Patent Publication Number: US-2006004652-A1

Title: Loan option algorithm adaptable to fully variable option loans and fixed option loans

Description:
This invention relates to a loan option algorithm which is adaptable to fully variable option loans and fixed option loans, which is disclosed in the U.S. provisional application serial number 60,582,030, filed Jun. 22, 2004. 
    
    
     FIELD OF THE INVENTION  
     SUMMARY OF THE INVENTION  
      Loan Options is the process where a lender gives an option to the borrower to omit one or more payments between the first and last payment. The Option and parameters of the loan are negotiated at origination.  
      Within Loan Options, there are unlimited combinations of the key parameters: schedule of omitted payment, term and interest rate. 
    
    
     SCHEDULE OF OMITTED PAYMENTS  
      It can be predetermined when the borrower will omit the first payment, but only after making the first “n” payments. The borrower can decide to omit one payment every twelve months, one every six months, one every three months or one every other month. Alternatively, the borrower can be given the full choice of when to exercise the option on the first payment, and subsequent omitted payments, subject to making a minimum number of payments between any two omitted payments.  
      Term  
      In addition, the term of the loan can be increased for each omitted payment, or the term can remain fixed, but then the amount of each remaining payment is increased.  
      Interest Rate  
      The interest rate can remain fixed at the rate for a loan without Loan Options. Alternatively, the interest rate can be increased at the time of each option exercise (or just at the first) by a fixed amount. The interest rate can also float, capped or uncapped until option exercise. Interest does continue to accrue on the outstanding balance, such that payment after omitted payment has more than one month&#39;s (regular payments) interest. 
          Next is a short algorithm of the process:     Determine loan parameters and payments of standard loan without Loan Options,     Offer Loan Options to borrower,     If borrower accepts Loan Options, determine parameters     Determine if borrower wants full option to choose omitted payments or determine loan omission schedule at origination,     Determine if interest will change or remain fixed per loan without Loan Options,     Determine if term will increase or remain fixed,     Detail payment schedule given parameters or detail formula for recalculating payment if borrower takes full option to choose omitted payment.        

      The algorithm is preferably embodied in a computer program for use in a suitable computer or central processing unit capable of reading and acting out the steps of the program.  
     BRIEF DESCRIPTION OF THE DRAWINGS  
       FIG. 1  is a flow chart for a fully variable option loan;  
       FIG. 2  is a flow chart for a fixed option loan; and  
       FIG. 3  is a combined flow chart for a standard loan, fully variable option loan, and a fixed option loan.