A data processing system for selectively determining an appropriate
balance of credit parameters associated with the issuance of Reverse
Equity Mortgage financing. The system manages the risk associated
with the credit by structuring a concurrent single premium deferred
annuity to provide future cash flows starting at a system determined
date corresponding to actuarially determined requirements of the
borrower. The data processing system accepts inputs of the critical
data required to perform the calculations and provides a detailed
assessment of the proper level of credit and blend of annuity payments
for the borrower, thereby solving the principal problem associated
with RM products. Thereafter, the system provides the management
for the plural current and past accounts associated with the client-based
attributes for each lending opportunity.
What is claimed is:
1. In combination in a system for commercial product and/or service
support including processing one or more user defined illiquid assets
having a measurable valuation and developing a combination of financial
instruments corresponding to combined secured credit and deferred
means for collecting and inputting into a data processing system
a set of application parameters associated with a request for access
to reverse equity financing said application parameters include
biographical data on an applicant and asset valuation data on one
or more qualified assets forming a basis for securing of credit;
means for selectively accessing actuarial data taken from a database
in communication with said system and/or calculated by a data processing
means of said system, based on said application parameters;
means for inputting one or more system or user selected combinations
of secured debt parameters and annuity parameters corresponding
to a select level of incremental cash flow objectives;
means for interactive evaluation of said incremental cash flow
and selection of an annuity and loan program structure corresponding
to a selected cash flow;
data processing means in said system responsive to said input means
and accessing means for calculating a credit allocation and insurance
premium consistent with system defined credit lending parameters
and selected cash flow, wherein said data processing means further
provides a framework of periodic payments associated with a release
of credit in the form of a reverse equity mortgage loan and a premium
level for a deferred annuity wherein a deferral period for said
deferred annuity is determined in part from biographical information,
including information relating to life expectancy.
2. The system of claim 1 wherein said data processing means further
comprises means for determining an initial deferral period for said
deferred annuity based on said biographical data and stored life
3. The system of claim 2 wherein said forecasting data includes
an appreciation rate for selected assets.
4. The system of claim 3 wherein said system iteratively calculates
separate payment schedules pursuant to user selected preferences.
5. The system of claim 1 wherein applicant data is collected through
the entry of field values in a form.
6. The system of claim 5 wherein said form reposes on a display
and data is entered in said fields via key stroke entry.
7. In combination in a data processing system for commercial product
and/or service support by processing of individual accounts corresponding
to applicants for select credit wherein said system processes account
data for the selective assessment of financial instruments including
a reverse equity mortgage and a deferred annuity to provide a stream
of cash flow for an indeterminate period of time secured by predefined
first computer input means for selective entry of system and applicant
account parameters corresponding to a credit application which is
to be applied to an assessment of a current and future value associated
with said pre-defined assets;
data processing means connected to said first computer and responsive
to said inputted parameters for determining account processing and
record keeping parameters based on a designated combination of reverse
equity mortgage commitment and deferred annuity structure corresponding
to the select cash flow requirements of said account applicant,
actuarial data on said applicant and the valuation of said asset;
second computer means in communication with said first computer
means for account processing and tracking actual events associated
with said mortgage commitment and deferred annuity implementation
including asset transactions and creating a report corresponding
to account parameters.
8. The system of claim 7 further comprising a second data processing
means for providing a line of credit associated with a segmented
portion of said asset available to provide additional credit to
the account applicant.
9. The system of claim 7 wherein said input means receives input
parameters including an appraisal, an appreciation rate, loan start
date, applicant actuarial assessment, and current interest rate.
10. The system of claim 7 wherein said data processing means provides
a set of initial account attributes based on the life expectancy
of the account applicant and permits reassessment of account attributes
via interactive adjustment of select parameters including deferral
period for said annuity.
11. A data processing system of the type for processing plural
accounts having discrete and disparate attributes corresponding
to an integrated reverse equity loan and annuity product, comprising:
account qualification means including interactive data collection
to provide information for assessing prospect data and screening
prospects to narrow a universe of applicants to a smaller segment
of viable loan prospects;
loan structure means for receiving input including information
on an applicant and an underlying asset and determining a suitable
structure of distributed payment stream income, annuity deferral
period based in part on biographical data of an applicant, line
of credit and reserved equity for said applicant for a loan; and
loan servicing means for monitoring a plurality of accounts for
reverse equity financing and providing for one or more transactions
associated with said accounts, including scheduled payments and
unscheduled tracking of events.
