U.S. patent application number 12/108757 was filed with the patent office on 2008-10-02 for risk profiles in networked loan market and lending management system.
This patent application is currently assigned to AxcessNet Innovations. Invention is credited to Yoni Cheifetz, Nava Goren, Eyal Shavit.
Application Number | 20080243719 12/108757 |
Document ID | / |
Family ID | 37727706 |
Filed Date | 2008-10-02 |
United States Patent
Application |
20080243719 |
Kind Code |
A1 |
Shavit; Eyal ; et
al. |
October 2, 2008 |
RISK PROFILES IN NETWORKED LOAN MARKET AND LENDING MANAGEMENT
SYSTEM
Abstract
Systems, methods, and apparatus for receiving, from a lender, a
lending order that specifies a desired risk profile, end term, and
interest rate for a loan, the risk profile specifying a plurality
of parameters used to determine a risk of a loan; and generating a
portfolio loan that includes a plurality of atomic loans with a
plurality of different borrowers or borrower requests that, in
combination, satisfy the desired risk profile, term, and rate
specified in the lending order, wherein the atomic loans each
comprise a direct contractual agreement between the lender and a
borrower.
Inventors: |
Shavit; Eyal; (Concord,
MA) ; Cheifetz; Yoni; (Tel-Aviv, IL) ; Goren;
Nava; (London, GB) |
Correspondence
Address: |
OCCHIUTI ROHLICEK & TSAO, LLP
10 FAWCETT STREET
CAMBRIDGE
MA
02138
US
|
Assignee: |
AxcessNet Innovations
Lexington
MA
|
Family ID: |
37727706 |
Appl. No.: |
12/108757 |
Filed: |
April 24, 2008 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
|
|
11501057 |
Aug 9, 2006 |
|
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12108757 |
|
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|
60706751 |
Aug 10, 2005 |
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60796857 |
May 3, 2006 |
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Current U.S.
Class: |
705/36R ;
705/38 |
Current CPC
Class: |
G06Q 40/00 20130101;
G06Q 40/02 20130101; G06Q 40/025 20130101; G06Q 40/06 20130101;
G06Q 40/04 20130101 |
Class at
Publication: |
705/36.R ;
705/38 |
International
Class: |
G06Q 40/00 20060101
G06Q040/00 |
Claims
1. A computer-implemented method, comprising: receiving, from a
lender, a lending order that specifies a desired risk profile, end
term, and interest rate for a loan, the risk profile specifying a
plurality of parameters used to determine a risk of a loan; and
generating a portfolio loan that includes a plurality of atomic
loans with a plurality of different borrowers or borrower requests
that, in combination, satisfy the desired risk profile, term, and
rate specified in the lending order, wherein the atomic loans each
comprise a direct contractual agreement between the lender and a
borrower.
2. The computer-implemented method of claim 1, further comprising:
calculating the risk of the loan using an algorithm that receives
as inputs one or more of the plurality of parameters used to
determine the risk of the loan.
3. The computer-implemented method of claim 1, further comprising
calculating the risk profile of the portfolio loan based on risk
ratings of each of the requested loans.
4. The computer-implemented method of claim 3, wherein calculating
the risk profile of the portfolio loan further comprises
calculating the risk profile of the portfolio loan based on
correlations among the borrowers.
5. The computer-implemented method of claim 4, wherein the
correlation between the borrowers comprises a quantification of a
qualitative relationship between the borrowers.
6. The computer-implemented method of claim 5, wherein the
qualitative relationship is based on at least one of a family
relationship, an employer, geography, industry, and collateral.
7. The computer-implemented method of claim 1, wherein at least
some of the atomic loans in the portfolio loan have different risk
ratings and different interest rates.
8. The computer-implemented method of claim 1, wherein a particular
interest rate for a particular borrower is based on a risk
profile.
9. The computer-implemented method of claim 1, further comprising
receiving, from the lender, a set of conditions included in the
lending order, the conditions being selected from the group
consisting of a time period, a maximum number of loans in the
portfolio loan, states of the borrowers, regions of the borrowers,
insurance requirements, prepayment options, penalties, and credit
rating of the borrower.
10. The computer-implemented method of claim 1, further comprising:
receiving a change in user data from a borrower; updating a risk
profile based on the change in the user data for the borrower; and
automatically generating an event based on the updated risk
profile.
11. The computer-implemented method of claim 10, wherein the change
in user data comprises one of the introduction of new collateral,
change in collateral, and a change of address.
12. The computer-implemented method of claim 1, wherein generating
a portfolio loan comprises selecting the atomic loans included in
the portfolio loan to diversify an overall risk of the portfolio
loan.
13. The computer-implemented method of claim 1, further comprising
managing collateral associated with one or more of the atomic loans
included in the portfolio loan.
14. The computer-implemented method of claim 1, further comprising
receiving information related to available collateral from a
user.
15. The computer-implemented method of claim 14, wherein generating
the portfolio loan comprises selecting one or more of the atomic
loans based in part on the information related to the available
collateral.
16. An apparatus comprising: a lending order receiver configured
to: receive, from a lender, a lending order that specifies a
desired risk profile, term, and interest rate for a loan, the risk
profile specifying a plurality of parameters used to determine a
risk of a loan; and generate a portfolio loan that includes a
plurality of atomic loans with a plurality of different borrowers
or borrower requests that, in combination, satisfy the desired risk
profile, term, and rate specified in the lending order, wherein the
atomic loans each comprise a direct contractual agreement between
the lender and a borrower.
17. The apparatus of claim 16, wherein the lending order receiver
is further configured to receive, from the lender, a set of
conditions included in the lending order, the conditions being
selected from the group consisting of a time period, a maximum
number of loans in the portfolio loan, states of the borrowers,
regions of the borrowers, insurance requirements, prepayment
options, penalties, and credit rating of the borrower.
18. The apparatus of claim 16, wherein the lending order receiver
is further configured to: receive a change in user data from a
borrower; update a risk profile based on the change in the user
data for the borrower; and automatically generate an event based on
the updated risk profile.
19. The apparatus of claim 16, wherein at least some of the atomic
loans in the portfolio loan have different risk ratings and
different interest rates.
20. The apparatus of claim 16, wherein a particular interest rate
for a particular borrower is based on a risk profile.
Description
RELATED APPLICATIONS
[0001] The present application is a continuation of U.S.
application Ser. No. 11/501,057, filed Aug. 9, 2006, and titled
"Networked Loan Market and Lending Management System," which claims
priority from U.S. Provisional Patent Application No. 60/706,751,
filed on Aug. 10, 2005, and U.S. Provisional Patent Application No.
60/796,857, filed on May 3, 2006, the contents of which are
incorporated herein by reference.
FIELD AND BACKGROUND OF THE INVENTION
[0002] The present invention relates to generating and processing
lending and borrowing transactions and more particularly, but not
exclusively to a system and a method for generating and processing
lending and borrowing transactions by means of matching between
borrowers and lenders. Borrowed money is a primary source of
capital for both businesses and consumers. Banks and other
financial institutions are the primary facilitators, bridging
between lenders and borrowers, managing risks and collecting fees
in the process.
[0003] Banks borrow money from depositors through certificates of
deposit, checking accounts, money market accounts and other debt
instruments. Depositors lend their money to the bank against the
bank's balance sheet, relying partly on government insurance (such
as the Federal Deposit Insurance Corporation--FDIC) and government
regulation. The bank, in turn, lends this money to both business
and consumers. It is the bank's responsibility to assess the
lending risk, to verify collaterals, to manage the flow of funds
and to take action in cases of delinquency by borrowers. No direct
contractual relationship exits between the original lenders and the
eventual borrowers who receive the money from the bank.
[0004] Governments, Government Agencies and commercial enterprises
routinely issue bonds and other debt instruments. With the
exception of government issued debt instruments, such securities
carry the credit risk of the issuers, are relatively liquid (say,
traded at various exchanges), and have preset maturity schedules
(the schedules of repayments by dates and amounts), and prepayment
options. Bonds are usually issued with respect to large sums of
money.
[0005] Banks and other financial institutions package and sell many
other forms of debt securities and debt derivatives. In essence, in
these packages, a number of loans (each with its terms and
conditions and risks profile) are owned by a single entity, whose
securities (debt or equity) are directly linked to the risks and
the performance of the loans or derivatives owned by the entity.
There is no direct contractual relationship between the securities
holders of such entity and the borrowers who receive the packaged
loans.
[0006] Micro-Lending, within and outside the traditional banking
sector, involves lending of relatively small amounts (typically
less than $25,000), to micro entities (individuals or
organizations) who lack the collateral or the capacity to convince
traditional banks that they are able to repay a loan, and are
therefore considered a risky client group. Micro entities
frequently have limited track record or financial reporting
capacity. The costs of processing small loans and the risks
involved in lending to micro entities make financial institutions
hesitant to develop services for micro entities and small time
entrepreneurs. All these factors limit the access to credit
available for micro entities.
[0007] There are key differences in the service delivery principles
of micro-versus traditional lending. Micro lending is characterized
by its small loan size, the non-traditional aspects of collateral
requirements and assessment of credit worthiness, and quick and
easy access. The relatively high transaction costs of micro-lending
are covered either through above market level interest rates or
subsidies. No direct contractual relationship exits between the
sources of capital used by the micro-lenders and the eventual
micro-borrowers who receive the money.
[0008] Financial exchanges allow buyers and sellers to trade
various types of securities (stocks, bonds, futures, options).
Taking orders from both buyers and sellers, these exchanges match
sell or buy orders for individual securities based on price and
quantity, to generate trades.
[0009] With the rise of the Internet, and the growth of e-commerce,
a new breed of exchanges, i.e. electronic marketplaces, has
developed. These marketplaces, used mainly as auctions for trading
goods, are either Consumer-to-Consumer (C2C) marketplaces (such as
eBay.TM.), Business-to-Business service providers (B2B) (such as
Fiber2Fashion.TM.), or Business-to-Consumer (B2C) service providers
(such as yahoo.com.TM.).
[0010] Currently, there are a few electronic market lending places.
For example, Prosper Marketplace Inc. offers an electronic
marketplace where borrowers may organize in a group, for
negotiating better loan rates for the group.
[0011] In another example, Zopa Ltd. offers a web site where
lenders may define the minimum required credit rating of the
borrowers (according to a single rating agency) and the desired
interest rate. Only borrowers rated by the single rating agency may
choose to agree to the loan terms. The funding offered by the
lender under the loan terms is arbitrarily divided between the
borrowers that meet a specific credit rate, such that each borrower
is allocated a small chunk of the funding (less than 1/50).
[0012] Both financial exchanges and electronic marketplaces
implement one or more auction mechanisms to match buy orders and
sell orders, for generating transactions. An auction is defined as
any negotiation mechanism that is: mediated, well-specified (i.e.,
runs according to explicit rules) and market-based (i.e.,
determines an exchange in terms of standard currency).
[0013] Auctions can be either single dimensional--where the only
bid dimensions are price and quantity of a single good, or
multi-dimensional--where other attributes of the goods are also
negotiated. For example, if the goods are loans, the other
attributes may include the collaterals offered by the borrowers.
Single dimensional auctions can be further subdivided into
one-sided auctions and two-sided auctions.
[0014] Two-sided auctions include the Continuous Double Auction
(CDA) and Call Market (periodic clear) types described herein
below.
[0015] Two-sided auctions form the basis of many of today's
financial exchanges. For example, NASDAQ has a Continuous Double
Auction process, in which every new order is matched immediately if
possible, and the remaining orders are put on the order book. The
Arizona Stock Exchange (AZX) operates a Call Market ("periodic
clear") in which orders are matched periodically.
[0016] Multi-dimensional auctions include multi-attribute (matching
a single good with multiple attributes) and multi-good
mechanisms.
