Method and system for facilitating opportunistic transactions

Abstract

An automated internet based exchange system is described for controlling the exchanging of ownership interests in objects on a secondary market. The automated exchange includes one or more sub-exchanges for maintaining information representative of secondary market transactions and for controlling said transactions. The automated exchange includes a secondary portfolio auction sub-exchange, a pricing and valuation services sub-exchange, an electronic contract negotiation services sub-exchange and a delivery and auditing service sub-exchange. The automated exchange also includes a logic switch manager that creates opportunistic auctions from a transaction for a product or service so as to trigger further auctions or service sales on the same or different secondary markets.

Description

[0001] This application is a continuation of U.S. patent application Ser. No. 09 / 271,096 filed on Mar. 17, 1999, the contents of which are hereby fully incorporated by reference.[0002] I. Field of the Invention[0003] The invention is directed to online auctioning systems and methods, and more particularly to an online opportunistic auction system and method for use in commercial secondary markets.[0004] II. General Background of the Invention[0005] When a person or entity borrows money from a lender, the borrower must sign a promissory note promising to repay the home loan and a mortgage note (or deed of trust) to serve as collateral for the loan. The bearer of such notes has a legal claim to the underlying property until the mortgage loan is either paid in full or refinanced. When a lender has distributed all of its available funds, the lender will often raise money by selling groups of notes (mortgage loans) to investors. The selling of mortgage loans to investors is referred to a...

AI Technical Summary

Benefits of technology

"The patent is about an online auction system and method for selling mortgage notes in the secondary market. The technical effects of the patent include the creation of a more efficient and cost-effective way to sell mortgage notes and the development of standard sets of terms and formulas for flow deals, which allows lenders to offer loans to multiple purchasers and negotiate the best possible deal."

Problems solved by technology

Second, there are lenders that act as liquidity facilities to primary institutions, with loans backed by mortgage portfolios, and funded by issued bonds or borrowed external refinancing lines.

The process of compiling up to date loan specifics and advertisements for possible purchasers is typically a time consuming and expensive task.

The reliability of pricing information also suffers because mortgage pricing is not static and as such, mechanisms for updated pricing are required.

Evaluating multiple possible deals unfortunately is an extremely complex task because there are no standard sets of terms and formulas among purchasers when buying loans.

The non-uniformity among purchasers in the secondary market for flow deals currently requires lenders to develop profiles of average loans offered and run the profile against models built for each deal analyzed.

Typically, only a few flow deal scenarios are employed resulting in non-optimum mortgage transfers.

Furthermore, the actual process is characterized by intense negotiations that may necessitate high commissions to expensive salespersons.

The transaction costs for a flow deal using past methods is therefore both time consuming and expensive.

Notwithstanding the high capital volume involved, the secondary mortgage market suffers from many problems associated with the above described transactions.

Rather than fixed transaction costs regardless of loan size, operating expenses can vary from each transaction and typically increase with transaction volume.

Further, there can be a lag of several weeks to months for changes in portfolio and delivery pricing models to be effected.

Price changes are often manually handled by technical staff, thus increasing the likelihood of human error and associated auditing costs.

Presently, transactions in secondary markets such as the secondary mortgage market are slow and inefficient.

The buying and selling of mortgages is currently done in a fragmented and inefficient manner--often by hand and rarely aided by computer tools.

There is minimal automation, a very limited market of buyers, and inherent inefficiencies in this extremely high volume capital-intensive secondary mortgage market.

Unfortunately, this method of transferring mortgages is time consuming, costly and depends too greatly on human factors as previously described.

A key reason why the secondary mortgage market is so fragmented is that it is difficult to qualify sellers.

Sellers are thus forced to go through the tedious and expensive process of individually qualifying with each potential purchaser.

This limitation can be quite restrictive to time sensitive transactions or during volatile secondary market activity.

Time delays caused by qualifications can immediately impact the price and profitability of deals transacted under those conditions.

Often, purchasers are forced to accept sub-optimal price offers due to lack of competitive bids from multiple qualified sellers.

If however, a seller's status changes due to an increase in bankruptcies, foreclosures, delinquencies, etc., the previous qualification status is often null and void and needs to be updated.

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