12. The system of claim 11 further comprising means for utilizing
demographic data to establish an approximation of the underlying
13. The system of claim 11 wherein said loan structure means includes
means for establishing a deferred single premium annuity tied to
a termination date of said loan in accordance with loan recipient
14. The system of claim 11 wherein said loan servicing means further
provides for a line of credit and a periodic payment tied to an
asset collateralizing said loan.
15. The system of claim 11 wherein said unscheduled events include
death of the applicant and destruction of said underlying asset.
16. The system of claim 11 wherein said line of credit is financed
by a reverse mortgage on said asset.
17. The system of claim 11 wherein said loan servicing means includes
means for updating an account database with transactions.
18. The system of claim 11 wherein said prospect data is retained
in a database for future referral.
19. The system of claim 11 wherein said screening process includes
forecasting future appreciation of said asset.
20. The system of claim 11 further comprising means for collecting
prospect data for account qualification.
FIELD OF INVENTION
The present invention generally relates to systems for processing
a plurality of individual accounts directed to mortgage analysis
and management. More particularly, the present invention relates
to a data processing system designed to evaluate select inputs corresponding
to one of plural mortgage accounts, develop a profile of operating
characteristics for originating a reverse equity mortgage instrument
and managing a plurality of structured accounts in accordance with
the specifics of the selectively established mortgage characteristics.
BACKGROUND OF THE INVENTION
The run-up in real estate value during the last ten years has created
an unprecedented accumulation of wealth in the physical assets of
many persons. The story of the blue collar worker suddenly finding
himself in a house worth many times the purchase price is commonplace.
Indeed, as our general population ages, a significant portion of
the population is finding that most of their accumulated wealth
is tied up with their home.
It is, of course, mostly fortuitous that the aging generation in
the United States has such wealth, as a minimum acting as an inflation
hedge against both the erosion of their purchasing power from fixed
income, and the declining real return from other assets. This benefit
comes with concomitant stresses and choices, especially to elderly
homeowners. More particularly, inflation-diminished pensions in
many instances simply do not provide enough to cover basic living
expenses for those of retirement age. Although these homeowners
are rich "on paper" their relatively minimal cash flow
acts to impoverish them. Given their asset base in the house, these
homeowners are left with a difficult choice regarding funding future
needs, especially in view of concurrent strong desires to remain
in their present homes.
The increasing incidence of the foregoing circumstances has led
to the development of a new form of mortgage debt. During the last
several years, the financial community has begun to offer credit
to homeowners based on the equity in the house. This form of this
credit goes beyond the traditional second mortgages or home equity
loans because repayment is not due until the house is sold. In fact,
the loan is structured as a stream of cashflows for a period of
time corresponding to the level of equity in the house and the age
of the borrower. In this way, homeowners enjoy living in their homes
during the loan period while concurrently receiving periodic payments
to cover living expenses. This form of financing is known as a reverse
mortgage or "RM", and is now growing in popularity among
those with the majority of their assets in valuable real estate.
The RM product is without a doubt an important and valuable advance
in financing. Notwithstanding its current growth and popularity,
RM's include attributes and characteristics that do not satisfy
the needs of many possible users. Moreover, the implementation of
RM's is difficult as the value of the equity in a home is subject
to the vagaries of the marketplace. If not properly structured,
the issuing creditor will end up with segments of the loan lacking
OBJECTS AND SUMMARY OF THE INVENTION
It is, therefore, an object of the present invention to provide
a data processing system that manages the servicing of a plurality
of asset-backed RM loans.
It is also an object of the present invention to provide systems
for managing separate cash flow accounts that couple the features
of a reverse mortgage instrument with the features of a single premium
deferred annuity to insure continued cash flow on an actuarial basis.
It is another object of the present invention to provide a system
for evaluating individual applications for RM financing and selectively
determining the proper level and sequence of financial terms associated
with a RM product.