[0017] An auction operator performs three types of activities:
receiving bids, disseminating information and arranging trades
(clearing). Therefore, in analyzing the different types of
auctions, one can use three dimensions: bidding rules, clearing
policy and information revelation policy.
[0018] Current systems and methods for processing lending and
borrowing transactions have several disadvantages.
[0019] Businesses and consumers commonly borrow at local banks or
financial institutions having specific knowledge and information
about the local market, the community and often the individual
borrowers.
[0020] The emergence of credit reporting agencies and the Internet
have broadened the access to such information, but have not
eliminated the trust and long-term relationships aspects of lending
and borrowing decisions. Lenders without local presence have only
limited direct access to local borrowers. Similarly, borrowers are
limited in their access to lenders without local presence.
[0021] The banking system is characterized by high costs. The high
costs include both fixed costs, such as: fixed assets (branch
offices, distributed IT infrastructure, etc.), and variable costs
of operation, which include required capital reserves expensive
workforce, information systems services, insurance, and regulatory
costs.
[0022] The costs include both operational costs (bank branch
operation costs, salaries, providing local physical points of
service to the public), and financial costs associated with the
fact that banks need to hold reserves that cover the risk
associated with the fact that the bank is a part of the
transaction
[0023] The high costs are reflected by a large spread between the
interest rates paid to lenders and those collected from
borrowers.
[0024] The fact that the loan market is characterized by a limited
number of mega banks and financial institutions using a limited
number of lending policies, limits the options available to a
specific borrower based on his unique circumstances.
[0025] Most banks and lending institutions utilize a limited number
of inflexible lending processes. The limited and inflexible
processes prevent a potentially major increase in the number of
lenders able to manage their risk in a different way, which would
have resulted, had there been more flexible lending processes
available.
[0026] More flexible lending processes may create higher yield for
the lenders and more options for the borrowers. (i.e., a partial
advance against the total amount of the loan before verifying the
collaterals, a lower interest rate in return for a portion of the
borrower's earning from a particular activity, additional means of
payment such as bartered services, etc.).
[0027] Currently, lending institutions, banks, and other financial
institutions deal with very limited and finite number and types of
risk profiles. Consequently, the financial institutions lack the
ability to address very specific situations that current risk
profiles fail to address. Different lenders may have different
subjective risk assessment of the same borrower. For example
lending to a Chinese borrower may be deemed safe for one lender and
too risky to another lender. More opportunities will be available
if many borrowers and lenders participate in a large market where
each of them can find what he considers the best deal.
[0028] Borrowers of small amounts from thousands of Dollars to a
few Million Dollars are limited in their ability to issue public
debt securities. Even if they can issue such securities, the cost
may be prohibitively high and the regulatory requirements may be
complex. For example, there is a need to meet the Sarbanes-Oxley
(SOX) requirements. Sarbanes-Oxley (SOX) is a US law which was
passed in 2002, and aims at strengthening corporate governance and
restoring investor's confidence.
[0029] Consumers and many businesses invest their short term cash
surpluses in low interest money market accounts because they do not
have a better way to maximize their gain from small amounts
available for relatively short periods.
[0030] The public market for small debt issues is very limited and
illiquid and there is almost no market for non-public debt
issues.
[0031] Currently, lenders lack the ability to leverage their
knowledge or assessments in lending to particular industries,
geographies, or other profiles of entities. That as to say, the
lenders have to trust a bank or another financial institution to
make the decisions that are reflected in the interest rate
available to them. The interest rate is based on average costs and
risks across a very big loan portfolio of the bank in general,
rather than a target subpopulation of borrowers the lenders are
willing to finance.
[0032] Current lending processes represent cumbersome, inefficient
and costly processes that were appropriate in the past. The
processes fail to weigh together the needs of borrowers, lenders,
and other parties involved in the lending process. Current lenders
and borrowers face a rather limited number of choices, with regards
to the lenders/borrowers, lending/borrowing support services--which
are limited to traditional banking systems, etc.
[0033] There is thus a widely recognized need for, and it would be
highly advantageous to have, a system and a method, devoid of the
above limitations.
SUMMARY OF THE INVENTION
[0034] Preferred embodiments of the present invention provide in
one aspect a flexible loan market and/or a lending management
system.
[0035] The above aspect provides for such a flexible loan market
that is open to borrowers and lenders large and small.
[0036] The flexibility of the loan market allows each user, whether
acting as a borrower or a lender, to get the terms that best suit
him.
[0037] The loan market is preferably networked and allows
participants to act as borrowers, lenders, and subsidizers. The
loan market manages loans throughout their lifetime from inception
to completion of repayment. That is to say it manages the matching
of borrowers to lenders and subsidizers at the start creating one
or more composite loan and portfolio loans each made of one or more
atomic loans. The loan market manages collection of finds from
lenders and transferring composite loan finds to borrowers,
collecting repayment funds from borrowers, allocating such
repayment funds among the portfolio loans and transferring
repayment amounts to lenders. The loan market collects funds from
subsidizers at the appropriate time, and distribute them according
to the terms of the subsidy. It also manages the sale and transfer
of a loan from lender to lender
[0038] The operational aspects of the market may be carried out by
a network of third parties, certified and orchestrated by the
market operation.
[0039] According to one aspect of the present invention there is
provided an apparatus for generating and processing lending and
borrowing orders, comprising: a borrowing order receiver,
configured to receive at least one borrowing order from at least
one borrower, the borrowing order comprising borrower-requested
loan terms, a lending order receiver, configured to receive at
least one lending order from at least one lender, the lending order
comprising lender-requested loan terms, and a matcher, associated
with the borrowing order receiver and the lending order receiver,
and configured to automatically provide at least one match to a
respective current lending order from amongst the borrowing orders,
such that the matched orders are mutually satisfied with respect to
the loan terms.
[0040] According to a second aspect of the present invention there
is provided a method for generating and processing lending and
borrowing orders, comprising: receiving at least one borrowing
order from at least one borrower, the borrowing order comprising
borrower-requested loan terms, receiving at least one lending order
from at least one lender, the lending order comprising
lender-requested loan terms; and automatically providing a match to
a current lending order from amongst the borrowing orders, such
that the matched orders are mutually satisfied with respect to the
loan terms.
[0041] According to a third aspect of the present invention there
is provided an apparatus for managing a workflow of processes for
initiating and executing composite loans and portfolio loans as
well as the processes of collecting, aggregating and distributing
funds.
[0042] According to a fourth aspect of the present invention there
is provided a method for managing the life cycle of composite loans
and portfolio loans from initiation, signing the loans agreements,
handling collaterals, monitoring the collection and distribution of
funds, handling uncollected obligations and issuing appropriate
reports.
[0043] Unless otherwise defined, all technical and scientific terms
used herein have the same meaning as commonly understood by one of
ordinary skill in the art to which this invention belongs. The
materials, methods, and examples provided herein are illustrative
only and not intended to be limiting.
[0044] Implementation of the method and system of the present
invention involves performing or completing certain selected tasks
or steps manually, automatically, or a combination thereof.
Moreover, according to actual instrumentation and equipment of
preferred embodiments of the method and system of the present
invention, several selected steps could be implemented by hardware
or by software on any operating system of any firmware or a
combination thereof. For example, as hardware, selected steps of
the invention could be implemented as a chip or a circuit. As
software, selected steps of the invention could be implemented as a
plurality of software instructions being executed by a computer
using any suitable operating system. In any case, selected steps of
the method and system of the invention could be described as being
performed by a data processor, such as a computing platform for
executing a plurality of instructions.
BRIEF DESCRIPTION OF THE DRAWINGS
[0045] The invention is herein described, by way of example only,
with reference to the accompanying drawings. With specific
reference now to the drawings in detail, it is stressed that the
particulars shown are by way of example and for purposes of
illustrative discussion of the preferred embodiments of the present
invention only, and are presented in order to provide what is
believed to be the most useful and readily understood description
of the principles and conceptual aspects of the invention.
[0046] In this regard, no attempt is made to show structural
details of the invention in more detail than is necessary for a
fundamental understanding of the invention, the description taken
with the drawings making apparent to those skilled in the art how
the several forms of the invention may be embodied in practice.
[0047] In the drawings:
[0048] FIG. 1a is a block diagram schematically illustrating a loan
market implementing an apparatus according to a preferred
embodiment of the present invention.
[0049] FIG. 1b is a block diagram illustrating a first apparatus
for generating and processing lending and borrowing orders,
according to a preferred embodiment of the present invention.
[0050] FIG. 1c is a flowchart illustrating a method for collection
management, according to a preferred embodiment of the present
invention.
[0051] FIG. 2 is a block diagram illustrating a second apparatus
for generating and processing lending and borrowing orders,
according to a preferred embodiment of the present invention.
[0052] FIG. 2a is a block diagram mapping clusters of processes
carried out by an apparatus for loan market management, according
to a preferred embodiment of the present invention.
[0053] FIG. 2b is a second block diagram mapping processes carried
out by an apparatus for loan market management, according to a
preferred embodiment of the present invention.
[0054] FIG. 3 is a flowchart illustrating a first method for
generating and processing lending and borrowing orders, according
to a preferred embodiment of the present invention.
[0055] FIG. 4 is a flowchart illustrating a method for handling
user interactions, according to a preferred embodiment of the
present invention.
[0056] FIG. 4a is a flowchart illustrating a method for external
conditions verification, according to a preferred embodiment of the
present invention.
[0057] FIG. 5 is a flowchart illustrating a method for user
management, according to a preferred embodiment of the present
invention.
[0058] FIG. 5a is a flowchart illustrating a method for user
rating, according to a preferred embodiment of the present
invention.
[0059] FIG. 5b is a flowchart illustrating a method for user
collateral management, according to a preferred embodiment of the
present invention.
[0060] FIG. 6a is a flowchart illustrating a method for borrowing
order receiving and management, according to a preferred embodiment
of the present invention.
[0061] FIG. 6b is a flowchart illustrating a method for signature
verification, according to a preferred embodiment of the present
invention.
[0062] FIG. 7 is a flowchart illustrating a method for lending
order receiving and management, according to a preferred embodiment
of the present invention.
[0063] FIG. 8 is a flowchart illustrating a method for managing a
secondary loan sale, according to a preferred embodiment of the
present invention.
[0064] FIG. 9a which is a block diagram illustrating an exemplary
composite loan and portfolio loan, according to a preferred
embodiment of the present invention.
[0065] FIG. 9b is a flowchart illustrating a method for contract
management of a composite loan, according to a preferred embodiment
of the present invention.
[0066] FIG. 10 is a block diagram illustrating interactions between
escrow service providers and other parties in a loan market,
according to a preferred embodiment of the present invention.
[0067] FIG. 10a is a flowchart illustrating a repayment management
method, according to a preferred embodiment of the present
invention.
[0068] FIG. 11 is a flowchart illustrating a repayment management
method based on notices from escrow agents or banks, according to a
preferred embodiment of the present invention.
[0069] FIG. 11a is a flowchart illustrating a loan closing method,
according to a preferred embodiment of the present invention.
[0070] FIG. 11b is a flowchart illustrating a lender payment
dispensing method, according to a preferred embodiment of the
present invention.
DESCRIPTION OF THE PREFERRED EMBODIMENTS
[0071] The present embodiments comprise an apparatus and a method
for generating and processing lending and borrowing orders and for
managing a flexible loan market that is preferably networked and
allows participants to act as borrowers and lenders. As explained,
the loan market manages loans throughout their lifetime from
inception to completion of repayment. That is to say it manages the
matching of borrowers to lenders at the start. It manages transfer
of the loan from lender to lender and it manages repayment and
default.
