Method for structuring a supplemental interest mortgage
View Patent ↗A system and method of structuring a supplemental interest mortgage is disclosed. A principal debt obligation and a supplemental debt obligation based on the principal debt loan are secured by a single security instrument. The principal debt obligation includes the principal loan and principal interest to compensate a lender for use of the lender's funds. The supplemental debt obligation includes supplemental interest to compensate a lender for the risk of borrower nonpayment.
1. A computer implemented method of structuring a supplemental interest mortgage, comprising:
issuing a principal debt obligation to a borrower, wherein the principal debt obligation is issued over a communications network connected to a processor on which the principal debt obligation is calculated;
wherein the principal debt obligation comprises (i) a principal loan based on a principal debt amount; and (ii) a principal interest to compensate a lender for the borrower's use of the principal debt amount; and
issuing a supplemental debt obligation to the borrower based on the principal debt amount, wherein the supplemental debt obligation is issued over a communications network connected to the processor on which the supplemental debt obligation is calculated;
wherein the supplemental debt obligation comprises a supplemental interest based on the principal debt amount to compensate the lender for a risk of nonpayment by the borrower;
wherein the supplemental debt obligation is determined by at least one risk characteristic including at least one of a loan-to-value (LTV) ratio that exceeds a predetermined threshold value, a credit score that is below a predetermined threshold value and a Fair Isaac Credit Organization (FICO) credit score that is below a predetermined threshold value;
wherein the principal debt obligation and the supplemental debt obligation are secured by a single security instrument: and
wherein the supplemental interest mortgage is structured without borrower-paid mortgage insurance.
2. The method of claim 1 , wherein the supplemental interest mortgage is utilized to purchase a house.
3. The method of claim 1 , wherein the principal debt obligation satisfies a borrower's existing mortgage.
4. The method of claim 1 , further comprising
canceling the supplemental debt obligation when at least one risk characteristic is reduced to at least one predetermined condition.
5. The method of claim 4 , wherein the at least one risk characteristic is a loan-to-value (LTV) ratio that is reduced to a predetermined ratio.
6. The method of claim 4 , wherein the at least one risk characteristic is a credit score that is below a predetermined threshold value.
7. The method of claim 6 , wherein the credit score is a Fair Isaac Credit Organization (FICO) credit score.
8. The method of claim 7 , further comprising
combining the principal debt obligation with other loans having similar characteristics into a mortgage loan pool.
9. The method of claim 8 , wherein the mortgage loan pool is included in a mortgage-backed security.
10. The method of claim 1 , further comprising:
canceling the supplemental debt obligation based on payment of a portion of the principal debt amount.
11. The method of claim 1 , wherein the principal debt obligation and the supplemental debt obligation are issued by the same lender.
12. The method of claim 1 , wherein the supplemental debt obligation is interest only.
13. A computer program product comprising a computer usable medium having control logic stored therein for causing a computer to perform calculations for a supplemental interest mortgage, said control logic comprising:
first computer readable program code means for causing the computer to issue a principal debt obligation to a borrower; wherein the principal debt obligation comprises (i) a principal loan based on a principal debt amount and (ii) a principal interest to compensate a lender for the borrower's use of the principal debt amount, wherein the principal debt obligation is issued over a communications network connected to a processor on which the principal debt obligation is calculated; and
second computer readable program code means for causing the computer to issue a supplemental debt obligation to the borrower based on the principal debt amount, wherein the supplemental debt obligation is issued over a communications network connected to the processor on which the supplemental debt obligation is calculated; and
wherein the supplemental debt obligation comprises a supplemental interest based on the principal debt amount to compensate the lender for a risk of nonpayment by the borrower;
third computer readable program code means for causing the computer to determine the supplemental debt obligation by using at least one risk characteristic including at least one of a loan-to-value (LTV) ratio that exceeds a predetermined threshold value, a credit score that is below a predetermined threshold value and a Fair Isaac Credit Organization (FICO) credit score that is below a predetermined threshold value;
wherein the supplemental interest mortgage is structured without borrower-paid mortgage insurance.
14. The computer program product of claim 13 , further comprising
fourth computer readable program code means for causing the computer to cancel the supplemental debt obligation when a condition relating to a lender's risk exposure is met.
15. A computer implemented method of structuring a supplemental interest mortgage, comprising:
issuing a principal debt obligation to a borrower, wherein the principal debt obligation is issued over a communications network connected to a processor on which the principal debt obligation is calculated;
wherein the principal debt obligation comprises (i) a principal loan based on a principal debt amount; and (ii) a principal interest to compensate a lender for the borrower's use of the principal debt amount; and
issuing a supplemental debt obligation to the borrower based on the principal debt amount, wherein the supplemental debt obligation is issued over a communications network connected to the processor on which the supplemental debt obligation is calculated;
wherein the supplemental debt obligation comprises a supplemental interest based on the principal debt amount to compensate the lender for a risk of nonpayment by the borrower;
wherein the principal debt obligation and the supplemental debt obligation are secured by a single security instrument;
wherein the supplemental debt obligation is determined by at least one risk characteristic including at least one of a loan-to-value (LTV) ratio that exceeds a predetermined threshold value, a credit score that is below a predetermined threshold value and a Fair Isaac Credit Organization (FICO) credit score that is below a predetermined threshold value;
wherein the borrower pays the principal interest and the supplemental interest in periodic payments; and
wherein the supplemental interest mortgage is structured without borrower-paid mortgage insurance.
16. The method of claim 15 , wherein the periodic payments comprising the supplemental interest and the principal interest are paid concurrently by the borrower.
17. A computer program product comprising a computer usable medium having control logic stored therein for causing a computer to perform calculations for a supplemental interest mortgage, said control logic comprising:
first computer readable program code means for causing the computer to issue a principal debt obligation to a borrower; wherein the principal debt obligation comprises (i) a principal loan based on a principal debt amount and (ii) a principal interest to compensate a lender for the borrower's use of the principal debt amount, wherein the principal debt obligation is issued over a communications network connected to a processor on which the principal debt obligation is calculated; and
second computer readable program code means for causing the computer to issue a supplemental debt obligation to the borrower based on the principal debt amount, wherein the supplemental debt obligation is issued over a communications network connected to the processor on which the supplemental debt obligation is calculated;
third computer readable program code means for causing the computer to determine the supplemental debt obligation by using at least one risk characteristic including at least one of a loan-to-value (LTV) ratio that exceeds a predetermined threshold value, a credit score that is below a predetermined threshold value and a Fair Isaac Credit Organization (FICO) credit score that is below a predetermined threshold value;
wherein the supplemental debt obligation comprises a supplemental interest based on the principal debt amount to compensate the lender for a risk of nonpayment by the borrower; and
wherein the principal debt obligation and the supplemental debt obligation are secured by a single security instrument, and
wherein the borrower pays the principal interest and the supplemental interest in periodic payments; and
wherein the supplemental interest mortgage is structured without borrower-paid mortgage insurance.
18. The computer program product of claim 17 , wherein the periodic payments comprising the supplemental interest and the principal interest are paid concurrently by the borrower.