Servicer compensation system and method

• US 20070255654A1
• Filed: 04/11/2007
• Published: 11/01/2007
• Est. Priority Date: 12/30/2002
• Status: Active Grant

• Current Assignee: Fannie Mae
• Original Assignee: Fannie Mae
• Inventors: Whipple, F., McLuckie, Timothy
• Granted Patent: US 7,533,057 B2
• Time in Patent Office: Days
• US Class Current: 705/39
• 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

A method that comprises acquiring a home mortgage loan having a loan asset and a servicing asset and compensating a servicer that performs servicing of the loan during a term of the loan. The compensation provided to the servicer does not decrease through time during the term of the loan.

Claims

1. A method of creating and maintaining 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, comprising:

acquiring a plurality of home mortgage loans from one or more lenders, the acquiring step being performed by a secondary mortgage market participant which provides funding for home mortgage loans, the home mortgage loan having a loan asset and a servicing asset, the loan asset comprising a right to receive loan payments from a borrower in connection with the loan, the loan payments comprising a principal payment portion and an interest payment portion, the servicing asset comprising a right to receive a servicing fee portion of the interest payment portion in exchange for performing servicing of the loan, wherein the servicing fee portion of each loan payment decreases as an unpaid principal balance of the loan decreases, each of the plurality of home mortgage loans being sensitive to the different types of sub-loan level risk, the loan asset and the servicing asset for each of the plurality of home mortgage loans in combination 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;

decomposing each of the plurality of home mortgage loans into the plurality of sub-loan level cash flows, the decomposing step being performed by a computer-implemented cash flow decomposition/repackaging tool;

repackaging the plurality of sub-loan level cash flows to form the financial assets, including

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,

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, and

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

wherein the financial assets include a financial asset configured to produce a modified servicing fee for a servicer, wherein compensation provided to the servicer in accordance with the modified servicing fee does not decrease through time during the term of the loan, and

wherein the repackaging step is performed by the computer-implemented cash flow decomposition/repackaging tool;

selling the financial asset configured to produce the modified servicing fee to the servicer in connection with a transaction with the servicer, the transaction comprising one of (i) subcontracting responsibility for performing servicing of the loan to the servicer, wherein the servicer receives compensation for performing the servicing in accordance with the modified servicing fee, and (ii) reselling the servicing asset to the servicer, wherein the resold servicing asset comprises a right to receive the modified servicing fee in exchange for performing servicing of the loan;

selling the remaining financial assets to different investors in the capital markets, thereby permitting the different investors to hedge against the risks that oppose the different types of sub-loan level risk;

storing information concerning the modified servicing fee in a memory of a computer associated with the secondary mortgage market participant; and

allocating payments for the servicer in accordance with the modified servicing fee, the payments being allocated by the computer associated with the secondary mortgage market participant.

2. A method according to claim 1, further comprising compensating the servicer in accordance with the modified servicing fee, including permitting the servicer to retain the compensation from a payment received by the servicer from a borrower.

3. A method according to claim 1, wherein the payments allocated to the servicer in accordance with the modified servicing fee remain substantially fixed during the term of the loan for each of the plurality of home mortgage loans.

4. A method according to claim 1, wherein the payments allocated to the servicer in accordance with the modified servicing fee increase during the term of the loan for each of the plurality of home mortgage loans.

5. A computer-implemented method of creating and maintaining 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:

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 having a loan asset and a servicing asset, the loan asset comprising a right to receive loan payments from a borrower in connection with the loan, the loan payments comprising a principal payment portion and an interest payment portion, the servicing asset comprising a right to receive a servicing fee portion of the interest payment portion in exchange for performing servicing of the loan, wherein the servicing fee portion of each loan payment decreases as an unpaid principal balance of the loan decreases, the loan asset and the servicing asset for each of the plurality of home mortgage loans in combination 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;

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

repackaging the plurality of sub-loan level cash flows to form the financial assets using a computer implemented engine, including

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,

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, and

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

wherein the financial assets include a servicing fee financial asset configured to produce a modified servicing fee, wherein the modified servicing fee does not decrease as the unpaid principal balance of the loan decreases;

storing information pertaining to a mapping relationship between the financial assets and the plurality of sub-loan level cash flows, the mapping relationship 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 storing step being performed by a computer-implemented cash flow repackaging tool used by a human operator;

processing loan payment information in accordance with the stored information and generating information regarding investment proceeds due to the investors in the financial assets, including

receiving a plurality of loan payments in connection with the plurality of home mortgage loans,

accessing the stored information that describes the mapping relationship between the financial assets and the plurality of sub-loan level cash flows, and

allocating, for each of the plurality of home mortgage loans, corresponding sub-loan level cash flows to a financial assets based on the mapping information; and

allocating payments for the investors in the financial assets with funds derived from the plurality of loan payments and in accordance with the allocation of the plurality of sub-roan level cash flows to the financial assets, thereby permitting the different investors to hedge against the risks that oppose the different types of sub-loan level risk; and

allocating compensation for a servicer that performs the servicing of the plurality of home mortgage loans during a term of the plurality of home mortgage loans in accordance with the modified servicing fee.

6. A method according to claim 5, further comprising subcontracting responsibility for performing servicing of the loan to the servicer for each of the plurality of home mortgage loans.

7. A method according to claim 5, further comprising reselling the servicing asset to the servicer, and wherein the resold servicing asset comprises a right to receive the modified servicing fee in exchange for performing servicing of the loan for each of the plurality of home mortgage loans.

8. A method according to claim 5, wherein the compensation allocated to the servicer does not decrease during the term of the loan for each of the plurality of home mortgage loans.