[0072] Preferred embodiments of the present invention relate to
facilitating and managing a method for concurrent direct lending
and borrowing transactions through a risk aware exchange. More
particularly, a preferred embodiment of the present invention
introduces a method for generating clusters of atomic loans that
together match the risk profile and rates desired by lenders and
acceptable to borrowers. A preferred embodiment of the present
invention provides a method for managing the life cycle of clusters
of atomic loans by directing and coordinating multiple independent
qualified service providers, as explained in further detail herein
below.
[0073] A preferred embodiment of the present invention may be
implemented as a workflow, handling a variety of transactions and
operations: a request for external verification, waiting for
external event, etc.
[0074] Reference is now made to FIG. 1a, which is a block diagram
schematically illustrating a loan market implementing an apparatus
according to a preferred embodiment of the present invention.
[0075] An apparatus according to preferred embodiments of the
present invention may be used by organizations, irrespective of
whether they provide banking services in general, for supporting
the actual execution of the loans through fund transfer
[0076] Optionally, the actual transfer of funds from the lender(s)
102 to the borrower(s) 101 and from the borrower(s) to the
lender(s) (repayment) may be carried out by escrow agents
communicated to by the apparatus with appropriate money transfer
requests. That is to say, the actual transfer of money may be
carried out by escrow agents rather than banks. The lender pays the
escrow agent who transfers the money to the borrower(s). Money
transfer by the escrow agents is described in greater detail herein
below.
[0077] The present embodiments attempt at providing an optimized
match between lenders 102 and borrowers 101 and a solution which is
appropriate for lending to private customers or micro-lending.
[0078] Preferred embodiments of the present invention may allow
replacing banks in general and handling of loans of any type or
magnitude, not necessarily between private customers or
micro-lending
[0079] Preferred embodiments of the present invention provide an
apparatus for managing a loan market 100a, as described in further
detail herein below. Optionally, the loan market is implemented as
a part of a web site, such that Internet users may communicate with
the apparatus for posting borrowing orders, lending orders, etc, as
described in further detail herein below.
[0080] In a loan market managed using an apparatus according to
preferred embodiments of the present invention, lenders 102 may
offer to lend funding, using lending orders LO1, LO2. A lending
order (LO) defines general lending terms proposed by a certain
lender 102 for funding a loan. The lending terms are not specific
with respect to a certain borrower, but rather define general terms
the lender is willing to lend under.
[0081] The lending terms may include, but are not limited to: the
amount to be lent, the target risk the lender is willing to assume,
the type of algorithm used to calculate the risk taken and the
specific parameters used in such algorithm, (including the type and
amount of collaterals, the geographic location of the borrower, the
use of the funds, the business type of the borrower, the financial
condition of the borrower, the desired period(s) (or alternative
periods), the minimum interest rates, and any other term associated
with each acceptable set of parameters).
[0082] Similarly, borrowers 101 may express their wish to borrow,
using borrowing orders BO1, BO2. A borrowing order (BO) is used to
specify borrowing terms. A borrowing order defines general
borrowing terms proposed by a certain borrower 101. The borrowing
terms are not specific with respect to a certain lender, but rather
define general terms the borrower is willing to borrow under, as
described in greater detail herein below.
[0083] Then, a matching process is carried out, where a set of
matches is provided, where a lending order is matched with
borrowing orders, such that the lending order and the borrowing
orders are mutually satisfied, as described in further detail
herein below.
[0084] Preferably, there may also be subsidizers 103, such as a
government agency, a municipality, commercial entities that want to
promote their products and/or services (for example a car dealer
that subsidizes loans for new cars), etc. Subsidizers may
participate in the loan market 100a, subsidizing certain loans,
according to subsidizing terms defined by the subsidizers 103, as
described in further detail herein below.
[0085] Preferably, an apparatus according to a preferred embodiment
also supports a secondary loan market 10b.
[0086] In the secondary loan market 100b, a lender 102 may put his
position in a certain loan for sale, and another lender may buy the
position, as described in further detail herein below. Furthermore,
a lender from the secondary loan market 100b may act as a seller
104. The seller (lender) 104 offers his position in a loan traded
in the secondary loan market 100b for sale in the loan market 100a
managed by the apparatus of the present invention's embodiment, as
described in further detail herein below.
[0087] The secondary loan market is actually the same market in
which existing loans are offered for sale by lenders who hold them
and other lenders who buy the loans. That is to say, the buyer in a
secondary trade is a lender who steps into the shoes of the
original lender. In the eyes of the buyer (who is a lender), the
atomic loan meets his criteria and he does not care (and maybe
doesn't know) that the loan originates from another lender.
[0088] The principles and operation of a method and an apparatus
according to the present invention may be better understood with
reference to the drawings and accompanying description.
[0089] Before explaining at least one embodiment of the invention
in detail, it is to be understood that the invention is not limited
in its application to the details of construction and the
arrangement of the components set forth in the following
description, or illustrated in the drawings. The invention is
capable of other embodiments or of being practiced or carried out
in various ways. Also, it is to be understood that the phraseology
and terminology employed herein is for the purpose of description
and should not be regarded as limiting.
[0090] Reference is now made to FIG. 1b, which is a block diagram
illustrating a first apparatus for generating and processing
lending and borrowing orders, according to a preferred embodiment
of the present invention.
[0091] Apparatus 1000 includes a borrowing order receiver 110. The
borrowing order receiver 10 receives one or more borrowing order(s)
in either an online mode or a batch mode. (for example, the orders
may first be received by a business partner or an agent, and later
input to the borrowing order receiver in a batch process).
[0092] Orders that are created (both lending orders and borrowing
orders) are then stored in a database and processed by the matching
system.
[0093] Optionally, the borrowing order receiver 110 communicates
with one or more borrower(s) over a communication network, for
receiving the borrowing order(s). Preferably, the borrowing order
receiver 110 is implemented as a part of a web site, and
communicates with the borrowers(s) over the Internet.
[0094] In each borrowing order, a borrower expresses his wish to
borrow money. A borrowing order defines general loan borrowing
terms proposed by a certain borrower. The loan borrowing terms are
not specific with respect to a certain lender, but rather define
general loan terms the borrower is willing to borrow under.
[0095] The loan borrowing terms in a borrowing order may include,
but are not limited to: the maximum effective interest rate and
fees the borrower is willing to pay, the borrower's desired period
of the loan, the type of loan the borrower is interested in (say, a
balloon loan having a single payment due upon maturity of debt),
etc.
[0096] The borrowing order also includes information about the
borrower himself, such as--the borrower's name, his address, his
tax ID., his financial information, description of the borrower's
business etc.
[0097] The borrower may also provide supporting information
including available collaterals, or any other information that is
usable for assisting the process of rating the risk of lending to
the borrower.
[0098] Apparatus 1000 further includes a lending order receiver
120. The lending order receiver 120 receives one or more loan
lending order from lender(s). Optionally, the lending order
receiver 120 communicates with one or more lender(s) over a
communication network, for receiving the lending order(s).
[0099] Preferably, the lending order receiver 120 is implemented as
an interactive process over the Internet, and communicates with the
lender(s) over the Internet.
[0100] A lending order defines general loan lending terms proposed
by a certain lender for the finding. The loan lending terms are not
specific with respect to a certain borrower, but rather define
general loan terms the lender is willing to lend under.
[0101] The loan lending terms may include, but are not limited to:
the amount to be lent, the target risk the lender is willing to
assume, the type of algorithm used to calculate the risk taken and
the specific parameters used in such an algorithm (including the
type and amount of collaterals), the desired period(s) (or
alternative periods), the minimum interest rates, and any other
term. (e.g. required diversification), either within one loan or
within the entire inventory of loans held by the lender, in terms
of geography, industry, loan types, reluctance to lend to specific
group of borrowers etc.
[0102] The apparatus 1000 further includes a matcher 130 which
receives lending orders and borrowing orders from their respective
repositories and processes them.
[0103] The matcher 130 automatically provides a match to a current
lending order from amongst the borrowing orders, such that the
matched orders are mutually satisfied with respect to the loan
terms defined in the orders. The matcher may match many borrowers
with each lender, so as to optimally diversify the risk associated
with each portfolio loan, as described in further detail herein
below.
[0104] The matcher 130 implements a matching method, as described
herein below.
[0105] Preferably, the matching method is based on an optimization
technique, as described in greater detail herein below.
[0106] For providing the match, the matcher 130 matches each
lending order with a set of borrowing orders. The provided match
translates into a loan funded by the lender who issues the lending
order. The loan is preferably spread among multiple borrowers, as
described in further detail herein below.
[0107] Preferably, the loan is matched with respect to the lending
terms defined by the lender in the lending order and borrowing
terms defined by the borrowers in their borrowing orders. Matching
is optimized to satisfy a preset utility function.
[0108] Preferably, the optimization takes into consideration all
orders pending in the cycle, yielding an optimized combination of
resultant loans.
[0109] More preferably, the matcher 130 takes into consideration
the risk associated with each Borrowing Order (BO) including the
rating (if available) of each of the borrowers, the purpose of the
loan, and any other available and relevant information, in choosing
which borrowing orders to match with the lending order, such that
the lending order is satisfied with respect to lender-requested
risk terms defined in the lending order, as described in further
detail herein below.
[0110] Thus from the perspective of the lender, the lender holds a
portfolio loan, satisfying his lending order, as discussed in
greater detail herein below. The portfolio loan is comprised of
atomic loans, each representing a direct contractual agreement
between one lender and one borrower.
[0111] Preferably, the borrowing orders matched with the lending
order are selected by the matcher 130, so as to also satisfy the
loan with respect to the borrowing terms defined by each of the
borrowing orders. That is to say, from the perspective of the
borrower, the borrower takes a composite loan satisfying the
borrowing terms as specified in his borrowing order. The composite
loan comprises atomic loans. Each atomic loan represents a direct
contractual agreement between one lender and one borrower, as
described hereinabove, but it is handled as a part of the composite
loan for borrower's convenience.
[0112] For example, a borrower may wish to borrow $1200 and pay it
off in equal monthly payments, and issues a borrowing order bearing
such loan terms. The borrower may take out a single atomic loan at
5% interest and pay back $100 plus interest each month.
Alternatively he may take a composite loan split such that $500 are
borrowed from the first lender at 5% interest, $200 from a second
lender who is prepared to lend at 2% for a whole year, and $500
from a third lender who charges 3% for a six months loan.
[0113] Preferably, the apparatus 1000 further includes a secondary
sale manager, for receiving a sale order from a first lender
offering to sell his position as a lender in a loan, and a buying
order from a second lender willing to buy the share of the first
lender in the loan.
[0114] The secondary sale manager handles various aspects of the
sale, and updates data pertaining to the loans in databases of the
apparatus 1000. Using the secondary sale manager, lenders may offer
to sell their positions in one or more atomic loans or portfolio
loans.
[0115] The sale order is used by a lender to express his will to
offer a selection of his active loan(s) for sale. The lender may
specify criteria for selection of active loans from his loan
portfolio, or may specifically identify certain loans for offering,
etc.
[0116] Optionally, the buying order is not received directly from a
lender, but is rather derived automatically from an original
lending order, by the secondary sale manager. The original lending
order belongs to a lender who expresses his indifference with
regards to the question whether the buying order derived from his
lending order is satisfied by a primary loan, or through trading a
loan in secondary sale.
[0117] Preferably, the apparatus 1000 further includes a subsidizer
order receiver 140, connected with the matcher 130.
[0118] The subsidizer order receiver 110 receives one or more
subsidizing order(s) from loan subsidizers. For example, a
government agency may function as a loan subsidizer for students,
low income earners, etc. In another example, a car dealer may offer
subsidy for a specific make or model, in various forms, such as
assuming the payment of interest on the loan, reducing the borrower
obligation to repay by paying the first payment, etc.