It is still another object of the present invention to provide
a shared appreciation RM product implemented and tracked on a data
The above and other objects of the present invention are realized
in an illustrative RM account data processing system. The subject
invention includes a database memory for storing a plurality of
individual accounts. A separate processor provides for loan servicing
and general account management. The accounts represent loans provided
to borrowers which are delivered in periodic payments in accordance
with stored loan parameters. Individual accounts are stored in memory
and routinely updated by the system manager. The loan accounts are
further coupled to a single premium deferred annuity of pre-selected
characteristics conforming to the risk reduction attributes defined
by the individual account needs at the time of origination. The
management of the account is accomplished by the programmed controlled
In accordance with the varying features of the present invention,
the loan is typically repaid from the proceeds that accrue from
the sale of the asset used to secure the loan (such as the house).
The repayment event date is variable and usually contingent on the
borrower's sale or move out of the property, or on the death of
the borrower. To reduce the risk associated with the variable end
of the loan term, the system implements a single premium deferred
annuity to provide future cash flow at a predetermined point prior
to loan asset exhaustion. Implementation of the above attributes
on a large scale requires a specifically structured data processing
system that is configured to manage the multiple accounts in accordance
with the characteristics of each account.
The foregoing features are more fully appreciated taken in conjunction
with the following description of a specific illustrative example
thereof including the following drawings.
BRIEF DESCRIPTION OF THE FIGURES
FIG. 1 depicts the tri-part relationship associated with system
FIG. 2 depicts the interrelated hardware platforms associated with
the present invention;
FIG. 3 depicts in functional block form the hardware associated
with the present invention;
FIGS. 4A and 4B provide a flow chart of the logic for prospect
FIGS. 5A and 5B provide a flow chart of the pricing model;
FIG. 6 provides a supplemental flow chart for the deferral subsystem;
FIG. 7 provides a supplemental flow chart for the closing subsystem;
FIG. 8 provides a flow chart of the line of credit subsystem;
FIG. 9 provides a flow chart of the loan servicing subsystem; and
FIGS. 10-19 screen displays associated with loan management and
DETAILED DESCRIPTION OF THE INVENTION
First describing the present invention in overview, the data processor
is directed to two discrete functions for implementing the above
described financial system. The first function of the present invention
involves the determination of an optimal mix of loan and deferred
annuity appropriate for reducing risk to the lender. In essence,
the property securing the loan is evaluated for present and future
worth. The age of the borrower is used to make an actuarial assessment
of future cash flow which can be provided for the rest of his/her
life. A balance is then struck between the diminishing equity in
the house and the potential future need of income due to survival
beyond the depletion date of this equity, and based thereon, a set
of loan parameters is calculated as the optimal configuration for
the extension of credit to the borrower.
Once the loan attributes are established and the loan is closed,
a loan servicing module controls the day to day management of servicing
the loan--including, by way of example, the payment of fixed or
variable periodic payments, scheduling periodic visits to the property,
sending periodic accounting statements, ensuring proper collection
of property taxes and other periodic events and the monitoring of
the loan throughout its life. This is undertaken for multiple accounts--each
having a distinct profile requiring individual and borrower specific
With the foregoing overview in mind attention is now directed to
a specifically delineated example of the present invention. To provide
a more complete understanding of the invention, FIG. 1 is used to
indicate the distinct yet contiguous information that is processed
and managed by the system data processor. Specifically, FIG. 1 provides
a simple pie chart divided into three fundamental areas--the agreement,
the borrower and the property. The data processor--as a primary
matter--focuses on managing information that falls into one or more
of these three areas.
Turning now to FIG. 2, a block diagram is used to depict the type
of hardware and the associated interconnections there-between that
may be used to implement the present invention. The central database
is managed by CPU 10 which is either a PC or UNIX based workstation
that is discussed in more detail with reference to FIG. 3. The CPU
is linked to Network Server 20 and Communication Server 30. These
two servers are shown as distinct units to highlight their individual
function. It is possible that both server functions will be undertaken
by CPU 10 without departing from the system design.
Continuing with FIG. 2, Network Server 20 provides separate links
to one or more individual and discrete work stations (WS) 40. These
work stations provide for multiple access ports to the database
for loan input, creation and servicing by the loan administrators.
As will be more clear from the following discussion, the implementation
of the RM requires a plethora of outside support--uniquely contributed
by remote entities--but completed in a manner consistent with the
timing requirements of the system. Accordingly, CPU 10 is linked
via Server 30 to a plurality of outside vendors responsible for
Appraisals 50, Inspection 75, Credit 60 and Insurance 70. The above
link provides for rapid submission of ascertained data to the CPU
on individual RM applications.
