Patent Publication Number: US-2010131426-A1

Title: Method and Apparatus for Issuance of Trade of Real Estate Notes

Description:
CROSS REFERENCE TO PRIOR APPLICATIONS 
     This application is a continuation-in-part of and claims priority to U.S. patent application Ser. No. 11/865,899, filed Oct. 2, 2007, which is incorporated by reference for all purposes. This application is a continuation-in-part and claims priority from U.S. patent application Ser. No. 12/058,930, filed Mar. 31, 2008, which is incorporated by reference for all purposes. This Application claims priority from Provisional Application Ser. No. 61/035,588, filed Mar. 11, 2008. 
    
    
     BACKGROUND 
     1. Technical Field 
     This invention relates generally to a method and an apparatus for financing a mortgage on an individual real estate parcel with real estate notes sold to one or more investors using electronic networks and automated trading systems. 
     2. Background Art 
     Real estate investments are the largest asset class in the United States. However, investments in real estate are not very liquid, as compared to stocks and bonds. For example, real estate bond investors face liquidity issues and valuation challenges. Mortgage bankers are seeking to explore new ways to securitize its loan portfolios, and mortgage brokers are seeking better financing terms for the property owners. 
     To finance a real estate purchase, a buyer typically undertakes a debt, i.e. a mortgage, on the property. Mortgage originators may (1) hold a new mortgage in their portfolio, (2) sell the mortgage to an investor or other financing conduit, or (3) use the mortgage as collateral for the issuance of a security. A new security was created called a mortgage-backed security. A mortgage-backed security is a pool of mortgages that represent the collateral for a security. The cash flow pattern associated with a mortgage-backed security is based on the payment of the individual mortgage loans underlying the security. The ability of borrowers, e.g. homeowners, to prepay part or all of the mortgage at any time creates uncertainty regarding cash flow (above and beyond projected delinquencies), so investors usually wish to be compensated for accepting the risk of unscheduled payments. A targeted mortgage-backed security is a security collateralized by a pool of mortgages where the borrowers&#39; incomes are no more than 80 percent of the area median income. 
     Mortgages may be sold on a secondary market. For example, a bank may purchase mortgages from across the country that share similar characteristics—payment terms, interest rates, loan terms, and other characteristics that vary. For example, some mortgages may carry greater credit risk than others based on the type of property or the credit history of the borrowers. 
     The bank purchases large numbers of mortgages that they “pool,” or bundle together, into large groups. The bank guarantees timely payment of principal and interest to the investors who invest in these pools. 
     Pooled mortgages are used to “back,” i.e. collateralize, the issuance of a particular type of instrument known as a mortgage-backed security. Many investors—typically large-scale institutional investors such as pension funds or mutual funds—find mortgage-backed securities very attractive. 
     Sometimes mortgage-backed securities are called “pass-through” securities because the bank “passes through” to investors the funds borrowers pay for their mortgages. 
     By investing in mortgages, the bank attracts funds for primary mortgage market lenders from debt investors who would not otherwise invest in the U.S. residential mortgage market or who might be averse to prepayment risk. The bank finances these mortgages by issuing debt securities. 
     A mortgage-backed security is similar to a loan. When an investor purchases a mortgage-backed security, it indirectly lends money to a borrower who promises to pay interest and to repay the principal. The purchase enables the lender to make more mortgage loans. Mortgage-backed securities are known as “fixed-income” investments and represent an ownership interest in mortgage loans. Other types of bonds include U.S. government securities, municipal bonds, corporate bonds and federal agency (debt) securities. 
     Traditionally, lenders originate mortgages and sell groups of similar mortgage loans to investors, e.g. organizations like Bank of America, which then securitize the mortgage loans. The lenders originating the mortgage loans use the proceeds they receive from the sell to make additional mortgage loans in their communities. The resulting mortgage-backed securities carry a guarantee of timely payment of principal and interest to the investor and are further collateralized by the mortgaged properties themselves. The lenders originating the mortgage-backed securities, e.g. the mortgage-backed security issuer, or a servicer collects monthly payments from borrowers and “passes through” the principal and interest to the investors. 
     Thus, these pools are known as mortgage pass-through or participation certificates (PCs). Most mortgage-backed securities are backed by 30-year fixed-rate mortgages, but they can also be backed by shorter-term fixed-rate or adjustable rate mortgages. Additionally, the lender originating the mortgage loans pools the mortgage loans from many borrowers, creates a new security that is divided in trenches or segments based on certain criteria, e.g. credit rating, and sells these divided securities to investors on the secondary market. The trenches or segments are assigned certain rating, e.g. C as a very low rating and AAA as a very high rating. When borrowers within the pools default, investors in the highest rated trench get paid first while those in the lowest trench sustain a loss. 
     Investors in a traditional mortgage-backed security face a number of challenges, including no loan diversification risk, loss position in the pool without any residual collateral, low or non-existing liquidity, and continuous asset pricing issues. 
     Remarkably, while the debt and equity markets are highly liquid, the real estate mortgage-backed securities market is not. An increased liquidity in the real estate mortgage-backed securities market would make the overall market more efficient, which would generate more wealth. 
     Thus, there is a need for an improved method and system for financing real estate mortgages and increasing the liquidity in the real-estate industry. 
    
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
       The accompanying figures, where like reference numerals refer to identical or functionally similar elements throughout the separate views and which together with the detailed description below are incorporated in and form part of the specification, serve to further illustrate various embodiments and to explain various principles and advantages all in accordance with the present invention. 
         FIG. 1  illustrates one embodiment of a schematic block diagram illustrating a real estate note sale management system in accordance with the invention. 
         FIG. 2  illustrates one embodiment of a block diagram showing a central controller in accordance with the invention. 
         FIG. 3  illustrates one embodiment of a block diagram showing a real estate mortgage owner interface in accordance with the invention. 
         FIG. 4  illustrates one embodiment of a block diagram showing an investor interface in accordance with the invention. 
         FIG. 5  illustrates one embodiment of a method for generating a real estate note offer in accordance with the invention. 
         FIG. 6  illustrates one embodiment of a method for an acceptance of a real estate note offer by a central controller in accordance with the invention. 
         FIG. 7  illustrates one embodiment of a method for an activation of a real estate note offer in accordance with the invention. 
         FIG. 8  illustrates one embodiment of a method for maintenance of active real estate note offers in accordance with the invention. 