[0119] In the subsidizing order, the subsidizer may define
subsidizer loan terms for loans he wishes to subsidize. The
subsidizer loan terms may include but are not limited to: a profile
of borrowers (students, low income earners, certain minority
groups, etc), the level of subsidizing (covering part of the
interest rate, providing part of the loaned sum of money at
preferred rate or terms, whether the amounts payable by the
subsidizer are paid up front or over the term of the loan, etc.),
other loan terms, etc.
[0120] Preferably, apparatus 1000 further includes a report
generator.
[0121] The report generator may include a variety of reporting
tools, and provide an operator of the apparatus 1000 with reporting
services. The reports may also be provided to other users of the
apparatus. The reporting services may include but are not limited
to: statistical analyses of orders, reports for auditing, tax
reports, calculated indexes (For example--normal interest rates in
currently traded loans in a loan market managed by the apparatus
1000), etc.
[0122] Preferably, apparatus 1000 also includes an external loan
market interface manager. The external loan market interface
manager manages communication between the apparatus 1000, and an
external-apparatus managing a loan market external to a loan market
managed by the apparatus 1000.
[0123] The interface managed by the external loan market interface
manager supports processes between the two loan markets.
[0124] The processes supported by the interface may include, but
are not limited to: posting lending and borrowing orders on the
external loan market, receiving lending and borrowing orders from
the external loan market, receiving existing loan data from the
external loan market (for trading lender positions in the loans
existing in the external market in the loan market managed by the
apparatus 1000), and sending existing loan data to the external
loan market (for trading lender positions in loans existing in the
loan market managed by the apparatus 1000 in the external loan
market).
[0125] The processes may further include registering matching data
pertaining to orders sent the external market and matched by the
external-apparatus to orders in the external loan market, emulating
users of the external-apparatus (lenders, borrowers, service
providers, etc.)--to allow users of the apparatus 1000 to
communicate with them, registering service providers of the
external loan market by the apparatus 1000, etc.
[0126] Preferably, the external loan market interface manager
manages interfaces to multiple external-apparatuses. Each of the
external apparatuses manages a loan market external to a loan
market managed by the apparatus 1000.
[0127] Preferably, apparatus 1000 also includes a loan profile
receiver, for receiving a one or more loan profile(s) from a user.
The loan profile comprises default loan terms, to be used as
default loan terms for an order received from a borrower or a
lender providing the loan profile. The profile may be specific to a
certain user (lender, borrower, subsidizer, etc.), specific to a
group of users, or general.
[0128] Preferably, apparatus 1000 also includes a collection
manager, for managing the processes related to debt collection. An
exemplary debt collection process as carried out by a collection
manager according to a preferred embodiment of the present
invention is provided in FIG. 1c.
[0129] Preferably, the apparatus 1000 also handles a variety of
additional processes including but not limited to: collateral
management, external verification management, etc, as described in
further detail herein below.
[0130] Reference is now made to FIG. 2, which is a block diagram
illustrating a second apparatus for generating and processing
lending and borrowing orders, according to a preferred embodiment
of the present invention.
[0131] Apparatus 2000 includes an access controller 12, for
controlling the access of users--lenders 4, borrowers 6, escrow
agents 8, other service providers 10, or any other users, to the
apparatus 2000.
[0132] Optionally, the access controller 12 checks the user's ID
and password.
[0133] Preferably, if the user is recognized and the password is
correct, the controller 12 may use a predefined user-profile to
prompt the user for additional forms of authentication such as a
physical token, a user key, or any other form of authentication, as
defined by the operator of the apparatus 2000. Access to certain
sensitive functions provided by the apparatus 2000 may require
additional measures of authentication. The additional measures are
performed by the controller 12 upon the attempt to exercise the
sensitive functions.
[0134] Apparatus 2000 further includes a user manager 14 connected
to the access controller 12.
[0135] The user manager 14 handles the management functions that
involve users of all types including: lenders, borrowers, or
occasional authorized users. The management of users may include,
but is not limited to: user registration, fees, subscription
handling, definition of user access profiles and authorizations,
etc, as described in further detail herein below.
[0136] Apparatus 2000 further includes a query and reporting
manager 16.
[0137] The query and reporting manager 16 provides query and
reporting services to the operator of the apparatus 2000. The query
and reporting manager 16 produces statistical analyses on requests,
offers and fulfillments.
[0138] The query and reporting manager 16 also produces various
reports and forms for audit and tax purposes. Reports may be
generated as a routine activity, as part of the auditing procedure,
etc. The reports may be stored on magnetic media, to be retrieved
and viewed upon request (say as timed snapshots). The query and
reporting services provided by the query and reporting manager 16
are discussed in further detail herein below.
[0139] Apparatus 2000 further includes order receivers 18,
connected to the access controller 12. The order receivers 18
include the borrowing order receiver 110--for receiving borrowing
orders and the lending order receiver 120--for receiving lending
orders, as described for apparatus 1000 hereinabove.
[0140] Apparatus 2000 further includes a matcher 20.
[0141] The matcher 20 automatically provides a match to current
lending orders from amongst the borrowing orders, such that the
matched orders are mutually satisfied with respect to the loan
terms defined in the orders.
[0142] For providing the match, the matcher 20 matches each lending
order with a set of borrowing orders. The loan funded by the lender
who issues the lending order is spread among multiple
borrowers.
[0143] As discussed hereinabove above, the loan is matched with
respect to the lending terms defined by the lender in the lending
order and borrowing terms defined by borrowers in their borrowing
orders. The optimization in the matching process is based on a
utility function that dictates the goal of the optimization as
described in detail herein below.
[0144] From the perspective of the lender, the lender holds a
portfolio loan, satisfying the lender loan terms defined in his
lending order, as discussed in greater detail herein below. Each of
the loans in the portfolio loan is an atomic loan. An atomic loan
represents a direct contractual agreement between one tender and
one borrower.
[0145] Preferably, the borrowing orders matched with the lending
order are selected by the matcher 20, so as to yield an optimized
combinations of atomic loans with respect to the utility function
defined by an authorized user.
[0146] From the perspective of the borrower, the borrower receives
a composite loan satisfying the borrowing terms as specified in his
borrowing order. The composite loan comprises atomic loans. Each
atomic loan represents a direct contractual agreement between one
lender and one borrower, as described hereinabove.
[0147] The matcher 20 may utilize different types of algorithms
with varying degrees of complexity, for providing the match, as
described in greater detail herein below.
[0148] Apparatus 2000 further includes a loan manager 22. The loan
manager 22 handles inter alia the actual execution of the atomic
loans and the composite loans (say, using escrow agents), as
described in further detail herein below.
[0149] Preferably, the loan manager 22 also includes a workflow
engine, which handles the various events and transactions involved
in the life cycle of the atomic loans and the composite loans. The
events and actions include but are not limited to initiating,
executing, and collecting a loan resultant upon the matching
described hereinbelow.
[0150] Apparatus 2000 further includes one or more database(s) 26,
for storing information relating to users of services provided by
the apparatus 2000 (lenders, borrowers, escrow agents, and others),
to borrowing orders, to lending orders, to loans, to user profiles,
to active content--such as up to date market trend analysis,
quotes, etc.
[0151] The apparatus 2000 further includes an interface to data
24.
[0152] The interface to data 24 controls access to information
stored in the database 26. The interface to data 24 controls both
authorization of access and physical access (i.e., physical
distribution of data records in the data bases 26, Web Services,
servers, etc.). Optionally, the databases 26 are arranged as
several different data stores for storing, updating and retrieving
data on users, orders, loans, etc. Each data store may have an
audit trail (i.e., log) of changes made to the database.
[0153] For example, the orders data store may be separated into
several different data stores, one for logging every borrowing
order, a second for logging every lending order, and a third for
maintaining all loan profiles used by the users of the apparatus
2000. A loan profile is used by a lender to define the kind of loan
he wishes to give. A loan profile may be defined at the user level,
at a group level, thus applying to orders placed by a lender or a
borrower who belongs to the group, or at a general level, usable by
any lender or borrower.
[0154] Reference is now made to FIG. 2a, which is a block diagram
mapping processes carried out by an apparatus for loan market
management, according to a preferred embodiment of the present
invention.
[0155] An apparatus according to a preferred embodiment of the
present invention implements processes for interaction with the
outside world 210 (say, for managing the interaction with other
loan markets), access control process 211--say, for controlling the
access of users to data pertaining to the loans, order management
212 processes, administration 213 processes, background service 214
processes, matching 215 processes--for proving an optimized match
amongst borrower's and lender's orders, loan import/export 216
processes, loan life cycle management 217 processes, market
operation 218 processes, and service provider 219 processes.
[0156] Reference is now made to FIG. 2b which is a second block
diagram mapping processes carried out by an apparatus for loan
market management, in further detail, according to a preferred
embodiment of the present invention.
[0157] In an apparatus according to a preferred embodiment of the
present invention, the processes for interaction with the outside
world may include user access management 11, and use a gateway 200
for connecting two or more loan markets.
[0158] The apparatus may implement processes for finding a match 20
between borrowing orders and lending orders, as described in
further detail herein below.
[0159] The apparatus may also implement order management processes:
borrowing order management 22, lending order management 24, subsidy
order management 23, secondary sale order management 25, and loan
profile management 28, as described in further detail herein
below.
[0160] Optionally, the apparatus may further implement
administration processes: user management 14, service provider
management 13, etc., as described in further detail herein
below.
[0161] The apparatus may also implement loan export/import
processes including but not limited to: external loan registration
18, and exporting loans to another loan market 19.
[0162] Preferably, the apparatus may implement loan management
processes, including but not limited to: contract management 51,
payment management 31, loan closing 58, and loan sale 108.
[0163] The apparatus may also carry out processes for operating the
loan market, including but not limited to: report management 82
processes (for defining and generating reports relating to the
loans, to the borrowers and lenders, etc.), market parameter
management 86 processes, etc.
[0164] Preferably, the apparatus also implements background
processes, which are activated by various events in the loan
management, or initiated based on a pre-set cycle: collateral
management 54, fund dispensing 59, reporting & queries 26,
index publishing 84, collection management 56, subsidy management
72, external condition management 101, etc., as described in
further detail herein below.
[0165] Preferably, the apparatus further implements service
provider processes, including but not limited to: escrow service
management 120, rating services 122, legal service management 124,
lending agent management 126, insurance service management 128,
information service management 130, loan monitoring management 132,
etc., as described in further detail herein below.
[0166] Reference is now made to FIG. 3, which is a flowchart
illustrating a first method for generating and processing lending
and borrowing orders, according to a preferred embodiment of the
present invention.
[0167] In a method 3000 according to a preferred embodiment, a
borrowing order is received 310 from a borrower
[0168] In each borrowing order, a borrower expresses his will to
borrow money, and defines his requested borrowing loan terms.
[0169] A borrowing order defines general borrowing loan terms
proposed by a certain borrower. The borrowing loan terms are not
specific with respect to a certain lender, but rather define
general loan terms the borrower agrees to borrow under. The
borrowing loan terms in a borrowing order may include, but are not
limited to: the maximum effective interest rate and fees the
borrower agrees to pay, the borrower's desired period of the loan,
etc., as discussed hereinabove.
[0170] The borrower may also provide supporting information
including available collaterals, insurance, and other information
that may be usable for assisting the process of rating the risk of
lending to the borrower, etc.
[0171] Method 3000 further includes receiving 320 a lending order
from a lender. A lending order defines general loan lending terms
proposed by a certain lender for the funding. The loan lending
terms are not specific with respect to a certain borrower, but
rather define general loan terms the lender wishes to lend under.
However, the terms may include conditions related to certain
characteristics pertaining to borrowers, such as type of business
or industry they are active in, geographic region, etc.