Alternatively, this information may be transmitted by conventional
phone communications to be locally inputted into CPU 10. Finally,
the system provides for remotely located representatives 80 to facilitate
the application process--the results of which may be downloaded
to the local CPU via the link therebetween. As will be described
more completely below, the reps 80 will be equipped with small laptop
PCs individually programmed with the Pricing Module--and thus individually
capable of establishing the matrix of loan parameters on an individual
As discussed above, the specific requirements of CPU 10 will depend
in large measure on the scope and complexity of the programs offered
and the number of participating applicants and ultimately--borrowers.
This is delineated in block diagram form in FIG. 3. At the nascent
stage of operation, much processing functionality can be accomplished
on a system with a single processor 12, with monitor 14, keyboard
or mouse input 16 and hard disk memory 18--utilizing a simple PC
database program such as Excel. As system demands increase, the
associated hardware may include optical storage 17 and separate
communications port 19. As the demands increase with large numbers
of applicants and current loans, the PC unit may be replaced preferably
with a CPU utilizing UNIX operating system, a Sybase database and
a number of individually programmed interfaces using PowerBuilder
to support the separate applications. One aspect of the present
invention involves the qualification of applicants during the pre-application
process. In particular, recognizing that the number of individually
owned homes is in the tens of millions and only a very small fraction
of that total would have need for an RM, the system provides a series
of screening operations--to size the universe of applicants to a
Part of this process is delineated in flow chart form in FIG. 4A.
Beginning with start block 100, an initial database of potential
applicants DBX (I) is loaded into system memory. On an incremental
basis, each member (utilizing the Ith counter) of the database is
tested as to age--test 120; a negative response branches logic to
test 130 wherein the applicant age (I) is compared to a pre-stored
minimum age; applicants not old enough (no response) pass to block
150 and are stored in a "future" database in age order;
logic continues at block 160 returning to the next Ith applicant.
A positive response to test 130 provides for continuation of the
processing to the next screen--set forth as the affirmative (yes)
response to test 120.
Continuing with FIG. 4, at block 170 the system loads the zip code
for the Ith applicant and determines the state code associated with
the zip code. This state code is then compared to the list of approved
states stored in the database--if the code does not match a valid
state (no to test 170), logic branches to block 190 and the candidate
is discarded with processing continuing to the next candidate (I+1);
however a positive response to test 170 passes logic to the final
test in this series--a screen based on the perceived value of the
property. Again this is accomplished by a comparison of the Ith
property value PRPT (I) to a minimum value PRPT min. Values in excess
of the minimum (yes to test 200) are stored in the final abridged
database CP (I) via blocks 220 and 230 in sequence. Properties failing
to meet the minimum value are dropped via block 210.
The foregoing screening procedures may be augmented by outside
applications that further qualify prospects. In particular, local
property values may be accessed via systems such as MetroScan--a
service that calculates an estimated appraisal for a selected property,
i.e., the prospect, based on a numerical assessment of the recent
sales data for property transactions in the same geographical area.
These determinations are refined by the selected variables of house
type, age, etc. resulting in a fairly good first estimate without
an actual personal visit by a professional appraiser.
In addition, this can be linked to the prospecting process of FIG.
4B--utilizing the AutoAssess application loaded via block 240. The
resulting property and prospects CPAA (I) are stored in a separate
file. Finally, the prospects are entered for a preliminary run through
the Pricing Module (the operation of which will be described in
detail below) block 260 and the PM (I) data selectively arranged
by prospect rank, block 270. The file is thus complete and available
for transfer to one or more local reps, test 280 and block 290--but
stored in any event at block 300.
To better understand the parameters important in the prospect and
application process, Table I below provides the type of information
that is collected during the application process. The application
information is collected and stored in the system database--a process
that is accomplished in the field using laptop computers with the
resulting biographic data transmitted via modem to the central computer
or manually via facsimile or similar means and then key stroked
into the system. ##SPC1##
The inventive system includes a predictive price model engine for
determining a select mix of loan variables optimally configured
to the applicant's particular needs. This process is delineated
in the next sequence of flow charts--shown in hierarchial fashion
for illustrative purposes. The system utilizes indexed variables
to manage the plurality of accounts and to interface with the loan
servicing subsystems. The variables often employ cryptic nomenclature
and therefore the following table is provided as a guide through
TABLE 2 ______________________________________ Variables ______________________________________
App(I) = Appraisal value ($) for Ith application Elec(I) = Elective
reserve for Ith application OHV(I) = Origination home value FVB(I)
= Future value of base amount FV(I) = Future value of closing costs
NPD(I) = Number of periods until deferred annuity for Ith application
MP(I) = Monthly payment for Ith application BA(I) = Borrowers age
for Ith application PP = Period (e.g., one month) LDS(I) = Loan
date - Start DSD(I) = Deferral start date CC(I) = Loan closing costs
LSM(I) = Loan - lump sum LLN(I) = Liens on Ith property LOC(I) =
Line of credit - see, FIG. 8 HRR(I) = Home repair reserve (Ith)
LOF(I) = Loan originator fees RecF(I) = Recordation fees TTL(I)
= Title Insurance Costs FVMA(I) = Future value of mortgage amt.
