System and method for reducing mortgage interest rate and mortgage guaranty insurance premiums associated with a mortgage loan

• US 20020059136A1
• Filed: 05/18/2001
• Published: 05/16/2002
• Est. Priority Date: 11/16/2000
• Status: Active Grant

• Current Assignee: United Guaranty Corporation (Arch Capital Group Limited)
• Original Assignee: American International Group Incorporated
• Inventors: May, Andrew W.
• Granted Patent: US 6,671,677 B2
• Time in Patent Office: Days
• US Class Current: 705/38
• CPC Class Codes: G06Q 20/10 specially adapted for electronic funds transfer [EFT] systems; specially adapted for home banking systems
• 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

Abstract

In the present invention, a system and method is described for reducing the mortgage interest rate and mortgage guaranty insurance premium associated with a mortgage loan by financing discount points into the mortgage loan at origination. In addition, the mortgage guaranty insurance premium is determined based on the original loan-to-value (LTV) percent, independent of the amount of discount points financed into the original loan.

Claims

1. A method for reducing at least one of insurance rates and insurance premiums of a financial product, comprising the steps of:

determining a loan-to-value (LTV) ratio of said financial product, said financial product having an interest rate associated therewith;

adding a cost of a buydown to the amount of said financial product to reduce said interest rate of said financial product; and

determining the insurance premium based on said LTV regardless of the added cost of said buydown.

2. The method of claim 1, wherein said financial product is a loan.

3. The method of claim 2, wherein said loan is one of a mortgage loan, a piggy-back loan, and a spread account.

4. The method of claim 1, wherein said insurance premium is a mortgage guaranty insurance premium.

5. The method of claim 1, wherein said LTV is the ratio of the amount of said loan to a value of an associated property.

6. The method of claim 5, wherein said value is the lesser of a sales price, appraisal, and broker price opinion.

7. The method of claim 1, wherein the cost of said buydown is the cost of at least one discount point.

8. The method of claim 7, wherein the cost of each said discount point equals one percent of the amount of said loan.

9. The method of claim 8, wherein each said discount point reduces said interest rate within a range of approximately 0.20 to 0.33 percent.

10. The method of claim 9, wherein the amount of the reduction of said interest rate is further based on at least one of the type of said loan, the time length of said loan, a loan lender, a mortgage guaranty insurer, and credit of the borrower.

11. The method of claim 10, wherein said type of said loan is one of a fixed rate mortgage or an adjustable rate mortgage.

12. The method of claim 7, wherein said at least one discount point is a maximum of six discount points.

13. The method of claim 7, wherein said at least one discount point is a maximum of three discount points.

14. The method of claim 1, further comprising a step of determining basis points, wherein said step of determining the insurance premium is further based on the amount of determined basis points.

15. The method of claim 14, wherein said basis points are determined based on at least one of said LTV, a coverage amount of said insurance, a debt-to-income ratio of the borrower, and the credit of said borrower.

16. The method of claim 14, wherein said steps of determining the LTV, adding the buydown cost, determining the insurance premium, and determining basis points are performed by a computerized system.

18. The method of claim 17, wherein the cost of each discount point equals one percent of the amount of said loan.

19. The method of claim 18, wherein each said discount point reduces said interest rate within a range of approximately 0.20 to 0.33 percent.

20. The method of claim 19, wherein the amount of the reduction of said interest rate is further based on at least one of the type of said loan, the time length of said loan, a loan lender, a mortgage guaranty insurer, and credit of the borrower.

21. The method of claim 20, wherein said type of said loan is one of a fixed rate mortgage or an adjustable rate mortgage.

22. The method of claim 17, wherein said at least one discount point is a maximum of six discount points.

23. The method of claim 17, wherein said at least one discount point is a maximum of three discount points.

24. The method of claim 17, further comprising a step of determining basis points, wherein said step of determining the insurance premium is further based on the amount of determined basis points.

25. The method of claim 24, wherein said basis points are determined based on at least one of said original LTV, a coverage amount of said insurance, a debt-to-income ratio of the borrower, and the credit of said borrower.

26. The method of claim 17, wherein said value is the lesser of a sales price, appraisal, and broker price opinion.

27. The method of claim 24, wherein said steps of determining the original LTV, adding the buydown cost, determining the second LTV, determining the insurance premium, and determining basis points are performed by a computerized system.

29. The financial product of claim 28, wherein said insurance premium is a mortgage guaranty insurance premium.

30. The financial product of claim 28, wherein said LTV is the ratio of the amount of said loan to a sales price of an associated property.

31. The financial product of claim 28, wherein the cost of said buydown is the cost of at least one discount point.

32. The financial product of claim 31, wherein the cost of each said discount point equals one percent of the amount of said loan.

33. The financial product of claim 32, wherein each said discount point reduces said interest rate within a range of approximately 0.20 to 0.33 percent.

34. The financial product of claim 28, wherein the amount of the reduction of said interest rate is based on at least one of the type of said loan, the time length of said loan, the loan lender, and a mortgage guaranty insurer.

35. The financial product of claim 34, wherein said type of said loan is one of a fixed rate mortgage or an adjustable rate mortgage.

36. The financial product of claim 33, wherein said at least one discount point is a maximum of six discount points.

37. The financial product of claim 33, wherein said at least one discount point is a maximum of three discount points.

38. The financial product of claim 28, wherein the amount of said insurance premium is further based on the amount of determined basis points.

39. The financial product of claim 38, wherein said basis points are determined based on at least one of said LTV, a coverage amount of said insurance, a debt-to-income ratio of the borrower, and the credit of said borrower.

40. The financial product of claim 28, wherein said loan is one of a mortgage loan, a piggy-back loan, and a spread account.

17. A method for reducing the mortgage guaranty insurance premium of one of a mortgage loan and piggy-back loan having an interest rate associated therewith, the method comprising the steps of:

determining an original loan-to-value (LTV) ratio of a loan, said original LTV is the ratio of the amount of said loan to a value of an associated property;

adding a cost of at least one discount point to the amount of said loan to reduce said interest rate of said loan;

determining a gross loan-to-value (LTV) ratio of said loan, said gross LTV is the ratio of the added cost of said at least one discount point and the amount of said loan to said value of said associated property; and

determining the mortgage guaranty insurance premium based on said original LTV.

28. An insurance financial product, comprising:

a loan-to-value (LTV) ratio of a loan, said loan having an interest rate associated therewith;

a cost of a buydown to the amount of said loan to reduce said interest rate of said loan; and

an insurance premium based on said LTV regardless of the added cost of said buydown.