         FIG. 9  illustrates one embodiment of a method for selecting a real estate note offer by an investor in accordance with the invention. 
         FIG. 10  illustrates one embodiment of a method for binding of an investor commitment offer in response to a real estate note offer in accordance with the invention. 
         FIG. 11  illustrates one embodiment of a method for binding of an investor commitment offer in response to a real estate note offer in accordance with the invention. 
         FIG. 12  illustrates one embodiment of a method for completing a real estate note offer and a payment between an investor and a real estate mortgage owner in accordance with the invention. 
         FIG. 13  illustrates one embodiment of a method for implementing a payment in accordance with the invention. 
         FIG. 14  illustrates one embodiment of a method for implementing counteroffers by an investor in accordance with the invention. 
         FIG. 15  illustrates one embodiment of a method for implementing counteroffers by an investor in accordance with the invention. 
         FIG. 16  illustrates one embodiment of a method for generating an investor sale offer or an investor purchase offer and subsequently being accepted by a central controller in accordance with the invention. 
         FIG. 17  illustrates one embodiment of a method for accepting and maintaining active investor sale offers and investor purchase offers in accordance with the invention. 
         FIG. 18  illustrates one embodiment of a method for accepting and maintaining active investor sale offers and investor purchase offers in accordance with the invention. 
         FIG. 19  illustrates one embodiment of a method for accepting and maintaining active investor sale offers and investor purchase offers in accordance with the invention. 
         FIG. 20  illustrates one embodiment of a method for completing a transaction between investors of investor purchase offer and investor sale offer in accordance with the invention. 
         FIG. 21  illustrates one embodiment of a method for maintaining real estate note offers which pay a rate of return in accordance with the invention. 
         FIG. 22  illustrates one embodiment of a schematic block diagram illustrating a method of real estate note sale management system in accordance with the invention. 
         FIG. 23  illustrates one embodiment for a method for creating, marketing, and selling real estate notes in accordance with the invention. 
         FIG. 24  illustrates one embodiment of a method for early termination of RENO and completing final payments in accordance with the invention. 
         FIG. 25  illustrates one embodiment of a method for determining and distributing periodic real estate note payments. 
     
    
    
     Skilled artisans will appreciate that elements in the figures are illustrated for simplicity and clarity and have not necessarily been drawn to scale. For example, the dimensions of some of the elements in the figures may be exaggerated relative to other elements to help to improve understanding of embodiments of the present invention. 
     DETAILED DESCRIPTION OF THE INVENTION 
     Before describing in detail embodiments that are in accordance with the present invention, it should be observed that the embodiments reside primarily in combinations of method steps and apparatus components related to securitizing and financing real estate mortgages with real estate notes sold to one or more investors. Accordingly, the apparatus components and method steps have been represented where appropriate by conventional symbols in the drawings, showing only those specific details that are pertinent to understanding the embodiments of the present invention so as not to obscure the disclosure with details that will be readily apparent to those of ordinary skill in the art having the benefit of the description herein. 
     The terms “comprises,” “comprising,” or any other variation thereof, are intended to cover a non-exclusive inclusion, such that a process, method, article, or apparatus that comprises a list of elements does not include only those elements but may include other elements not expressly listed or inherent to such process, method, article, or apparatus. An element proceeded by “comprises . . . a” does not, without more constraints, preclude the existence of additional identical elements in the process, method, article, or apparatus that comprises the element. 
     Embodiments of the invention are now described in detail. Referring to the drawings, like numbers indicate like parts throughout the views. As used in the description herein and throughout the claims, the following terms take the meanings explicitly associated herein, unless the context clearly dictates otherwise: the meaning of “a,” “an,” and “the” includes plural reference, the meaning of “in” includes “in” and “on.” Relational terms such as first and second, top and bottom, and the like may be used solely to distinguish one entity or action from another entity or action without necessarily requiring or implying any actual such relationship or order between such entities or actions. 
     Embodiments of this invention relate generally to a method and apparatus for facilitating an original issue of financial derivatives called real estate notes in an underlying individual mortgage loan, i.e. a “mortgage,” of real estate. Real estate is a large asset class and although most real estate-related assets on the market today are freely and voluminously traded, real estate mortgage assets are not because they are bundled into “dark investment pools” and sold to investors that are hard to value, trade and price at any given moment. Embodiments of this invention disclose a method and a system by which one may offer a financially sound, fixed income note secured by an individual mortgage on a specific real estate property. These real estate mortgage notes are not mortgage-backed securities, nor do they imply any partial real estate mortgage ownership. Instead, a real estate mortgage note is based on a fixed income contract with a predefined rate of return. 
     The asset embodied in this invention is not a pool of mortgages, i.e. mortgage-backed securities or combined holdings of a Real Estate Investment Trust (REIT), but is rather a single real estate mortgage for a single individual real estate parcel such as a private residence or a commercial site. Embodiments of the invention also facilitate sale of the real estate note to public investors across an automated exchange. This system includes facilitation of an active, on-going, multilateral market between investors. Embodiments of the invention allow mortgage owners to receive money from a plurality of investors for the purchase of a note corresponding to an individual real estate mortgage. 
     Embodiments of the invention also allow real estate mortgage owners to finance potential mortgages that will be created on a real estate parcel that is already owned or one they plan to purchase. Alternatively, real estate mortgage owners can finance an existing mortgage that has been originated on a real estate parcel. Further, investors are able to actively trade the issued notes with other investors on an exchange. One advantage of one embodiment of the invention is that real estate mortgage owners are able to receive money at the best interest rate that is bid down by investors during the initial purchase offer. Another advantage of one embodiment of the invention is that real estate mortgage owners are able to finance existing mortgages in order to obtain funds to continue to originate new mortgages. 