[0172] The loan lending terms may include, but are not limited to:
the amount to be lent, the target risk the lender agrees to assume,
the type of algorithm used by the lender to calculate his risk and
the specific parameters used in such algorithm, (including the type
and amount of collaterals), the desired period(s) (or alternative
periods), the minimum interest rates, and any other term associated
with each acceptable set of parameters, etc.
[0173] Finally, there is automatically provided 330 a match to a
current lending order from amongst the borrowing orders, such that
the matched orders are mutually satisfied with respect to the loan
terms, say using a matcher 130, as described in greater detail
hereinabove.
[0174] In the provided match, the lending order is matched with a
set of borrowing orders. The loan funded by the lender who issued
the lending order is spread among multiple borrowers.
[0175] Thus from the perspective of the lender, the lender holds a
portfolio loan, satisfying his lending order, as discussed in
greater detail herein below. Each of the loans in the portfolio
loan is an atomic loan. An atomic loan represents a direct
contractual agreement between one lender and one borrower.
[0176] That is to say, from the perspective of the borrower, the
borrower receives a composite loan satisfying the borrowing terms
as specified in his borrowing order. The composite loan comprises
atomic loans. Each atomic loan represents a direct contractual
agreement between one lender and one borrower, as described in
further detail herein below.
[0177] Optionally, the method may also include receiving one or
more subsidizer order(s) from subsidizer(s), such as a government
agency, or a commercial organization. In the subsidizer order, the
subsidizer may define the loan terms for loans he wishes to
subsidize. The loan terms may include but are not limited to: a
profile of borrowers (students, low income earners, etc.), the
level of subsidizing (as a part of the interest rate, as a part of
the loaned sum of money, etc.), other loan terms, etc.
[0178] In the matching process, the borrowing order may be matched
with subsidizer order(s) in addition to lending order(s), as
described herein above.
[0179] Optionally, the method 3000 further includes a step of
executing the loans satisfying the lending order.
[0180] The execution of the loans may include generating legal
documents for atomic loans, issuing instructions for transferring
money to a borrower according a composite loan, issuing
instructions for transferring money from a lender according to a
portfolio loan, etc.
[0181] Preferably, the instructions for transferring money between
users (lenders, borrowers, etc.) are forwarded to an escrow agent
for transferring the money, as described in greater detail herein
below. That is to say, the method 3000 may be implemented by an
entity which does not hold the funds transferred among lenders
borrowers service providers and other parties.
[0182] Reference is now made to FIG. 4, which is a flowchart
illustrating a method for handling user interactions, according to
a preferred embodiment of the present invention.
[0183] Preferably, a method according to a preferred embodiment of
the present invention may further include handling user
interactions with the apparatus 1000.
[0184] The identity of the user is verified. If the user is a new
user 410, the user is directed to a user registration process
420.
[0185] The user is presented a menu of functions, to select the
function the user wishes to access. Once the user selects the
function, there may be carried out another level of access control,
for example--in case of sensitive functions 430. For example, if
the user is a guest user 415, he may be presented an appropriately
customized menu 440, containing only those functions accessible to
guests.
[0186] Preferably, the ID and password of the user are checked.
Based on a predefined profile assigned to the user, the user is
prompted to additional forms of authentication such as physical
token or a user key, as known in the art, where required. Access to
certain functions may require additional measures of
authentication, as described hereinabove.
[0187] Preferably, the method for handling user interactions
implements external conditions verification, as illustrated in FIG.
4a.
[0188] Reference is now made to FIG. 5, which is a flowchart a
method for illustrating user management, according to a preferred
embodiment of the present invention.
[0189] A method according to a preferred embodiment handles all the
management functions that involve users of all types including, but
not limited to: lenders, borrowers, service providers, occasional
authorized users, etc. The user management functions include but
are not limited to: user registration 510, fees and subscription
handling, definition of access profiles and authorizations,
collecting of other information related to the user, etc.
[0190] All updates to user data are subject to a user information
assessment 560, which checks impact of the changes on the user's
status, rating (specifically--risk rating), loans in process, as
well as any other known information.
[0191] Specific attention is given to rating, carried out by a
user's rating assessment process 560. Any change in user data is
checked for its possible effect on the user's rating, which
indicates the risk involved in lending to the user, such as
introduction of new collaterals, change of address to a
neighborhood that is considered risky, etc. as illustrated in FIG.
5a.
[0192] The user may be ranked according to information provided by
one or more rating service(s), such as Dan & Bradstreet.TM.,
etc.
[0193] Optionally, the user information assessment 560 is followed
by external verification 520. In the external verification,
external verification service providers, such as a loan agent or a
rating service, provide additional information which bear relevance
to the user when borrowing or lending a loan.
[0194] A change in a user's rating may affect outstanding loans
(i.e. lent, currently in re-payment) as well as pending loans
(i.e., requested, not yet matched), as described in further detail
hereinabove. Based on the user information assessment 560,
automatic events may be generated, say by the apparatus 1000,
described hereinabove.
[0195] According to a preferred embodiment, the method for user
management also includes a process for managing user collaterals as
illustrated in FIG. 5b.
[0196] For example, collaterals available to a user may be a part
of the information stored 540 for the user. The available
collaterals information is used for allocating collaterals to
loans. The collaterals may be associated to a borrowing order (570)
or to a composite loan (580).
[0197] Preferably, each new user and visiting user to the apparatus
1000 undergoes a registration process. Each user is granted a user
name, a user type, credentials, one or more forms of authentication
(from a single password, through a multi-stage authentication that
may include a hardware device with built-in credentials, etc.).
[0198] The registration process may require presenting specific
documents to a trusted user that authenticates the documents and
reports the successful authentication to the apparatus 1000 (e.g.,
a certificate of good standing).
[0199] Preferably, the registration is a multi stage process, in
which the apparatus 1000 accumulates information about the
registering user, records the information in a database, provides
the registering user with selective access to the database, allows
other (specific) users to provide or be provided with information
about the user, and monitors the registration until it is
successfully completed, or abandoned.
[0200] Optionally, the registration process includes a rating
process. The rating process is invoked to initiate a request for an
external rating service. The rating service may be selected
according to geography, industry, etc. The information may be
provided by the external rating service provider in a batch mode,
in an on-line mode, or both.
[0201] In some cases, the system may provide a conditional or a
provisional registration for either lenders or borrowers.
[0202] For example, the user may be allowed to start using the
system but blocked from completing a transaction until required
conditions are met. The user may apply for a loan and participate
in the borrowing process but not receive the money until
authenticating himself to a user providing a user authentication
service.
[0203] In one exemplary provisional registration, a user is allowed
to start lending or borrowing a loan. However, a transaction for
ordering the money transfer to the user's account, or from the user
account is not completed before the user physically signs an
umbrella contract in front of a certain user who is a signature
guarantor. The signature guarantor checks the signed contract and
reports the signing to the apparatus 1000.
[0204] Preferably, a method according to a preferred embodiment may
include a service provider registration process resembling the user
registration described hereinabove.
[0205] The service provider registration process may be carried out
in multiple stages. The service provider registration process
includes, but is not limited to: checking the user's fulfillment of
predefined requirements, verification and authentication of
certification data, professional exams, etc.
[0206] The service provider registration process renders the
applicant legally or professionally capable of providing his
services.
[0207] The service provider is allowed to update only those data
elements he is authorized to modify. Preferably, following the
update, the apparatus 1000 performs a service provider (SP)
information assessment process.
[0208] In the SP information assessment process the update is
checked with respect to potential impacts on authorization or
certification. Optionally, there are generated certain events to
handle situations where such potential impacts exist. For example,
there may be automatically generated predefined notification to
certain authorized users upon the detection of the existence of the
potential impacts. The notification may be general or specific to
certain loans the service provider is involved in, say as a
borrower rating provider.
[0209] Reference is now made to FIG. 6a, which is a flowchart
illustrating a method for borrowing order receiving and management,
according to a preferred embodiment of the present invention.
[0210] According to a preferred embodiment, borrowing order
receiving and management starts from the interaction of a borrower
with the apparatus 1000. The borrower enters specifications for
desired loan borrowing terms, in a borrowing order, as described in
further detail hereinabove.
[0211] Optionally, borrowing orders may also be entered in a batch
process, where the data of the loan is provided from an external
system.
[0212] Optionally, the borrowing terms are based on a previously
stored borrowing profile 221, and may be modified for a specific
order.
[0213] Optionally, the user may provide collateral for the loan, in
which case, a collateral update process is invoked for updating 541
the database with the collaterals.
[0214] The borrowing order (BO) is characterized by a set of
parameters, including but not limited to: a borrower's identity
(ID)--a unique identifier of the borrower, through which his
relevant characteristics (e.g., contact details, account number,
tax payer ID., rating, etc.) may be obtained, price--the maximum
effective or absolute price (i.e., interest rate) which the
borrower wishes to borrow at, amount--the maximal or/and minimal
sums of money that the borrower wishes to borrow (by specifying
both the borrower indicates his willingness to get partial
fulfillment), the currency of the loan, the period for which the
loan is requested (start date and end date), and
repayment--repayment terms that the borrower wants (for example,
the borrower may request to repay in one lump sum at the end of the
period, or make a series of periodical payments).
[0215] The borrowing order (BO) may also be categorized by other
parameters: Prepayment Options--whether preliminary payment is
allowed, when is prepayment allowed, prepayment penalty, etc,
collaterals data--details of collaterals offered by the borrower,
insurance--whether or not the borrower wishes to buy insurance for
the loan to improve the rating, amount, conditions, etc, the
purpose of the loan--say a student's loan which may be subsidized,
as described hereinabove, subsidy reference--if the requested loan
is tied to an open subsidizing order, signature--an electronic
signature that is considered binding, (though may not suffice for
specific loans, such a loan exceeding a predefined amount, or in
certain jurisdictions), whether the borrower allows the loan to be
posted in a secondary loan market
[0216] As part of the borrowing order (BO) entry, a relevant
subsidy request (as specified by the borrower) is checked.
Eligibility or relevance is verified, either electronically or
through a lending agent.
[0217] There is also handled a priority among the predefined
various order profiles, stored in a loan profile directory, as
follows: user defined profiles, group defined (based on user's
characteristics), and lastly--general profiles. The user selects
the one appropriate for the current loan order, or--he--may prefer
to start from scratch, in which case he can still save the new loan
profile for future use. A separate process may be used for handling
updates to the loan profile directly.
[0218] According to a preferred embodiment, subsidizers are allowed
to post their unique offering in a subsidizer order, say utilizing
a subsidizer order receiver, as described hereinabove.
[0219] The subsidizer order describes loan subsidizing terms,
including but not limited to: the method of subsidy offered, a
method of verifying the borrower's entitlement for the subsidy
offered, a period in which the offer is available, a set of
specific conditions (say, the size of the loan, jurisdiction,
personal history, type of transaction, any specific requirement of
the lender), a method of calculating the amount or percent of
subsidy, the method of paying for the subsidy, a total amount of
cash covered by the specific subsidy offer, etc.
[0220] Optionally, based on the profile or the amount involved in
the subsidizer order, certain subsidizer orders may be routed to a
particular agent. The agent checks the details of the offer and has
the subsidizer sign an appropriate subsidy schedule to be added to
a subsidizer's agreement, before the subsidy order is released and
becomes active.
[0221] Reference is now made to FIG. 6b, which is a flowchart
illustrating a method for signature verification, according to a
preferred embodiment of the present invention.
[0222] A method according to a preferred embodiment further handles
signature entry for borrowing orders, lending orders, or any other
transaction. Various types of signatures may be entered, such as
Notary authorized signatures, Electronic Signatures, Biometric
signatures, Natural signatures, etc, as known in the art.
[0223] In a signature verification method, in accordance with a
preferred embodiment of the present invention, if the apparatus
1000 or a specific lender 602 requires a manual signature, the
signature may be verified 603 by a third party.
