US 8,478,670 B2Granted

Method and system for determining which mortgage choice is best for a consumer

AssigneeAndrew Kalotay Associates, Inc.

InventorAndrew J. Kalotay

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Abstract

A method and system for selecting a preferred debt instrument (e.g., mortgage) for an individual consumer, where the option adjusted spreads (OAS) and risk measures of a plurality of debt instruments are determined and ranked using standard bond valuation methodology. A typical scenario involves a consumer inputting a plurality of mortgages and associated features (e.g., term of loan or type of interest rate) and receiving the option adjusted spread and risk measure for each mortgage, from which the consumer may select the appropriate mortgage having the lowest option adjusted spread within his or her risk tolerance. These steps can be implemented by a computer which includes a central processing unit (CPU) and a computer code operatively associated with the CPU. The relative option adjusted spreads and risk measures of various debt instruments can be displayed on a visual display or used to automatically commence the financing of a mortgage.

Claims20

Dependent claims

A computer-based method for selecting a debt instrument for a borrower from a plurality of consumer debt instruments, said plurality of debt instruments having respective scheduled lives, costs, risk levels, annual percentage rates (APR) and option-adjusted spreads (OAS), said method comprising:

selecting, by the computer, debt instruments from the plurality of debt instruments, said selected debt instruments having risk levels that correspond to a risk-tolerance of the borrower, wherein said risk-tolerance of the borrower is a range of durations received from the borrower that are within the scheduled lives of the debt instruments;
determining, by the computer, present values of cash flows of the selected debt instruments based on the respective option-adjusted spreads, wherein the present values include the values of the borrower's option to prepay the selected debt instruments before the respective ends of the scheduled lives of said debt instruments;
determining, by the computer, option-adjusted annual percentage rates (option-adjusted APR) for the selected debt instruments based on the respective present values of the cash flows, including the values of the borrower's option to prepay the selected debt instruments, which values are determined by the OAS's of the selected debt instruments;
selecting, from the selected debt instruments, a debt instrument having the lowest option-adjusted APR for a duration within the range of durations received from the borrower;
and
outputting, from the computer, a report identifying the debt instrument selected for the borrower,
wherein the risk-tolerance of the borrower corresponds to a predetermined period of time in which the borrower will repay the debt instruments.

4 more elements

A computer-based system for selecting a debt instrument for a borrower from a plurality of consumer debt instruments, said plurality of debt instruments having respective scheduled lives, costs, risk levels, annual percentage rates (APR) and option-adjusted spreads (OAS), said system comprising:

a processor;
and
a data storage device including computer-readable instructions that, when executed by the processor control the computer to:
select debt instruments from the plurality of debt instruments, said selected debt instruments having risk levels that correspond to a risk-tolerance of the borrower, wherein said risk-tolerance of the borrower is a range of durations received from the borrower that are within the scheduled lives of the debt instruments;
determine present values of cash flows of the selected debt instruments based on the respective option-adjusted spreads, wherein the present values include the values of the borrower's option to prepay the selected debt instruments before the respective ends of the scheduled lives of said debt instruments;
determine, by the computer, option-adjusted annual percentage rates (option-adjusted APR) for the selected debt instruments based on the respective present values of the cash flows, including the values of the borrower's option to prepay the selected debt instruments, which values are determined by the OAS's of the selected debt instruments;
select, from the selected debt instruments, a debt instrument having the lowest option-adjusted APR for a duration within the range of durations received from the borrower;
and
output a report identifying the selected debt instrument selected for the borrower,
wherein the risk-tolerance of the borrower corresponds to a predetermined period of time in which the borrower will repay the debt instruments.

7 more elements

Dependencies are inferred from the claim text.

Facts

Application: 11/510,897Filed 28 Aug 2006 · us provisional application
Priority: 30 Aug 2005
Published: US 2007/0055603 A18 Mar 2007
Granted: 2 Jul 2013
Term ends: Not estimatedThe source records don’t support an estimate.

Classification3 codes

G06Q 40/02
Finance; Insurance; Tax strategies; Processing of corporate or income taxes: banking, e.g. interest calculation or account maintenance
G06Q 40/06
Finance; Insurance; Tax strategies; Processing of corporate or income taxes: asset management; Financial planning or analysis
G06Q
Information and communication technology [ict] specially adapted for administrative, commercial, financial, managerial