     Each mortgage represents a loan which is profiled based on hundreds of criteria. Each profile is represented by a risk profile with a specific score. The score helps investors to determine the rate of return an investor can expect to receive on the loan. Traditional structures of mortgage financing, like mortgage-backed securities, pool many mortgages together to form a pool and offer these pools for sale to investors. Embodiments of the invention facilitate mortgage financing by breaking a loan into many interest-bearing notes which represent a fraction of the whole loan. Each fractional interest may represented by a real estate note. For example, each note may have a face value of $100, which is a unit of investment by investors. Each note may also have a specified rate of return. The value of the note may change over time, the change representing the gain or loss of the note over a specified period. The rate of return can be determined in number of ways. In one case, a note with a principal amount of $100 might have a coupon rate that is paid over a number of periods. For example, a $100 note may have a 6% coupon rate that is paid monthly for 360 months. The note issuer can repay the principal along with the monthly coupon rate payments, or the note issuer may pay the entire principal amount at the end of the term. In another case, a note can be sold at a discount equivalent to the present value of a one time future payment. For example, a $100 note with a 6% per year discount rate to be paid over 360 months may be sold for $16 today. This type of note may be called a zero coupon note. Based on investors&#39; criteria and risk allocation strategy, investors may be able to create portfolios containing these types of real estate notes to achieve desired diversification, risk tolerance, and reward position. 
     In one embodiment, communications between real estate mortgage owners and investors are conducted using an electronic network and central controller. The term “real estate note” or “note” will be used herein to refer to any contract, promise, paper or other acknowledgment representing and acknowledging a debt and promising payment. The term “real estate mortgage owner” will be used to refer to (i) an individual, a corporation, a partnership, a government, or any other entity that is looking to obtain financing in order to pay-off/refinance an existing mortgage or create a new mortgage by selling several individual notes in a mortgage on a single real estate parcel  1   e  and (ii) any owner of an existing real estate mortgage, collateralized by a single, individual real estate parcel, looking to finance this mortgage by dividing the mortgage into several individual notes and selling these individual notes to investors. A “mortgage” is used herein to refer to any existing or potential real estate parcel debt, e.g. a singular residential parcel mortgage or a singular commercial parcel mortgage. A “parcel” is used herein to refer to any singular segment of land, property, or similar tract. 
     A real estate mortgage owner who wishes to sell a real estate note in an individual real estate mortgage accesses the central controller, which may be located at a remote server across a network. The real estate mortgage owner then creates a Real Estate Mortgage Based Note Offer (RENO) to finance the mortgage by selling a note. In one embodiment, the real estate note is only for a percentage of the real estate mortgage. The payment may be realized periodically based on a rate of return and terms included in the note. In the initial note offer, the real estate mortgage owner and investor may negotiate a rate of return, payment periods, term period, mortgage amount as percentage of real estate parcel value, and other conditions as required by the investor. 
     The real estate note may be an interest-bearing note on a faction of an existing mortgage. It may have a face value of $100 and an interest or coupon rate which is variable based on a rate set by investors at origination. The interest rate is determined at the time of the initial RENO and is set by investors who bid on the offer based on their initial loan risk assessment. 
     By way of example, take a homeowner who lives in La Jolla, Calif. The value of the home is $1,200,000. In one embodiment, this price can be derived from a combination of the last sale price of the property scaled by a weighted average of price adjustments based upon property index price data changes. Further, the homeowner carries a mortgage for $1,000,000, with an interest rate of 6.5%, for 30 years and believes that he or she can refinance the existing mortgage at a lower rate. To create a RENO based on this example, the homeowner works with a real estate mortgage broker or the bank owning the mortgage to refinance the existing mortgage using a RENO. In this case, the mortgage broker or the bank owning the mortgage completing the RENO process would be considered a real estate mortgage owner. The real estate mortgage owner may create an offer to sell notes with a term of 30 years and a coupon rate of 5.5% to be paid monthly. In one embodiment, the coupon rate of such a note is based upon data related to the homeowner&#39;s credit score, property loan-to-value, and homeowner debt-to-income ratio and is determined through a Dutch auction. A Dutch auction is a type of auction where an auctioneer begins with a high asking price which is lowered until some participant is willing to accept the auctioneer&#39;s price, or a predetermined reserve price (i.e. the seller&#39;s minimum acceptable price) is reached. The winning participant pays the last announced price. In the case of the RENO process, the auctioneer begins with a high interest rate, which may be lowered if participants, in the aggregate, bid more money than the auctioneer is seeking. The participants are required to accept lower interest rates in order to participate. The winning participants accept the lowest interest rate that is bid to complete the total amount of re-financing. Based on investor-defined weighted scores, i.e. a specific risk profile, the RENO receives a score from 1-1000. For the purposes of this discussion, the note may be assigned a score of 900. An investor might consider this score to be a risk-free investment and be willing to purchase $100,000 of notes at 5.5% and so on. 
     Based on investors individual risk assessment, investors can bid a risk premium spread up or down with different commitment amounts and different coupon rates as follows:
         a. $100,000 at 5.5%   b. $250,000 at 5.75%   c. $350,000 at 5.85%   d. $450,000 at 6.25%   e. $375,000 at 6.5%   f. $275,000 at 6.75%   g. $150,000 at 7%       

     In this example, the bid-to-cover ratio is 1.95. This is calculated by adding all bids and dividing by the amount being financed, i.e. $1,950,000 in total bids divided by $1,000,000 being financed gives 1.95; therefore, not every bidder will receive notes because amount of bids exceeds the amount being financed. Bids will be filled from the lowest yield until the entire $1,000,000 has been financed. This auction will clear at a yield of 6.25% and all bidders will get the yield. This feature of the Dutch auction format leads to more aggressive bidding as those who, in this case, bid 5.85% will receive the note at the higher yield of 6.25%. Once the RENO auction is completed, the real estate mortgage owner originates the mortgage and finances it with the money received at the auction. In one embodiment, the real estate mortgage owner services the mortgage and collects monthly payments from the homeowner. Every month, the real estate mortgage owner pays investors based on the RENO and will take some compensation for ongoing facilitation of payments. This process may lead to a new mortgage being created, e.g. the original mortgage owned by the bank may be paid-off. 
     In another embodiment of the invention, a method and system for a bank owning an existing real estate mortgage to obtain additional financing related to that existing real estate mortgage is provided. The bank may own a $200,000 mortgage with a 6.5% interest rate, which the bank used its reserve funds to finance the real estate purchase. The bank may desire to raise money from investors to replenish reserve funds or offer new mortgages. In one embodiment, the bank may create the RENO, complete the RENO process that creates an offer to sell real estate notes with a 30 year term and a 5.5% coupon rate to be paid monthly. In one embodiment, the coupon rate of such a note is based upon data related to the homeowner&#39;s credit score, property loan-to-value, and homeowner debt-to-income ratio and is determined through a Dutch auction. In this example, when the bank is successful in selling notes in the total amount of $200,000 at 5.5% or better, the bank continues to own and service the mortgage and is responsible for monthly payments to investors calculated based on RENO terms. The funds received from the RENO process may be used by the bank to replenish its reserve funds, offer new mortgages, or conduct other business. 