[0224] A demand event for verification of a signature is generated
604. Next, there is determined a designated lending agent (by
region, industry, etc.) 605, and the lending agent is notified
about the event 606.
[0225] Reference is now made to FIG. 7, which is a flowchart
illustrating a method for lending order receiving and management,
according to a preferred embodiment of the present invention.
[0226] A system administrator or an authorized system user defines
the general and the group type profiles. The lending terms may be
stored in a lending loan profile for a specific lender. The lending
terms are default lending terms, presented 24 to the specific
lender, whenever the lender places a lending order, as default
terms for the lending order
[0227] A lending order may include, but is not limited to the
following: an identifier of the lender, a price--a minimum
effective or absolute interest rate the lender agrees to lend at,
maximal and minimal (range) sums of money that the lender wishes to
lend, currency, minimal and maximal time period for the lender's
proposal, and repayment mode and terms that the lender requests
(linear, zero coupon, balloon payment, minimum increment amount to
receive, etc).
[0228] The lending order may further include special conditions,
such as: whether the lender prefers to lend over a period of time
or in one payment, maximum number of loans cut from the entire
amount offered, states/regions of the borrowers, whether or not
insurance is required for the loan and details relating to the
insurance, whether prepayment is allowed and under what conditions
or penalties, etc.
[0229] The lending order may also include signature requirements
defining specifics of requirement for a manual signature
verification, tied to a formulated condition (e.g., amount), or
non-conditional.
[0230] The lending order received from the lender is recorded in a
database. Upon providing a matching to lending order, as described
in further detail hereinabove, the lending order is marked as
fulfilled. Preferably, data pertaining to the lending order may be
used for historical statistical analysis, archived, etc.
[0231] Preferably, when a lender enters a lending order, the lender
is presented with default lending terms from a pre-stored profile.
The presented terms are fetched according to a priority starting
with lender specific lending terms stored in a lender specific loan
profile.
[0232] When there is no loan profile specific to the lender, or the
lender specific loan profile fails to provide a default value to
certain loan term (say, the range of interest rates), the apparatus
1000 may search for a loan profile defined for a group of lenders
that the lender belong to. Finally, the default value may be
fetched from a general loan profile.
[0233] When the lender is presented the default lending terms
according to existing loan profiles, he may choose to override
certain terms with new values for the specific lending order. The
lender may also be allowed to update or define lender specific
lending terms, in a lender specific loan profile, as described
hereinabove.
[0234] Reference is now made to FIG. 8 which is a flowchart
illustrating a method for managing a secondary loan sale, according
to a preferred embodiment of the present invention.
[0235] A method according to a preferred embodiment includes a
process allowing a lender to act as a seller offering a selection
of his active loans for sale. The process described herein below,
may be carried out by a secondary sale manager, as described
hereinabove.
[0236] The lender may specify 810 criteria for selection of active
loans from his active loans, that he is interested in putting his
position at for sale. The lender is presented 820 a list of loans
from his loan portfolio. Each loan in the presented list meets the
criteria.
[0237] Then, the lender may choose 830 from the list one or more
specific loan(s) he wishes to put for sale. If one of the loans put
for sale by the lender is not assignable 840, say as a result of
certain conditions imposed by a subsidizer of the specific loan
which is put for sale, a rejection is issued 850 and reported to
the lender.
[0238] Next, the lender may specify 860 various sale terms, to be
recorded in a sale order for the loan. The sale terms may include
but are not limited to: the price, the transaction type, the
percentage of the position being offered for sale, or any other
conditions.
[0239] Finally, the terms defined by the lender are saved in the
secondary sale order, and a second lender may decide to buy the
position, using the secondary sale manager, as described in further
detail hereinabove. The resale may be done in the Matching: the
offered loan for resale is handled as a borrowing order, and any
lender's order (LO) may be matched with it (unless the "buying"
lender specified his wish not to buy a sold loan.)
[0240] The second lender may issue a buying order defining his
terms for buying a position in an existing loan.
[0241] Alternatively, a buying order is rather automatically
derived from a lending order of the second lender, by the secondary
sale manager. Optionally there may be provided that the second
lender agrees that his lending order be fulfilled in a secondary
market, say as an indication in a user profile stored for the
second lender.
[0242] A Method for Providing a Match
[0243] The matcher 130 matches each lending order with multiple
borrowing orders and visa versa, distributing the risk.
[0244] As described herein bellow, the matching process results in
composite loans made of a sets of atomic loans from multiple
lenders to a single borrower; and corresponding portfolio loans
made of sets of atomic loans from a single lender to multiple
borrowers.
[0245] Reference is now made to FIG. 9a which is a block diagram
illustrating an exemplary composite loan and portfolio loan,
according to a preferred embodiment of the present invention.
[0246] The effective characteristics (interest rates, amounts,
time, repayment schedules, risk profile, etc.) of the composite
loan are derived from the characteristics of each of the atomic
loans. The interest rate of the composite loan is the weighted
average of the interest rates of the underlying atomic loans
multiplied by each atomic loan's percentage.
[0247] For example, if the composite loan of $1000 is a combination
of a $600 loan at 3% interest and an additional $400 at 4%
interest, then the composite loan of $1000 bears
(3%*600+4%*400)/1000=3.4% interest rate.
[0248] The amount of the composite loan 910 is the sum of the
amounts of all the atomic loans 901 of which it is composed. The
time period of a composite loan is the union of the time periods of
the atomic loans 901 of which it is composed. The repayment
schedule of a composite loan is a union of the repayment schedules
of the underlying atomic loans 901.
[0249] A composite loan 910 can be made of atomic loans 901 with
different re-payment schedules and different methods and priorities
in allocating specific payments among the underlying atomic
loans.
[0250] Once we have generated a set of composite loans 910 to
satisfy a set of borrowing orders and lending orders, we can look
at all of the atomic loans 902 associated with a single lending
order as a portfolio loan 920
[0251] The risk associated with this portfolio loan 920 may be
calculated from the respective risks (ratings) of each of the
borrowers associated with the portfolio loan 920 and the
correlations between them.
[0252] In essence, a portfolio loan can be looked upon as a virtual
investment portfolio. The risk of the portfolio loan 920 can be
calculated using--for instance--the risk calculations of Modern
Portfolio Theory (MPT). Therefore, if we have two atomic loans 902
given by a lender L to borrowers B1 and B2, the risk associated
with the portfolio loan 920 is calculated in one possible
implementation as follows:
R.sub.12= {square root over
(w.sub.1.sup.2R.sub.2.sup.2+w.sub.2.sup.2R.sub.2.sup.2+2w.sub.1w.sub.2R.s-
ub.1R.sub.2.rho..sub.12)}
Where w.sub.1, w.sub.2 represent the weights associated with each
of the two loans, respectively, and w.sub.1+w.sub.2=1, and
.rho..sub.12 is the correlation coefficient between the two
borrowers. The formula for the risk of a portfolio loan R.sub.P
composed of more than two borrowers can be generalized using the
MPT principles:
R P = i w i 2 R i 2 + i j w i w j R i 2 R j 2 .rho. ij 2
##EQU00001##
[0253] Where:
i .noteq. j ; ##EQU00002## i w i = 1 ##EQU00002.2##
[0254] And .rho..sub.ij is the correlation coefficient between
borrower i and j.
[0255] The correlation coefficient represents the direction and
strength of the relationship between two borrowers, and takes on a
value between -1 and +1. The sign of the correlation coefficient
indicates the direction of the relationship: a positive sign
indicates that there is a positive relationship between the
borrowers, while a negative sign indicates that there is a negative
relationship between the borrowers.
[0256] The strength of the relationship is indicated by the
absolute value of the correlation coefficient: the closer the
number is to 1 the stronger the relationship, while the closer the
number is to 0 the weaker the relationship. A generalization of the
idea of the correlation coefficient may be as follows:
[0257] .rho.=1--means that there is an exact positive relationship
between the two borrowers, i.e. if one defaults on the loan
repayment so does the other and vice versa.
[0258] .rho.=0--means that there is no relationship between the two
borrowers. [0259] .rho.=-1--means that there is an exact negative
relationship between the two borrowers, i.e. if one borrower repays
the loan the other is sure to default and vice versa.
[0260] The correlation coefficient between two borrowers plays a
major role in determining the effectiveness of diversifying the
risk of a portfolio loan.
[0261] To determine the correlation between two atomic loans, one
can use quantitative methods based on the loan histories of the
borrowers. If the loan histories are unavailable, one can use
methods that try to quantify the qualitative relationship of the
borrowers. For example, are they relatives, do they work for the
same employer, do they live in the same geography, etc.
[0262] Borrowers and lenders have different goals. Borrowers
typically wish to borrow money at the lowest possible interest
rate, while lenders wish to lend money for the highest return at a
specified risk level.
[0263] According to a preferred embodiment of the present
invention, the match provided by the matcher 130 is optimized with
respect to one or more criteria. The criterion(s) may be defined by
an operator of the apparatus 1000.
[0264] Preferably, the matcher 130 has to carry out a method
including a constrained optimization process aimed at satisfying a
set of criteria defined by the operator of the apparatus as the
utility function, as described in further detail herein below.
[0265] The optimization process involves finding a match amongst
each lending order and respective borrowing orders, such that the
found matches yield the best result as indicated by the criteria
defined by the operator. The found matches further satisfy
constraints as defined by borrowers and lenders under the loan
terms (i.e., level of risk, time period, etc), as defined in their
respective borrower requests and loan orders.
[0266] Theoretically, at each point in time, the matching process
generates for each outstanding borrowing order BO, the set of all
possible composite loans CL.sub.j (BO.sub.i) combinations that can
satisfy the borrower's loan terms.
[0267] After doing so for all outstanding borrowing orders, the
intermediate result is a set of all of the possible composite loan
combinations CL.sub.ij that can satisfy all of the outstanding
borrowing orders.
[0268] The next step in the matching process is the selection of a
subset CL.sub.ij of the composite loans that optimizes the Matching
Utility Function, defined herein below such that for each borrowing
order BO.sub.i at most, one composite loan is selected, and that
the subset of composite loans can co-exist.
[0269] The set of all possible composite loans that satisfy a
single borrowing order can be infinite. For example, if the
borrower requests a loan of $1000, the set may theoretically be
composed of an infinite number of lender/amount combinations.
[0270] To reduce the complexity of the matching process, the
apparatus 1000 may define a limited number of values for each of
the borrowing/lending order dimensions. For example, the period
possibilities can include: 3-months, 6-months, 1-year, 2-years, . .
. 10 years. Likewise the rating (risk) scale can be divided into
{very high, high, medium, low, very low}. The finite set of loan
specifications, greatly reduces the number of composite loans that
match a single borrowing order.
[0271] Preferably, a user of the apparatus 1000 may be allowed to
configure the Matching Utility Function within matcher 130, to be
optimized through the constrained optimization process. The user
may define the Matching Utility Function and the parameters the
function uses.
[0272] The utility function expresses the goal of the matching
process. A higher utility function score expresses a better match,
and is thus preferable.
[0273] Borrowers desire to borrow money at the lowest cost
(interest rate, commissions) available that complies with their
other requirements (amount, time, repayment schedule) as defined in
their borrowing order(s).
[0274] Lenders, on the other hand, want to lend money for the
highest return at a specified maximum level of risk that complies
with their other requirements (amount, time, repayment schedule) as
defined in their lending order(s).
[0275] The operator of the apparatus 1000 wishes to generate the
highest volume of loans, to maximize his profit from transaction
fees, and to maintain a maximum level of customer satisfaction. For
example, if only one of two identical borrowing orders can be
satisfied, typically the one that is outstanding the longest is
selected, all else being equal, so as to shorten the averaged
waiting time for borrowers.
