, the method comprising:

providing upfront liquidity as an initial payout to at least one small business and electronically recording the initial payout in the at least one non-transitory computer storage medium;

defining a payment stream to be made by the small business as a repayment obligation of the at least one small business for a term, using the at least one computer processor;

generating at least one index related to a market value of the at least one small business by the at least one computer processor;

electronically determining a change in the index, using the at least one processor;

adjusting at least one payment in the payment stream in response to a change in the index, using the at least one computer processor; and

in the case of payoff before the end of the term, determining a present value of future payments from the payment stream using the at least one index, using the at least one computer processor.

36. The method of claim 35 wherein determining the present value includes using one or more prior index levels applied to the payment stream and a discount rate to calculate the present value of the future payments that would have otherwise been made, using the at least one computer processor.

37. A method of providing liquidity with prepayment adjustments, the method including steps executed by at least one computer processor coupled to at least one non-transitory computer storage medium having stored computer instructions used in performing such steps, the method comprising:

providing upfront liquidity to a small business of a payout amount;

generating at least one index related to a market value of the small business by the at least one computer processor;

defining a payment stream to be made by the small business for a term, the payment stream calculated for a principal amount that is greater than the payout amount, using the at least one computer processor;

at the end of the term, determining if the principal has been repaid and if there is still an amount due, forgiving at least a portion of the amount due based on the index, using the at least one computer processor.

38. The method of claim 37 wherein forgiven amount includes forgiven principal.

39. The method of claim 37 wherein forgiven amount includes forgiven interest.