Systems and methods for selecting loan payment terms for improved loan quality and risk management
Inventors
Dharmadhikari, Sachin • Krishnamoorthy, Ganesh
Assignees
Andrei Iancu Under Secretary Of Commerce For Intellectual Property And Director Of United States Patent And Trademark Office And Successors Thereto • Ashley Moody Florida Office Of Attorney General And Successors Thereto • Heuer Joan D • Jeanette Nunez Lieutenant Governor Of Florida And Successors Thereto • Laurel M Lee Florida Secretary Of State And Successors Thereto • Steven Mnuchin United States Secretary Of Treasury And Successors Thereto • Bureau of the Fiscal Service
Interested in licensing this patent?
MTEC can help explore whether this patent might be available for licensing for your application.
Publication Number
US-10198766-B1
Publication Date
2019-02-05
Expiration Date
2030-06-18
Abstract
Systems, methods, and computer-readable media are disclosed for selecting loan payment terms for improved loan quality and risk management. An exemplary embodiment includes storing first loan data corresponding to a first loan to a first borrower. The first loan may have been funded based on an initial financial disclosure that reflects the financial status of the first borrower during an initial time period when the first loan was funded. First payment terms and second payment terms are stored, and one of the first payment terms or the second payment terms is selected based on whether the first borrower provides the updated financial disclosure. The first loan data is processed consistently with the selected payment terms.
Core Innovation
The invention provides systems, methods, and computer-readable media to select loan payment terms that improve loan quality and risk management by using updated financial disclosures from borrowers during the repayment period of a loan. The invention stores first loan data associated with a loan funded based on an initial financial disclosure describing the borrower's financial status at funding. It then stores multiple sets of payment terms and selects between them based on whether the borrower provides updated financial disclosure reflecting their financial status after funding.
The problem addressed arises because initial financial disclosures provided by borrowers at loan funding may become outdated, as borrowers' financial conditions change during the loan repayment period. Lenders traditionally do not receive updated financial information once a loan is funded, limiting their ability to accurately assess ongoing risk, default probability, and prepayment likelihood. The invention seeks to obtain updated financial disclosures from borrowers by providing incentives through varied payment terms, allowing lenders to better evaluate loan risks based on current borrower financial status rather than relying solely on initial disclosures.
Claims Coverage
The patent contains one independent method claim and one independent computer-readable medium claim, both describing methods executed by a risk engine for loan payment term selection and risk evaluation.
Using updated financial disclosures to select loan payment terms
The method involves retrieving loan data for a loan originally funded based on initial financial disclosure, retrieving two sets of payment terms—one for when updated financial disclosure is provided and one for when it is not—and determining if the borrower provides the updated disclosure during the repayment period. One of the payment terms is selected based on this determination, and loan data is processed consistent with the selected terms.
Incentivizing and varying payment terms based on mandatory and optional disclosures
The updated financial disclosure includes mandatory financial attributes required by contractual agreement and optional attributes that provide additional incentives. Discounts or favorable payment terms are associated with providing optional disclosures. The discount can vary year to year according to a predetermined schedule. Payment terms may include lower interest rates or penalties depending on whether disclosures are provided.
Calculating and using recurring updates of relative risk of default based on selected payment terms
Processing loan data with the selected payment terms triggers recurring updates of a determined relative risk of default, calculated by applying the selected payment terms to the initial or updated financial disclosure. The risk engine determines changes with each update, which are used to assess the loan's default or prepayment risk. These recurring updates are transmitted in parallel to borrower, servicer, lender, and investor computer systems.
The inventive features encompass a systematized process of selecting and applying loan payment terms contingent on borrower-provided updated financial disclosures, integrating incentives for such disclosures, and dynamically assessing loan default or prepayment risk based on these updated terms and disclosures, with communications to relevant parties.
Stated Advantages
Improved loan quality and risk management through use of updated borrower financial disclosures during the repayment period.
Provision of incentives to borrowers to supply updated financial information, thereby enabling more accurate risk evaluation.
Enhanced ability for lenders and investors to monitor and respond to changes in borrower financial status over time.
Dynamic adjustment of loan payment terms, including interest rates and fees, based on updated financial disclosures to better reflect current risk.
Documented Applications
Administration of mortgage-backed securities (MBS) where payments and risk evaluation depend on borrower updated financial disclosures.
Evaluation of risk of payment events such as loan defaults and prepayments based on updated financial disclosures from borrowers.
Modification of existing loans to offer better payment terms contingent on borrower agreement to provide updated financial disclosures.
Interested in licensing this patent?