     In another embodiment of the invention, the RENO provides a method and system for a bank or real estate mortgage broker to finance a new real estate mortgage. By way of example, a bank might need to originate a $200,000 mortgage with a 6.5% interest rate in order to finance a new real estate purchase for a potential buyer. The bank desires to raise money from investors to finance the mortgage/purchase at the same time as the bank originates the mortgage. In this case, the bank may create the RENO and complete the RENO process that creates the offer to sell notes with a 30 year term and a 5.5% coupon rate to be paid monthly. In one embodiment, the coupon rate of such a note is based upon data related to the real estate buyer&#39;s credit score, property loan-to-value, and debt-to-income ratio and is determined through a Dutch auction. In this embodiment, when bank is successful in selling notes in the total amount of $200,000 at 5.5% or better, the bank may own and service the mortgage and be responsible for monthly payments to investors calculated based on RENO terms. 
     Once the RENO has been created, the real estate mortgage owner then attaches a user identification to the RENO. The RENO is then transmitted to the central controller across the network. Examples of transmission schemes of the present invention include a world-wide-web interface, such as a web browser or portal, electronic mail, voice mail, facsimile, or postal mail. The system may attach standard legal provisions and boilerplate language to the RENO, and may further “fill in the gaps” to complete the RENO. 
     Before transmitting the RENO to potential investors, the central controller first authenticates the real estate mortgage owner&#39;s unique identification number. In one embodiment, this authentication is made possible by a real estate mortgage owner database, which includes publicly available information about the real estate parcel. The central controller may require additional verification by requesting that the real estate mortgage owner provide a social security number or other personal information. This personal information may be used for credit verification, existing debt obligation verification, income sources and expense verification. The personal information may also be used to ensure that the real estate mortgage owner has sufficient income available to cover the periodic payments that might be required by the RENO. 
     Once the verification process is complete, the central controller then assigns a unique tracking number to the RENO. The RENO is then presented globally so that it becomes available for viewing by potential investors. The RENO may be categorized with other RENOs, perhaps by property location, to make it easier for potential investors to identify relevant RENOs. Thus, an investor interested in RENOs in the state of Florida could log onto a web portal and peruse a listing of Floridian RENOs. In one embodiment, the investor may have to be pre-qualified to access RENO listings. 
     If, after reviewing a particular RENO, a potential investor wishes to participate in the RENO, the investor communicates his interest to the central controller. The central controller then timestamps the interest message and authenticates the identity of the investor, as well as his capacity to deliver the funds set forth in the RENO. The central controller then verifies that the RENO is “active” and available for participation. If a RENO is available for participation by only one investor, it is “completed” when the first qualified investor accepts it. Subsequent investors will not be able to participate in a “completed” RENO, but may be added to a corresponding waiting list. 
     If a RENO is available for participation to many investors, subsequent investors will be able to participate in the same RENO until the funding set forth in the RENO is obtained. Once this funding is obtained, the RENO is marked “completed” and additional investors may be added to a waiting list. When an investor participates in an active RENO, the central controller assigns a unique tracking number to the investor&#39;s participation. The participation details are then stored in a database. Once participation is confirmed, the real estate mortgage owner and investor become parties to a legally binding contract. 
     In another embodiment, the central controller manages payments between the real estate mortgage owner and investor automatically. Various methods of payment may be used in accordance with the invention, including payment by credit cards, personal checks, electronic funds transfer, debit cards, and digital cash. The payment system may also involve the use of an escrow account associated with the RENO wherein a trustee maintains funds advanced by the parties until the RENO is complete. Moreover, payment timing may be varied, depending upon application. For instance, the real estate mortgage owner may receive funds immediately after the investor commits funds. Alternatively, payment may be delayed until after the real estate mortgage owner performs and signs all required documents and they are recorded. 
     In another embodiment of the invention, an investor may be given an option of responding to a RENO by issuing a counteroffer with conditions different from the original. In such a scenario, the investor transmits the counteroffer to the central controller. The central controller, in turn, forwards the counteroffer to the real estate mortgage owner. Upon receiving the counter offer, the real estate mortgage owner is given the option of accepting the counteroffer. Where the counter offer is accepted, the investor becomes bound to the investor for the terms of the counter offer. 
     In one embodiment, the RENO may be constructed to pay periodic payments or distributions. Where payments or distributions are used, the central controller maintains the obligations and facilitates transactions required for payment. The central controller may also record payments and distributions on an exchange. 
     While one embodiment of the present invention is intended for networked use, embodiments of the present invention may also take off-line forms. Instead of using electronic mail or web-based servers, for example, real estate mortgage owners and investors may communicate with the central controller via telephone, facsimile, postal mail, or another off-line communication tool. For instance, real estate mortgage owners may use telephones to create RENOs (with or without the assistance of live agents). Similarly, potential investors may use a telephone to browse and bind RENOs. 
     Once a RENO is completed, an investor may use the system to sell the real estate note obtained to other investors. The investor does this by communicating an offer to sell the real estate note to the central controller and specifying selling price and time of offer expiration. Other investors may have an interest in purchasing existing real estate notes traded on an exchange. Such investors may communicate their offer to purchase to the central controller, specifying purchase price and time of offer expiration. Since an existing real estate note terms cannot be changed, the price of an original $100 note can be more or less than $100 and will depend on a current risk score of the note, interest rates on the market for alternative investments and many other options that investors can take into consideration. The central controller monitors orders received from buyers and sellers. Where a match is found, the controller executes the transaction and real estate note ownership rights are transferred from seller to buyer. The controller instructs a settlement system to transfer funds between parties. During such a transaction, the real estate mortgage owner who originally sold real estate notes is unaffected. 
     In one embodiment, security protocols are used. For example, cryptographic protocols may be used to authenticate the identity of buyers and/or sellers, as well as to verify the integrity of buyer and seller communications with the central controller. Using cryptography or other technologies such as biometrics, the central controller can make it significantly more difficult for unauthorized persons to tamper with the system. 