Specifically and turning attention to FIG. 5A, the first step in
determining the optimal mix for the borrower is to determine the
Appraised Value for the borrower's property which is loaded APP
(I)--the Ith application--into the system at block 410. If the property
value is less than the pre-established lower limit, test 420, a
message is printed that the property is not appropriate for a reverse
mortgage at block 430. If the property value is over the lower limit
(LL (I)), the property may be suitable for a reverse mortgage and
logic continues to block 440 and the applicant's elective reserve
(an amount selected by the borrower to be excluded from loan considerations)
is entered into the system as a variable: Elec (I). This borrower's
elected reserve amount, called Borrower's Elective Reserve, is protected
in all but the case in which the home is destroyed and not rebuilt.
As depicted in block 450, the Borrower's Elected Reserve is then
subtracted from the Appraised Value, the result of which is called
the Origination Home Value (OHV (I)). If the origination Home Value
is greater than the pre-established upper limit or less than the
pre-established lower limit (Omin)--determined at test 460--a message
is printed that the property is not appropriate for a reverse mortgage,
block 470. If the Origination Home Value is within the above stated
limits, then the Origination Home Value is multiplied by 0.8 and
used as the full Origination Home Value for subsequent processing,
block 490. This is also the value referred to as the Base Amount
from which the monthly payment is determined (see below).
The system next determines the future value of the base amount
FVB (I)--a process that requires two additional factors besides
the Base Amount. The first is the Appreciation Rate which is the
rate determined by the lender and loaded at block 500 (APR (I)).
This rate may change with the calculation of each loan or geographic
area, or may be held constant for all loans in a given portfolio.
The second factor is the Number of Periods Until the Deferred Annuity
Payments Begin (NPD (I))--this value is determined in the manner
described below in reference to FIG. 6 and is shown as input via
block 505 to this process stream. Based thereon the system calculates
the future value of the base amount FVB (I) at block 510 using well
known discounted cash flow techniques. This amount is then reduced
by 20 percent via block 520 to ascertain the lendable amount. Processing
is then linked to block 530 and the future value of the closing
costs is loaded from FIG. 6 and the net base amount NBA (I) is calculated
at block 540 (FIG. 5B); given the applicant's prior choices of Elected
Reserve Equity (Elec (I)) and Line of Credit options--see below--the
system can calculate the reverse mortgage monthly payments using
as variables: 1) the Net Base Amount; 2) the Interest Rate; and
3) the Number of Periods until the Deferred Annuity Payments Begin.
This calculation is depicted at block 555.
Once the Monthly Payment is determined (MP (I)), this information
is provided to the applicant to determine acceptability, test 570.
If the answer is yes, a report is printed with the specifics of
the loan (I); If the MP (I) is too high, the applicant is requested
to select a smaller amount, XMP (I)--block 600, at which point the
system will return to the calculation of the line of credit function
and recompute the monthly payment based on a higher line of credit
amount available able which it will also recompute, block 610. If
the amount is too low, "NO" to test 590, the system loops
back, block 620 and selects a new deferral period for each of the
three years on either side of the deferral period used in the current
calculation. The system then recomputes seven new monthly payment
amounts and puts each of these payments and annuity costs associated
with each payment into a Table. The Table is then used, along with
the Number of Periods Until the Deferral Start Date Begins and the
Interest Rate to calculate the Net Present Value of each of the
seven alternatives. The system then selects the choice with the
highest net present value amount which is the optimized monthly
payment for the borrower.
