US 2006/0080228 A1Published application

Home equity protection contracts and method for trading them

OwnerBradley McGill, C. McCormickinventors

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Abstract

A method for creating, marketing, and selling a contractual instrument for protecting a value characteristic of a homeowner's residential real estate property is provided according to the invention. The derivative instrument can be created in the form of a simple contract like a “Home Equity Protection Product” sold to the homeowner by a mortgage originator or P&C insurer. It provides a cash-settled payout to the buyer at a predetermined expiration date defined by the contract correlated to, e.g., the home's market value or home equity value, and a reduction in value of a benchmark real estate index between, e.g., the contract purchase date and the expiration date. The Home Equity Protection Contracts of the present invention may be securitized much like mortgage-backed securities on a secondary and sold to institutional investors to permit them to speculate in the value of residential real estate in order to broaden their investment portfolios.

Claims10

Dependent claims

A method for creating and selling a financial security for protecting a value characteristic of a homeowner's residential real estate property, comprising:

(a) establishing or accessing a benchmark index that characterizes the value of a plurality of residential real estate properties of the same type as the homeowner's property;
(b) establishing a financial security based upon the benchmark index for that particular type of real estate property having a first value at a first time, the financial security having an expiration date, and defining a cash-settled payout correlated to the value characteristic of the homeowner's property at the first time, and a reduction in value of the index between the first time and the expiration date;
(c) selling the financial security to the homeowner in return for a purchase price;
(d) securitizing the financial security along with other similar financial securities sold to other homeowners on a secondary market for purchase by buyers speculating in the value of residential real estate;
and
(e) wherein the homeowner will receive the cash-settled payout on the expiration date if the value of the benchmark index has decreased between the first time and the expiration date.

3 more elements

Dependencies are inferred from the claim text.