[0276] The utility function is a user configurable function of the
total volume, return, risk and customer satisfaction index of the
set of composite loans that satisfies a match. Optionally, the
utility function is such that: The higher the volume of loans
generated--the higher the utility score, the lower the interest
paid by borrowers--the higher the utility score, the higher the
return generated for lenders--the higher the utility score, the
higher the risk level--the lower the utility score, the higher the
customer satisfaction index--the higher the utility score.
[0277] The goals of borrowers and lenders are of opposite nature,
i.e., borrowers want to borrow at the lowest cost, whereas lenders
want to lend at the highest rate for the specified risk level.
[0278] For example, let us assume lender L wants to lend money with
interest of at least 4%, and borrower B wants to borrow money at a
cost (interest rate) of at most 6%. Assuming all other parameters
support a match, the loan between B and L could be executed with
interest anywhere in the range of 4% to 6%.
[0279] The nature of the Matching Utility Function determines the
exact value of the loan. A fair utility function may minimize the
difference of the actual loan from the desired (minimum/maximum)
levels of interest sought after by the lender and borrower, as
defined by their respective orders.
[0280] Preferably, an operator of the apparatus 1000 may be allowed
to configure the matcher 130 with the Matching Utility Function, as
described hereinabove. For example, the operator may configure the
matcher 130 with a Matching Utility Function having the general
scheme:
U = w i Volume + w 2 Return Risk + w 3 C S I . ##EQU00003##
[0281] In the exemplary utility function, w.sub.1, w.sub.2, and
w.sub.3 denote the relative weight assigned by the operator to the
volume of orders, the return/risk ration, and the customer
satisfaction index (CSI), respectively.
[0282] The customer satisfaction index (CSI) quantifies the service
level that the transacting parties (borrowers and lenders)
experience. The CSI takes into account the amount of time an order
is outstanding, previous orders that are not fulfilled (and their
distance from market rates), and so forth.
[0283] The matching process may be implemented utilizing different
types of algorithms with varying degrees of complexity. Ideally,
one may want to select an algorithm that generates the optimal
match in the shortest time. However, the multi-dimensional matching
problem at hand is complex in nature. Therefore, in reality, the
algorithms used may be sub-optimal on the one hand, but fast enough
on the other.
[0284] Optionally, the matching problem at hand is formulated as
follows.
[0285] Let {BO.sub.1, . . . , BO.sub.N} denote pending borrowing
orders, and {LO.sub.1, . . . , LO.sub.M} denote pending lending
orders.
[0286] Each borrowing order (BO) represents a tuple
BO.sub.i=BO.sub.i(.alpha.,p, .nu.), and each lending order LO
represents a tuple LO.sub.i=LO.sub.i(.alpha.,r, .nu.), where:
BO.sub.i(.alpha.)--represents the amount of the borrowing order,
typically a range [.alpha..sub.min,.alpha..sub.max] indicating the
minimum and maximum amounts; BO.sub.i(p)--represents the price
(interest rate) of a borrowing order; BO.sub.i(r) represents the
risk of the borrowing order; BO.sub.i( .nu.) represents the
remaining terms of the borrowing order; LO.sub.i(.alpha.)
represents the amount of the lending order, typically a range
[.alpha..sub.min,.alpha..sub.max] indicating the minimum and
maximum amounts; LO.sub.i(p)--represents the price (interest rate)
of the lending order; LO.sub.i(r)--represents the risk allowed by
the lending order; and LO.sub.i( .nu.)--represents remaining terms
of the lending order.
[0287] To facilitate the matching process, a matrix CL.sub.ij is
used. The matrix has N rows and M columns, where each cell is a
tuple CL.sub.ij=(m,.alpha.) where
C L ij ( m ) = { 1 if B O i matches L O j 0 if B O i does not match
L O j ##EQU00004##
and CL.sub.ij(.alpha.) designates the amount allocated from a
lending order LO.sub.j to a borrowing order BO.sub.i.
[0288] At each moment of time, during the optimization process, the
first phase of the matching process is to traverse the matrix and
initialize each cell CL.sub.ij(m) to bit values (0/1). Each bit
value indicates whether there is a potential match between
borrowing terms defined by borrowing order BO.sub.i and lending
order LO.sub.j.
[0289] Preferably, rather than recalculating each cell (bit value)
in the matrix in each cycle of the optimization process, the cells
corresponding to matched orders are removed and cells corresponding
to new borrower and lending orders are added to the matrix.
[0290] That is to say, the matching process becomes a continuous
multi cyclic optimization process where matched orders are removed
from the matrix and new orders are added to the matrix through each
cycle, as described hereinabove. In each cycle, there is found an
optimized match between pending borrowing orders and lending
orders. However, some of the orders may be left unmatched, and
passed on to the next cycle.
[0291] Optionally, the matching algorithm may maximize
j Return ( L O j ( a ) ) Risk ( L O j ( a ) ) , ##EQU00005##
such that:
.A-inverted.j
.alpha..sub.min.ltoreq.LO.sub.j(.alpha.).ltoreq..alpha..sub.max
.A-inverted.i
.alpha..sub.min.ltoreq.BO.sub.i(.alpha.).ltoreq..alpha..sub.max
.A-inverted.j Risk(LO.sub.j(.alpha.)).ltoreq.LO.sub.j(r)
Where:
[0292] Return ( L O j ( a ) ) = i C L ij ( m ) .times. C L ij ( a )
##EQU00006## Risk ( L O j ( a ) ) = i C L ij 2 ( a ) B O i 2 ( r )
C L ij ( m ) + i k C L ij ( a ) C L kj ( a ) r ik ( j ) C L ij ( m
) C L kj ( m ) ##EQU00006.2##
r.sub.ik(j)=BO.sub.i(r)BO.sub.j(r).rho..sub.ik (where .rho..sub.ik
denotes the correlation between borrowing orders BO.sub.i and
BO.sub.k.
[0293] That is to say, the matching problem is therefore a
constrained optimization problem that can now be solved using
various optimization techniques (e.g.: quadratic programming,
simulated annealing, etc).
[0294] In theory the multi-dimensional cube that the matching
algorithm has to search through to find the optimal match can be
extremely large, along multiple dimensions and allowing an infinite
range of continuous values for each attribute.
[0295] To simplify the matching process and reduce the complexity,
we can limit some of the attribute values to a small finite set of
discrete values, constituting discrete ranges of values, each range
used for one of the attributes. For example, the risk values can be
confined to a finite set of five values {very high--VH, high--H,
medium--M, low--L, very low--VL}, the period values can be confined
to {1 month, 3 months, 12 months, X years} and so forth.
[0296] Furthermore, in practice, the price (interest rate) of a
loan offer reflects the amount of risk the lender wishes to take.
Typically, the higher is the accepted risk, the higher the price
(rate) becomes. To further simplify the matching process the
pending offers are divided into a few different markets that
reflect the prices (rates) requested. By reducing the set of
possible values, the matching algorithm is limited to searching for
matches in the same market {BO.sub.i}s.
[0297] By relaxing attempts to find an optimal solution and rather
looking for a feasible solution that can be computed quickly
enough, a possible implementation may be reached, say using the
following "Greedy" algorithm.
[0298] The "Greedy" algorithm attempts to allocate each borrowing
order evenly between X lenders.
[0299] The algorithm is described herein below, using the above
notation.
[0300] Row CL.sub.0j and column CL.sub.i0 are added to the matrix,
such that the matrix holds in the added row and column the
temporary amounts allocated from the corresponding borrowing and
lending orders.
[0301] The algorithm includes the following steps: [0302] Sort
borrowing orders {BO.sub.i} according to risk; [0303] Sort lending
orders {LO.sub.j} according to price (interest rate); [0304] For
all i,j initialize CL.sub.ij(m) to the corresponding bit (0/1)
values; [0305] For i=1, . . . N do; [0306] For j=0, . . . , M do;
[0307] CL.sub.ij(.alpha.)=0; [0308] For j=1, . . . , M do; [0309]
CL.sub.0j(.alpha.)=0; [0310] For i=1, . . . , N do; [0311] For j=1,
. . . , M do; [0312] If (CL.sub.ij(m)=1 AND
CL.sub.0j(.alpha.)<LO.sub.j(.alpha.) AND
CL.sub.i0(.alpha.)<BO.sub.i(.alpha.)) [0313] then do: [0314]
CL.sub.ij(.alpha.)=CL.sub.ij(.alpha.)+BO.sub.i/X [0315]
CL.sub.i0(.alpha.)=CL.sub.i0(.alpha.)+BO.sub.i/X [0316]
CL.sub.0j(.alpha.)=CL.sub.0j(.alpha.)+BO.sub.i/X [0317] For j=1, .
. . , M do; [0318] If Risk(LO.sub.j(.alpha.))>LO.sub.j(r) then
[0319] For i=1, . . . N do; [0320]
CL.sub.i0(.alpha.)=CL.sub.i0(.alpha.)-CL.sub.ij(.alpha.); [0321]
CL.sub.ij(.alpha.)=0; [0322] For i=1, . . . N do; [0323] If
CL.sub.i0(.alpha.)<BO.sub.i(.alpha.) then [0324] For j=1, . . .
, M do; CL.sub.0j(.alpha.)=CL.sub.0j(.alpha.)-CL.sub.ij(.alpha.);
CL.sub.ij(.alpha.)=0;
[0325] Following the full run of the algorithm, the remaining
allocations CL.sub.ij(.alpha.) in the matrix can be used to
generate loans that satisfy the matching constraints. After the
loans are generated, their corresponding data is removed from the
matrix and the algorithm is re-started again.
[0326] The algorithm ensures that borrowing orders are satisfied
according to their risk level (borrowers with less risk satisfied
first), that a borrower gets the cheapest loan available (subject
to the Composite loans being distributed between 1/X lenders), and
that a reasonable level of risk management is achieved.
[0327] Preferably, Subsidizer Orders are also handled by the
matching process according to their limitations and considerations,
as described hereinabove.
[0328] A method according to a preferred embodiment of the present
invention allows the participation of service providers as
described in further detail, including but not limited to the
service providers described herein below.
[0329] Reference is now made to FIG. 9b, which is a flowchart
illustrating a method for contract management of a composite loan,
according to a preferred embodiment of the present invention.
[0330] The method of FIG. 9b utilizes a matrix resultant upon the
matching method described hereinabove. In the matrix, each row
represents one composite loan from multiple lenders to one
borrower. The composite loan includes a group of atomic loans. The
atomic loans are parsed and processed into atomic contracts. Each
atomic contract contains the basic data pertaining to the atomic
loan, such as--lender details, borrower details, amount, rate,
period, conditions and payment terms.
[0331] For each composite loan, there is carried out a process of
borrower rating 910, say using an external borrower rating service.
If the rating of the borrower is not sufficient, the composite loan
is rolled back 912, a log is updated with the roll back data 914
and the funds allocated to the loans (in lending orders) are
released for further processing by the matching process described
hereinabove.
[0332] Next, there is carried out a signature validation process
105, as illustrated hereinabove.
[0333] Next, each of the atomic loans in the composite loan is
parsed 920, a loan contract is generated 930 for the atomic loan,
and data pertaining to the loan contract is recorded 940.
[0334] Preferably, each loan contract is checked with respect to
internal conditions. If the loan contract fails to meet the
internal conditions, the loan contract is marked as unacceptable
950.
[0335] Preferably, each loan contract is also checked with respect
to external conditions. Optionally, the loan contract may be marked
as pending, until an external verification of conditioned is
carried out 962.
[0336] For each loan there are further carried out collateral
management processes 970, found transfer instruction processing 980
(say using escrow agents), and accumulation 990 of funds to be
provided by the lender, as described in further detail
hereinabove.