Turning now to FIG. 6, system logic is depicted that results in
the determination of the Future Value of the closing costs FV (I)
as used above. Start block 700 is followed by the calculation of
the closing costs CC (I)--based on the select inputs of any initial
lump sum loan LSM (I) block 710, Liens on the property LLN (I),
block 720, Line of Credit LOC (I) block 730 and Home Repair Reserve
HRR (I); these are summed and combined at block 770 with the inputs
depicted on the right hand portion of FIG. 6. These include the
title insurance TTL (I) block 745, recording fees RecF (I) block
750, the appraisal costs Appr (I), block 760 and loan origination
fees LOF (I), block 765 using as input the appraised value of the
property, block 755; and finally the home repair costs HRC (I) block
The total closing costs are defined as the sum of 1) title insurance
costs; 2) recordation and escrow fees; 3) Home Repair Costs--home
repair costs for work to be completed immediately after loan closing
and the extent of which was determined by a termite inspection and
contractor as part of the loan origination process; and 4) appraisal
fees all of which are manually determined and input into the system;
plus 5) the loan processing fee which is calculated by multiplying
the previously determined Lendable Future Value of the Property
by 0.015. The sum of these four costs total the Closing Costs to
be paid by the borrower from the proceeds of the reverse mortgage.
The system is responsible for determining the Deferral Start Date
(DSD (I)) and calculating the Number of Periods between the Start
Date of the Loan (LDS (I)) and the Deferral Date (DD (I)). This
process is delineated in FIG. 6 beginning with start block 640 and
block 645 with the input of the base amount BA (I). During the first
pass through the system, the Deferral Start Date is set as equal
to the average life expectancy of the applicant based on age--as
taken from Interpolated Average Life Expectancy Tables, block 675.
Once the Deferral Start Date is determined, the system calculates
the number of periods NPD (I), from the Start Date of the Loan until
the Deferral Start Date, block 660. This value is stored at block
670 and used in subsequent iterations. As part of the optimization
aspect of this program, the system will recompute the Monthly Payment
six more times by recalculating the Number of Periods Until the
Deferred Annuity Payments Begin. The system selects three start
dates on either side of the average life expectancy in order to
recompute the Number of Periods Until the Deferral Period Begins.
This is described in more detail later in this document.
From the Lendable Future Value of the Property, the Future Value,
computed at the note rate, of all annuity costs, closing costs,
line of credit and/or lump sum payments and/or VISA credit limits,
home repair costs as determined by termite inspection, any home
repair reserve, and any prior liens against the property are subtracted.
A more detailed discussion of the determination of the above-mentioned
costs or amounts follows below.
The line of credit option is available to the borrower who elects
to take less than the maximum amount of payment available in the
form of monthly reverse mortgage payments because he/she does not
want or need monthly income. To the extent that the borrower has
a line of credit amount available and does not use it, the actual
amount of the line of credit increases over time at a contractually
fixed interest rate until the annuity date. This amount is calculated
by the system as more fully described below.
Once determination of the line of credit amount is calculated,
it can be offered to the borrower in one of these forms: 1) as an
open end line of credit (that is, the credit limit can be drawn
down, repaid and redrawn down as often as desired); 2) a closed
end line of credit that can be drawn down at any time and does not
need to be repaid until repayment of the reverse mortgage; 3) a
single lump sum payment equal to or less than the line of credit
amount; or 4) a larger monthly reverse mortgage payment amount.
The borrower may also select some combination of the above four
forms as long as the total amount does not exceed the line of credit
Referring to FIG. 8, the system logic for determining the line
of credit is depicted. Following start block 800, logic continues
to block 810 where the desired monthly payment XMP (I) is loaded
and used at block 850 to determine the Future Value of Mortgage
Amount (FVMA (I)); other inputs used in this calculation include:
the interest rate on the reverse mortgage (INT (I)) at block 820;
the Number of Periods until the Deferred Annuity Payments Begin
(NPD (I)) at block 830; and the Initial Closing Costs (CC (I)) at
block 840. With these inputs, the Future Value of Mortgage Amount
(FVMA (I)) can be calculated. Over time the Number of Periods Until
the Deferred Annuity Payments Begins, decreases, which in turn increases
the Future Value of the Line of Credit. This means that as time
goes on, the amount of the line of credit available increases, if
the borrower has not previously used the line of credit. This determination
is made at block 860.