     Similarly, the system in one embodiment works to maintain buyer and seller anonymity. For numerous privacy and competitive reasons, buyers and sellers often prefer not to have their identities revealed to the general public when engaging in commercial transactions. Embodiments of the invention offer such protection through the use of identification numbers stored in a database secured by the central controller. 
     One embodiment of a central controller suitable for use with the invention includes three controller components, which embody six systems: a membership system, a pricing system, a RENO system, a trading system, a clearing system and a compliance system. The membership system authenticates the identity of real estate mortgage owners and investors. The pricing system prices new RENOs or existing real estate notes. The RENO system facilitates creation of the RENO and posts the RENO to investors. The trading system records and facilitates real estate note trades. The clearing system settles money between all parties once transactions are completed. The compliance system stores a log of all activities in the central controller and performs system and compliance audits. This multi-system configuration allows for ease of controller distribution among specialized servers. 
     Where disputes arise, one embodiment of the invention offers a mechanism for dispute resolution. In one embodiment, the system attaches binding arbitration clauses to RENOs. The central controller may serve as an arbitrator or may refer the dispute to a third-party arbitrator for resolution. 
     Embodiments of the invention provide advantages not found in the prior art. First, the system provides the ability for real estate mortgage owners to access money from plural investors by selling real estate notes in a single real estate mortgage. Second, the system provides the ability for real estate mortgage owners to finance an existing mortgage through plural investors by selling real estate notes in a single real estate mortgage. Next, the system allows real estate mortgage owners to reach a large number of remotely located investors—investors who normally would not be able to afford to find the real estate mortgage associated with the RENO. Forth, the system allows investors to obtain diversification by participating in a number of a real estate mortgages through a purchase of real estate notes. Next, the system allows real estate mortgage owners to issue real estate notes and globally communicate note offers to investors. Transaction costs are minimal, and the system provides liquidity for the real estate note sold with a RENO. 
     The real estate parcel owner that is subject to the mortgage remains the owner of the parcel and the real estate mortgage owner offering the note remains the owner and the servicer or the mortgage. The system maintains a conformance record of all covenants required by the RENO. When the mortgage is refinanced or the note term ends, the system determines the note payoff according to the original RENO and distributes the appropriate funds to the property owner and investors on record. 
     Thus, embodiments of the invention provide a vehicle for permitting investors to benefit from fixed income return paid on a real estate note that is secured by an interest in a specific real estate parcel. Furthermore, investors benefit from interest changes as they reflect changes in the real estate note prices and diversification with investment in mixed-asset portfolio. It is a goal of embodiments of the present invention to provide a robust system that matches real estate mortgage owners having a desire to finance mortgages with investors capable of providing financing. The power of a central controller to field real estate note offers from real estate mortgage owners and investors, communicate those offers globally in a format which can be efficiently accessed and analyzed by other investors, effectuate performance of resulting sale of real estate notes, trade between parties, resolve disputes arising from those transaction, and maintain billing, collection, authentication, and anonymity makes the present invention an improvement over conventional systems. 
     As will be illustrated and described herein, an electronic system for creating, marketing, and selling real estate notes, representing an individual mortgage secured by a real estate parcel, between an owner of the individual a real estate parcel or a real estate mortgage and at least one of a plurality of investors is provided. The system includes a central controller having a network interface coupled to a network. The central controller includes and facilitates a trading system configured to process purchase and sale of one of the real estate mortgage based note offerings. The central controller also includes an investor interface coupled to the network interface across the network. The investor interface is configured to receive investor input. A real estate mortgage owner interface, which is a part of the central controller and is coupled to the network interface across the network, is configured to receive real estate mortgage owner input. 
     The central controller further comprises a pricing system that is configured process investor requests received by the electronic system for real estate mortgage based note offering prices. The pricing system is further configured to deliver one or more real estate mortgage based note offerings in response to the investor requests. The pricing system also is configured to process offering requests received by the electronic system for note offerings, and to deliver one or more note offering options in response to the offering requests. 
     A clearing system, also a part of the central controller, is configured to process financial transactions associated with the purchase and sale of the real estate mortgage based note offerings. A compliance system maintains records of central controller transactions. A real estate note offering system configured to process requests by real estate mortgage owners to initiate real estate mortgage based note offerings. 
     A real estate information system communication coupling, which may be connected to the central controller across the network between the central controller and a real estate information system, is configured to receive information validating real estate mortgage value, existing debt, property conditions and historical price index change for the area. A bank communication coupling, connected across the network between the central controller and a bank, is configured to receive information validating funds from the bank. A credit agency communication coupling, connected across the network between the central controller and a credit agency, is configured to receive information validating real estate mortgage owner personal information from the credit agency. 
     A membership system, which is included in one embodiment of the central controller, works with a real estate mortgage owner database and an investor database to authenticate an identity of at least one real estate mortgage owner and at least one investor by matching identities of real estate mortgage owners stored in the real estate mortgage owner database with certain system users. The membership system may also match identities of investors stored in the investor database with other certain system users. 
     A real estate note offering database, which is accessible by the central controller, is configured to invoke the real estate note offering system to create a plurality of note shares corresponding to the real estate mortgage information, and to store them in a real estate note offering database. In one embodiment, the real estate note offering database comprises a plurality of databases, accessible by the central controller. The plurality of databases can include at least a purchase commitment database for storing purchase commitments of the real estate mortgage based note offerings, and a clearing database for storing transaction data relating to the real estate mortgage based note offerings. Other databases may be included as well, each database being accessible by the central controller, including at least a purchase commitment database for storing purchase commitments of the real estate mortgage based note offerings, and a clearing database for storing transaction data relating to the real estate mortgage based note offerings. Additional databases include a contract detail database, a real estate notes database, and a payment database an audit database, an escrow database, and an investor offers database. 
     The central controller, upon receiving a request from the investor interface, is configured to invoke the pricing system to retrieve one or more notes from the real estate note offering database, associate a price with the one or more notes, and to deliver the price to the investor interface. Upon receiving a purchase commitment from the investor interface, the central controller is configured to invoke the trading system to generate an identifier specifying at least a financial account. The identifier is associated with the purchase commitment, which is stored with the identifier in the purchase commitment database. Once the purchase commitment is stored in the purchase commitment database, the central controller is configured to invoke the clearing system to transfer funds from an investor account to a real estate mortgage owner account. 