[0337] Preferably, there is managed a contract based on the
composite loan, such that the atomic loans in the composite loan do
not have to be exposed to the lender, as illustrated in FIG.
9b.
[0338] Once the matching process generates composite loans and the
corresponding portfolio loans, a set of atomic loans is established
between borrowers and lenders.
[0339] The apparatus 1000 instructs service providers to perform
functions such as: reviewing financial info, verify and accept
collaterals, review loans document with the borrower and obtain
notarize signatures etc.
[0340] Once all conditions are met, the apparatus 1000 issues
electronic funds transfer instructions to the escrow agents, to
collect money from the lender's account and transfer funds to the
borrower's account.
[0341] In most cases, a borrower gets one (or very few) transfers
for the entire composite loan. Similarly, lenders see one or very
few transfers for the entire amount of a portfolio loan. In most
cases all funds are transferred to and from the account of an
escrow agent, according to transfer.
[0342] Escrow Services
[0343] Escrow Services are provided by independent service
providers who hold in trust funds that are flowing among lenders,
borrowers and other service providers.
[0344] Reference is now made to FIG. 10 which is a block diagram
illustrating interactions between escrow service providers and
other parties in a loan market, according to a preferred embodiment
of the present invention.
[0345] According to a preferred embodiment, escrow agents 101
interact with lenders 102 and borrowers 103, say for executing the
transferring of funds between lenders and borrowers, etc, as
described in further detail herein below.
[0346] The escrow agents 101 also interact with subsidizers 104 who
transfer their share in principal or in interest of a subsidized
loan handled by the escrow agents 101, sellers 105 who sell their
positions in active loans, and third parties 106 having stakes in
the loan process.
[0347] The escrow agents 101 receives instructions from the loan
market 107, providing their services, for supporting various
processes carried out in the loan market 107, and reports back to
the loan market 107 about all funds received or paid for managed
loans and related services.
[0348] Multiple escrow agents may participate in the borrowing and
lending transactions, providing services to both borrowers and
lenders, as well as to the service providers, and to the
operator(s) of the apparatus 1000.
[0349] An escrow agent collects the funds, holds them in trust and
transfers them, when due, to the receiving entities. Funds held by
the escrow agent accumulate interest that is credited to the
appropriate party. Every transaction performed by the escrow
service may have a fee associated with it.
[0350] Preferably, there is defined a communication protocol
between the apparatus 1000, and each escrow agent. The protocol may
be used for: opening sub-accounts for new lenders, borrowers and
service providers, providing advice about money expected to be
received from lenders, providing advice about money expected to be
received from borrowers, issuing instructions to transfer money to
borrowers (say, either partial or complete loan amount), issuing
instructions to transfer money to lenders (as money is collected
from borrowers), issuing instructions to transfer money to service
providers, etc.
[0351] Preferably, the protocol is also used for delivering reports
from the escrow agent to the apparatus 1000. The reports may
include, but are not limited to: money collected from lenders
reports, moneys collected from borrowers reports, failing money
transfer reports, computed and assessed fees reports, interest
calculated periodically for each sub-account, etc.
[0352] The escrow agent may collect and dispense funds through any
currently known method or service, including but not limited to:
Automated Clearing House (ACH), wire services, charging a credit
card, using person-to-person payment services such as PayPal, etc.
The Escrow Agent can accept funds that were transferred by the
payer or draw directly from the payer account using Automated
Clearing House (ACH), or any other similar service(s).
[0353] Reference is now made to FIG. 10a, which is a flowchart
illustrating a repayment management method, according to a
preferred embodiment of the present invention.
[0354] According to a preferred embodiment of the present
invention, there is provided a method for managing repayment of
loans. The method includes monitoring the due payments according to
a schedule of payments. The schedule of payments is derived from
the composite loans resultant of the matching process, as described
in further detail hereinabove.
[0355] First, an authorized user of the apparatus 1000 provides a
date range for target payments 1010. Each active composite loan
1020 is examined 1030 with respect to having payments due within
the date range.
[0356] If there is used an automatic withdrawal method 1040, there
are generated a transaction for automatic electronic collection
1050 and a withdrawal advise to the borrower 1055.
[0357] If there isn't used automatic withdrawal, there are issued
instructions 1060 to an escrow agent to expect fund transfer to be
initiated by the borrower, and a statement is issued 1065 to the
borrower.
[0358] If there are unpaid payments that are past their due payment
date 1035, there is triggered a collection process, say by a
collection manager 1056.
[0359] Reference is now made to FIG. 11, which is a flowchart
illustrating a repayment management method based on notices from
escrow agents or banks, according to a preferred embodiment of the
present invention.
[0360] When there is input a notice of payment from a bank or from
an escrow agent 1110, there is retrieved 1020 the data of the
composite loan (CL) that the input notice of payment relates to. If
the payment is late or insufficient 1130, a collection manager 1140
is triggered to initiate a collection process, for collecting the
debt.
[0361] If not all conditions are met 1150, a notice is issued 1155
to the escrow agent, to verify conditions. Further, a statement is
issued 1158 to the borrower which refers to the outstanding
conditions.
[0362] Next, there are calculated fees and interest rates 1160,
there is allocated a payment 1170 to the lender.
[0363] Next, relevant collaterals, used for the composite loan, are
released 1180.
[0364] If the composite loan is fully paid 1190, the composite loan
is closed 1195, as illustrated in FIG. 11a.
[0365] Optionally, there is used a method for instructing the
escrow agent(s) to carry out fund dispensing to the borrower(s), as
illustrated in the flowchart presented in FIG. 11b.
[0366] Rating Services
[0367] Rating services are provided by independent, authorized
rating service providers.
[0368] A rating service provider is a third party offering borrower
rating on a fee basis. Typically, the acceptance of the rating
service provider as an authority is derived from its reputation.
The rating service provider's credibility relies heavily on the
thoroughness of its evaluation and verification of the subject
entity it rates.
[0369] A method according to a preferred embodiment may further
support the participation of other service providers in the loan
trading business, including but not limited to: legal service
providers, insurance services, external information providers, loan
monitoring service providers (say, for monitoring the financial
status of the borrower), etc.
Advantages of the Present Embodiments
[0370] The present embodiments may introduce advantages over
current solutions. The advantages may include, but are not limited
to the possible advantages described in the following
paragraphs.
[0371] The system allows for a flexible loan market.
[0372] The system provides for such a flexible loan market that is
open to borrowers and lenders large and small.
[0373] The flexibility of the loan market allows each user, whether
acting as a borrower or a lender, to get the loan terms that best
suit himself.
[0374] Efficiency and reduced costs--As described hereinabove, the
apparatus 1000 may be operated by entities which are not banks.
Consequently, there may be eliminated the requirement of capital
reserves for operating a bank. There may be a significant reduction
in the need for capital requirements involved in the operation of a
bank, for example--there is no need to rent many offices, as a bank
does for its branches. There may also be allowed competitive
sourcing of many of the services related to the loan markets. As a
result, there may be cut costs involving personnel, and there may
be leveraged existing-resources of other service providers, such as
local realtors, accountants, mortgage brokers, lawyers, insurance
agents, etc.
[0375] Optimal, customized, and multi-dimensional risk
management--The apparatus 1000 may allow each lender to define his
alternative customized loan profiles, based on an unlimited set of
parameters. Such parameters may include, for instance: economic
classifications of the borrower, the collaterals requested, the
geographic location of the borrower, third party rating service
providers the lender prefers to use and conditions imposed on the
rating provided by the rating service providers, lender's exposure
in other loans he already made, external markets data, commodity
prices, exchange rates, weather condition information (say, when
lending to a borrower in an hurricane prone geographical region),
any other factor that may influence a lending decision. etc.
[0376] The lender may apply his risk assessment to each such
profile, and set the price (interest rate) accordingly. The lender
may also use the system to check the demand for loans in each
profile, and decide which of few alternative sets of loan
profile/price he is going to choose, based on his individual risk
assessment, given such a granular and multi-dimensional ability to
select borrowers, as taught in preferred embodiments of the present
invention. However, the match is automatically generated, according
to the criteria set by the lender(s) and borrower(s), as described
in further detail hereinabove.
[0377] The methods introduced by the present invention aim at
providing a way better than current methods. With current methods
interest rates are based on a very few parameters mixed by a bank
into a very broad average loss ratio.
[0378] The present embodiments may enable a lender to define and
maintain his loan profiles in a very efficient way. Preferably, a
lender is able to choose standard general profiles from a library,
modify them as he wishes and store them as personalized lender
specific profiles. Special calculators and management tools may
also be provided, for allowing a lender to combine profiles. Other
tools may provide standard assessment and pricing algorithms. The
lender is able to enter his own parameters into general algorithms
and use them to calculate his asked price, assess his risk
involved, etc.
[0379] The present embodiments may further enable the lender to
introduce flexible conditions, including external conditions, into
a profile, or into a lending order, as described in further detail
hereinabove. For example, a lending order issued by a car
manufacturer may include an external condition that the overall sum
the car manufacturer lends to a certain car buyer does not exceed a
certain percentage of the price of the car, including
discounts.
[0380] Global exposure--Utilizing the apparatus 1000 described
hereinabove, there is provided a method to enable multiple entities
(borrowers, lenders, etc), spread all over the globe, to
participate in a global loan market comprising multiple smaller
loan markets (say, when the apparatus 1000 is implemented as a part
a web site). The global market where the multiple entities may act
simultaneously creates liquidity and enhances exposure of lenders,
borrowers, and service providers worldwide.
[0381] A multiplicity of focused loan markets--The apparatus 1000
may provide a method to enable cooperation between multiple focused
loan markets, say using the external market interface manager. Each
focus loan market is a loan market specializing in a certain sector
of the economy. For example, there may be a loan market
specializing in the energy sector where special aspects relating to
the oil business sector, such as the price of a crude oil barrel
(updated in real time) are addressed, etc.
[0382] Transparency--A system according to a preferred embodiment
of the present invention is built in a way that enables (but not
necessitates) the provision of transparency on a selective basis.
The apparatus 1000 enables to document and show regulators and
authorized parties the consistency and fairness of the matching
process. The apparatus 1000 may also enable to provide
confidentiality to borrowers and lender, so as to allow the
borrowers and lenders to feel they receive a consistent and fair
treatment.
[0383] Operations management is the system administrator--sets
system parameters such as how often does it do matching, and
provides reporting.
[0384] It is expected that during the life of this patent many
relevant devices and systems will be developed and the scope of the
terms herein, particularly of the terms "Internet", "web", and
"Network", is intended to include all such new technologies a
priori.
[0385] Additional objects, advantages, and novel features of the
present invention will become apparent to one ordinarily skilled in
the art upon examination of the following examples, which are not
intended to be limiting. Additionally, each of the various
embodiments and aspects of the present invention as delineated
hereinabove and as claimed in the claims section below finds
experimental support in the following examples.
[0386] It is appreciated that certain features of the invention,
which are, for clarity, described in the context of separate
embodiments, may also be provided in combination in a single
embodiment. Conversely, various features of the invention, which
are, for brevity, described in the context of a single embodiment,
may also be provided separately or in any suitable
sub-combination.
[0387] Although the invention has been described in conjunction
with specific embodiments thereof, it is evident that many
alternatives, modifications and variations will be apparent to
those skilled in the art. Accordingly, it is intended to embrace
all such alternatives, modifications and variations that fall
within the spirit and broad scope of the appended claims. All
publications, patents and patent applications mentioned in this
specification are herein incorporated in their entirety by
reference into the specification, to the same extent as if each
individual publication, patent or patent application was
specifically and individually indicated to be incorporated herein
by reference. In addition, citation or identification of any
reference in this application shall not be construed as an
admission that such reference is available as prior art to the
present invention.
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