The Present Value of the Line of Credit is determined (LOC (I))
at block 870 using time value of money and inputs of the Future
Value of the Line of Credit, the Number of Periods Until the Annuity
Date (block 873), and the Interest Rate on the reverse mortgage
(block 875). After the present value calculation is done, the Present
Value of the Line of Credit is compared with the LOCmax value--for
example, greater than 10% to 50% of the Current Appraised Value
(APP (I) ). Test 880 limits the present value of the line of credit
to 10% to 50% of the current Appraised Value (APP (I) ) via loop
blocks 890 and 900. Specifically, if the answer to test 880 is yes,
the amount of desired line of credit must be reduced, and the system
loops until the answer is no. If the amount is less than 10% to
50%,--a "NO" to test 880--then the only remaining choice
is the form in which the borrower wishes to utilize the available
line of credit (LOC). The choice of LOC form is made at test 910
and includes Lump Sum distribution, 920, a pure LOC, 930, a visa
card (or similar), 940, fixed monthly payment, 950, or a combination
of the above choices 960. Regardless of which form the borrower
elects, the total amount of all forms shall not exceed the total
Present Value of the Line of Credit.
Alternatively, the borrower specifies a present value amount of
the line of credit at loan origination. Under this alternative the
present value of the Line of Credit is input and computations proceed.
This input amount may not exceed 10% to 50% of the Lendable Future
Value of the Property.
As presented in the above pricing model, there are many options
that if selected require precise monitoring and overall system tracking
to insure adequate loan performance. In particular, the loan implicates
a long term relationship between the system proprietor and the numerous
clients--involving many periodic and unscheduled transactions. The
foregoing is handled by the system logic in a continuous manner.
The loan servicing aspect of this operation is delineated in part
in FIG. 9.
Beginning with start block 1000, logic continues to loop control
block 1010, setting the account variables for the loan no. (I) and
the date (or period control variable) (J). At block 1020, the system
loads loan database DD (J) for the current Jth period. At test 1030,
the system tests the first batch (Ith) for scheduled events that
need attendance. If the response to the test is positive, logic
branches to test 1050 and the system walks through the scheduled
events beginning with the Payment test--i.e., the ascertainment
of whether this period involves payment to the loan holder and the
amount thereof. If so, logic branches to block 1060 and the payment
is implemented at the specified amount--either by direct deposit
or other means. In a similar fashion, if the current period--J--is
associated with a rate adjustment for the Ith loan holder, the system
registers this at test 1070 and the loan attributes are modified
via block 1080. Finally, in this illustrative example, the system
tests for miscellaneous transactions at test 1090, with branches
to blocks 1100 (taxes), block 1110 (insurance) and block 1120 (occupancy
check)--these being typical of the many types of periodic and scheduled
events utilized in maintaining the loan portfolio.
A "NO" to test 1030 branches logic to test 1040 and the
determination of the existence of unscheduled events. If no unscheduled
events reside in DD (I,J), system proceeds to the next I account,
blocks 1140 and 1150. However, if unscheduled events have been entered
into the database, the system takes these into account via the sequence
of tests delineated in FIG. 9. Specifically, the system tests for
unscheduled drawing of money from a revolving line of credit, test
1160, the death of the loan holder, test 1190 or the sale of the
under-lying property, test 1210. Accordingly, the system loops through
all the accounts updating the records to insure proper response
to the loan commitments. The linked actions are either done automatically
(debiting an account balance) or manually (termination of contract
and collection on property value at sale). This iterative process
continues for each entry in the database.
The foregoing examples have shown hierarchial--batch type processing;
this formalization is used merely to enhance clarity of the presentation
and it is expected that numerous programming regimens (for example,
menu drives) may be employed to effect the fore-going objectives.
In principle, non-batch processes are more efficient and may be
exploited for these objectives by per se well known database techniques.
This is further illustrated with the menu screen displays depicted
in FIGS. 10 through 19. In general, these screen displays depict
several views available in managing the account loan servicing process.
Turning to the screen displays in FIGS. 10-19, the system provides
"views" of important database information for checking
and/or modifying, via user input. Each screen includes ten "tabs"
across the top, indicating ten separate views. Cursor selection
of any tab accesses that view. Sample views are presented for each
tab in FIGS. 10-19, which are otherwise largely self-explanatory.
The above-described arrangement is merely illustrative of the principles
of the present invention. Numerous modifications and adaptations
thereof will be readily apparent to those skilled in the art without
departing from the spirit and scope of the present invention.