     A method for creating, marketing, and selling real estate notes, represented by fixed income contracts with a rate of return and term in individual real estate mortgages, between a real estate mortgage owner and at least one of a plurality of investors, is also described. The steps of the method include providing a networked, electronic, exchange apparatus having a central controller, as described above, and receiving electronic real estate mortgage data from the owner interface, where the electronic real estate mortgage data comprising at least an address last recorded sale date and last recorded sale price of real estate parcel for the mortgage. Once the electronic real estate mortgage data is received, the central controller performs the step of generating a real estate mortgage based note offer associated with the electronic real estate mortgage data and delivers the real estate mortgage based note offer to the investor interface. In one embodiment, the real estate mortgage based note offering comprises at least an expected rate of return, a number of payment periods, and total mortgage amount. 
     The investors then get involved and transmit, through the investor interface, purchase commitments. Thus, the central controller performs the step of receiving at least one purchase commitment from the investor interface in response to the step of delivering the real estate mortgage based note offer. The central controller also receives an electronic financial account identifier associated with the at least one purchase commitment from the investor interface and executes an electronic transfer of funds via the electronic financial account identifier. Once the purchase commitment is received, the central controller executes the step of determining whether the purchase commitment meets or is less than the maximum interest rate on a loan. The central controller also executes the steps of validating the electronic real estate mortgage data and validating the at least one purchase commitment. The central controller is further responsible for delivering the at least one purchase commitment to the owner interface upon receiving the at least one purchase commitment, receiving additional transaction details from the owner interface; and generating, electronically, a counteroffer and delivering the counteroffer to the investor interface. All transactions may be tracked throughout the process. For instance, the central controller may perform the steps of adding a tracking number and time stamp to one of the real estate mortgage based note offering or the at least one purchase commitment. 
     Turning first to  FIG. 1 , illustrated therein is one embodiment of an electronic system  100  for creating, marketing, and selling real estate notes, represented by fixed income contracts with a rate of return and term associated with individual real estate mortgages, between a real estate mortgage owner and at least one of a plurality of investors. The system  100  will be referred to herein as a “Real Estate Notes Exchange” (RENE) system for discussion purposes. In one embodiment, the RENE includes a central controller  200 , a real estate mortgage owner interface  300 , and an investor interface  400 . 
     The system  100  receives real estate parcel and mortgage details  105  from real estate mortgage owner and provides the real estate mortgage owner with plurality of a real estate note offers for sale  106 . The system  100  further receives selected RENOs  110  from real estate mortgage owners, and then makes them available for viewing by potential investors. The system  100  allows investors to purchase RENOs as one entire interest or partial interest real estate note. Thus, a real estate mortgage owner is able to communicate his initial offer to participate in the purchase of the real estate notes associated with a mortgage related to an individual real estate parcel to an investor. Such an offer provides the investor with the confidence that if he purchases notes, he will benefit from the corresponding financial rewards in terms of a fixed income return. Once RENO  110  has been purchased by investors, the system  100  allows investors to buy or sell the real estate notes in an active, liquid market. The notes may be owned by investors and offered in an investor sale offer  140 , or may be solicited by other investors with investor purchase offer  145 . 
       FIGS. 1 through 4  illustrate one architecture for a system  100  in accordance with the invention. As shown in  FIG. 1 , the system  100  includes a central controller  200 , a real estate mortgage owner interface  300 , an investor interface  400 , a real estate information system  160 , a bank interface  180 , a credit agency  190 , and a connection to various other third parties  170 . Each of these connections is referred to as a “node.” 
     Each node is connected to another via a network connection, such as an Internet connection. The connection may be accomplished using a public switched telephone or broadband network, such as those provided by a local or regional telephone operating company. Communication connections may also be provided by dedicated data lines, cellular, Personal Communication Systems (“PCS”), microwave, or satellite networks. The nodes serve as the input and output gateways for communications with central controller  200 . 
     Turning now to  FIG. 2 , the central controller  200  includes central processor (CPU)  205 , 
     RAM  215 , ROM  220 , the membership system  209 , the pricing system  210 , the RENO system  211 , the trading system  212 , the clearing system  213 , the compliance system  214 , and other components, such as a clock  235 , an operating system  240 , a network interface  245 , and a data storage device  250 . Each of the systems may comprise executable software, functional with the CPU, and stored in memory. A conventional server computer with sufficient memory and processing capability may be used as central controller  200 . In one embodiment the central controller  200  operates as a web server, both receiving and transmitting RENOs  110  generated by real estate mortgage owners. The central controller  200  may also receive and transmit ISOs  140  and IPOs  145 . 
     In one embodiment, the central controller  200  is configured to handle a high volume of transaction processing. The central controller  200  also performs a significant number of mathematical calculations in processing communications and database searches. One example of a processor suitable for use as the CPU  205  is a Pentium microprocessor, such as the Single Quad-Core Intel Xeon 1200 2.4 GHz, commonly manufactured by Intel Inc. Equivalent processors include Dual-Core 64-bit AMD Opteron processors with 2×1MB L2 Cache 2.80 GHz commonly manufactured by AMD. 
     While the various systems may comprise executable software, each may include its own processor as well. For instance, the membership system  209 , pricing system  210 , RENO system  211 , trading system  212 , clearing system  213 , and compliance system  214  may each have their own dedicated microprocessor (such as the Intel Xeon). Alternatively, these systems may be configured as part of the central CPU  205 . 
     The membership system  209  authenticates the identity of real estate mortgage owners and investors. It uses a real estate mortgage owner database  255  and an investor database  260  to match identities of users that communicate with central controller  200 . The pricing system  210  processes real estate mortgage owner and investor requests for pricing real estate notes. Real estate mortgage owners provide real estate details  105  and receive one or more real estate note offers in return. Investors provide a real estate notes query  138  and receive one or more real estate notes meeting their query criteria in return. 
     The RENO system  211  facilitates creation of the RENO. The RENO system  211  further processes the sale of RENOs  110 , purchase commitments  120  and sale commitments  125 . This system provides all necessary operations for initial real estate notes issue by mortgage owner. The trading system  212  processes all investor trading on existing real estate notes, including Investor Sale Offers (ISO)  140  and Investor Purchase Offers (IPO)  145 . 
     The clearing system  213  processes all transactions which have a “pending” status. This system communicates with bank interface  180  to complete payment processing if needed. The compliance system  214  keeps track of every transaction by central controller  200 , thus maintains a history of every transaction. This system also provides reports to real estate mortgage owners and investors on all of their activities and monitors for various compliance issues. 
     The data storage device  250 , which may include hard disk, magnetic disk, optical storage units, CD-ROM drives, or flash memory, contains databases used in the processing of transactions. These databases include the real estate mortgage owner database  255 , the investor database  260 , the RENO database  265 , the purchase and sale commitment database  268 , the investor offers database  270 , the real estate mortgage owner account database  275 , the investor account database  276 , the contract detail database  280 , the payment database  285 , the clearing database  290 , and the audit database  295 . In a preferred embodiment database software such as Microsoft SQL Server 2005, manufactured by Microsoft Corporation, is used to create and manage these databases. 
     The real estate mortgage owner database  255  maintains data on real estate mortgage owners with fields such as unique identifier, name, address, phone number, ID number, social security number, electronic mail address, credit history, past system usage, etc. This information is obtained when the real estate mortgage owner first registers with the system, or immediately prior to posting his first RENO  110 . 
     The real estate mortgage owner account database  275  tracks all information pertaining to the real estate mortgage owner&#39;s account with fields such as real estate mortgage owner&#39;s name, bank and credit account numbers, and debit or credit transactions. Real estate mortgage owner payments for RENOs  110  may be sent to this database. This database may be a pointer to account data stored at the real estate mortgage owner&#39;s bank. 
     The investor database  260  maintains data on investors with fields such as unique identifier, name, contact information, real estate preferences. Contact information comprises a phone number, web page URL, blog address, pager number, telephone number, electronic mail address, voice mail address, facsimile number, or other contact indicia. Upon registration, the investor may be required to demonstrate evidence of a financial ability to purchase RENOs  110  or IPOs  145 . 
     The investor account database  276  tracks all information pertaining to the investor&#39;s account with fields such as investor&#39;s name, unique identified, bank and credit account numbers. This database may be a pointer to account data stored at the investor&#39;s bank. 
     The RENO database  265  tracks all RENOs  110  with fields such as status, tracking number, date, time, price, mortgage balance, expected parcel value, term period, conditions, and real estate mortgage owner identification number. This database is valuable in the event of disputes between real estate mortgage owners and investors regarding payment, because details of the offer can be produced. 
     The purchase and sale commitments database  268  tracks all purchase commitments  120  and sale commitments  125 . The structure of this database is similar to RENOs database  265 , plus the addition of a field for a RENO tracking number to facilitate purchase commitments  120  and sale commitments  125  being correlated with a particular RENO  110 . 
     The investor offers database  270  tracks all ISOs  140  and IPOs  145 . This database maintains data with fields such as real estate note identified, status, tracking number, date, time, amount, price, mortgage balance, expected parcel value, expiration date, conditions, and investor identification number. 
     The contract detail database  280  contains form background provisions for inclusion in RENOs  110 , ISOs  140  and IPOs  145 . These form provisions effectively fill the details of conditions specified by the real estate mortgage owner, details of RENO, and specifying the generic contract details common to most RENOs  110 . For an ISO  140  or an IPO  145 , the contract detail database  280  fills in the details of conditions specified by the investor and the corresponding RENO  110 . 
     The payment database  285  tracks all payments made by the investors with fields such as investor name, investor unique identifier, amount of payment, associated RENO  110 , ISO  140  or IPO  145  tracking number. This database may also store bank account information of investors. 
     The clearing database  290  tracks all records of transaction between real estate mortgage owners and investors, investors and investors and status of the transaction. Records include fields such as unique identifier, amount of payment, and associated RENO  110 , ISO  140 , or IPO  145  tracking number. 
     The audit database  295  stores transactional information relating to the posting of RENOs  110 , purchase commitments  120 , sale commitments  125 , ISOs  140 , IPOs  145 , and any other transaction processed by the central controller  200 . This database allows such data to be retrieved for later analysis. 
     The escrow database  299  temporary holds investor funds before they are placed in the account of real estate mortgage owner in real estate mortgage owner account database  275 . These funds may also be transferred from the escrow account database  299  to the investor account database  276 . 
     The network interface  245  is the gateway to communicate with investors, real estate mortgage owners, and third parties  170  or third party systems such as the real estate information system  160 , the bank interface  180 , or the credit agency  190 . Conventional internal or external modems, or network cards, may serve as the network interface  245 . In one embodiment, the network interface  245  supports modems at a range of baud rates from 1200 upward, but may combine such inputs into a T1 or T3 line if more bandwidth is required. In one preferred embodiment, the network interface  245  is connected with the Internet and/or any of the commercial on-line services such as America Online, DSL, or Cable Internet, thereby allowing investors and real estate mortgage owners to access the system  100  from a wide range of on-line connections. The system  100 , in one embodiment, is platform independent and utilizes open standards based on commonly understood Internet protocols. The system  100  also supports multiple languages. The system  100  may alternatively be configured as a voice mail interface, web site, bulletin board, or electronic mail address. 
     While the paragraphs above describe generally a single computer acting as central controller  200 , it will be obvious to those of ordinary skill in the art having the benefit of this disclosure that system functionality can be distributed across a plurality of computers. In one embodiment, the central controller  200  is configured in a distributed architecture, where the databases and corresponding processors are housed in separate units or locations. Some controllers perform the primary processing functions and contain at a minimum RAM, ROM, and a general processor. Each of these controllers is attached to a WAN hub which serves as the primary communication link with the other controllers and interface devices. The WAN hub may have minimal processing capability itself, serving primarily as a communications router. Those skilled in the art having the benefit of this disclosure will appreciate that an almost unlimited number of controllers may be supported. This arrangement can yield a dynamic and flexible system, which may be less prone to multiple processor hardware failures. 
     Turning now to  FIGS. 3 and 4 , illustrated therein are the real estate mortgage owner interface  300  and investor interface  400 , respectively. In an exemplary embodiment, both the real estate mortgage owner interface  300  and the investor interface  400  comprise conventional personal computers having an input device, such as a keyboard, mouse, or conventional voice recognition software package; a display device, such as a video monitor; a processing device such as a CPU; and a network interface such as a modem or network card. These devices interface with central controller  200  across a network. Alternatively, real estate mortgage owner interface  300  and investor interface  400  may comprise other devices, such as voice mail systems, fax machines, pagers, PDAs, or other electronic or voice communications systems. 
     Referring to  FIG. 3 , the real estate mortgage owner interface  300  includes a central processor (CPU)  305 , RAM  315 , ROM  320 , a clock  335 , a video driver  325 , a video monitor  330 , an operating system  340 , an input device  345 , a network interface  350 , and data storage device  360 . A Xeon microprocessor such as the Intel Core 2 Duo E6700 described above may be used for CPU  305 . The clock  335 , in one embodiment, is a standard chip-based clock which can serve to timestamp a RENO  110 , a purchase commitment  120  or a sale commitment  125 . 
     The data storage device  360  is a conventional magnetic-based hard disk storage unit such as those manufactured by Maxtor. The message database  370  may be used for archiving RENOs  110 , ISOs  140  and IPOs  145 , while the audit database  380  may be used for recording payment records and communications with central controller  200 . 
     Referring now to  FIG. 4 , the investor interface  400  includes a central processor (CPU)  405 , RAM  415 , ROM  420 , a clock  435 , a video driver  425 , a video monitor  430 , an operating system  440 , an input device  445 , a network interface  450 , and a data storage device  460 . All of these components may be identical to those described above in reference to  FIG. 3 . 
     Communications between the nodes and the central controller  200  may be enabled by various commercial software applications available today. Microsoft Outlook, manufactured by Microsoft Corporation, for example, provides editing tools for the creation of messages as well as the communications tools to route the message to the appropriate electronic address. When the central controller  200  is configured as a web server, conventional communications software such as the Internet Explorer web browser from Microsoft Corporation may also be used. The real estate mortgage owner interface  300  and investor interface  400  may use the Internet Explorer browser to transmit RENO  110 , investor purchase commitments  120 , sale commitments  125  or transaction confirmations  130 . 
     In one embodiment of the invention, transactions between real estate mortgage owners and investors take place across a network, with the central controller  200  acting as a web server. The real estate mortgage owner logs on to the central controller  200  and creates a RENO as described above. The real estate mortgage owner then disconnects from the network. The central controller  200  makes the RENO available to potential investors by posting it on, for example, the web page of the central controller  200 . The central controller  200  also performs periodic maintenance to ensure that active RENOs have not expired. 
     Investors transmit purchase commitments  120  or sale commitments  125  electronically to the central controller  200 , which in turn saves them in the purchase and sale commitment database  268 . Once a purchase commitment  120  or a sale commitment  125  for a given RENO have been validated, i.e. financially meets the price requested by the RENO, the central controller  200  clears the RENO  110  and transfers payments. 
     Turning now to  FIG. 5 , illustrated therein is one embodiment of a method by which the real estate mortgage owner formulates a RENO. At step  500 , the real estate mortgage owner logs on to the central controller  200  by way of the real estate mortgage owner interface  300 , thereby establishing a communication link. It should be noted that the real estate mortgage owner may be an individual, a corporation, a partnership, a government, or any other entity. In one embodiment, the central controller  200  provides a page on the World Wide Web, thereby allowing the real estate mortgage owner to communicate with the central controller  200  through the interface of conventional web browser software such as Internet Explorer, manufactured by Microsoft Corporation. 
     At step  510 , the real state owner provides the real estate detailed information for the real estate parcel and mortgage upon which he wants to issue RENO. As shown in box  515 , information might include property address, residential or commercial type, year purchased, current value, amount of existing debt, loan amount, etc. After the information is provided, a form is displayed on video monitor  330  of real estate mortgage owner interface  300 . 
     At step  520 , the real estate mortgage owner receives a list of options for RENOs available to him. These options are prepared by the pricing system  210  of the central controller  200 . As shown in the box  525 , offer options might include offer interest rate, note term period, loan amount, and so forth. A homeowner, for example, might want to raise money for his daughter to go to college. If he owns a house that he purchased 20 years ago, subject to a 30 year mortgage, he may use a RENO to refinance the mortgage with sale of notes. In accordance with one embodiment, he would enter his home address, last recorded property sale price and sale date, amount of any existing mortgage, his income, assets, expenses, etc. The real estate mortgage owner, i.e. the homeowner, simply fills in the blanks. The real estate mortgage owner then reviews choices for the real estate note offers  520  and chooses the one or more that most closely meets his needs. These options would be selected and the corresponding RENO generated. 
     As indicated in box  525 , real estate notes could include the provision that the note can be re-purchased, note term period, interest rate, loan amount, and so forth which are conditions of the note. 
     Real estate note offer term and conditions may be modified so as to allow the real estate mortgage owner to tailor the RENO for his specific needs. The RENO may also be based on one or more owner conditions. For example, one condition might state that four out of five other specified conditions must be met. Conditions may be based on external events. For example, the real estate mortgage owner may be required to obtain prior permission from the central controller  200  if he wants to refinance, sell or improve the parcel upon which notes are sold or bought. In another example, the real estate mortgage owner may want to command a specific interest rate for notes on a mortgage. 
     The real estate mortgage owner selects RENO choices at step  530 . At step  540 , the real estate mortgage owner may add an expiration date to the RENO if desired. This expiration date option allows the real estate mortgage owner to post a RENO without worrying about being bound after a date certain, for example when his needs may have changed. 
     At step  550 , the real estate mortgage owner attaches his name or a unique system identification number to the RENO. The central controller  200  provides the identification number when the real estate mortgage owner registers for the service. Alternatively, the real estate mortgage owner chooses the unique identification number and then registers with central controller  200  by phone. The central controller  200  maintains a list of the unique identification numbers in the real estate mortgage owner database  255 . Where less security is required, the user&#39;s social security number could serve as the unique identification number, as it offers the advantages of being both unique and easily remembered. 
     At step  560 , the central controller  200  may ask the real estate mortgage owner to provide additional personal information related to the mortgagee. As indicated in box  565 , the personal information may include the mortgagee&#39;s full name, social security number, credit scores, income sources, asset information, expenses, and so forth. 
     The real estate mortgage owner then transmits the information to the central controller  200  at step  570 . At step  580 , boilerplate language is added to the RENO to complete the RENO. The boilerplate language is stored in the contract detail database  280 . 
     As an alternative to the network interface, the real estate mortgage owner may also transmit RENO data via electronic mail, voice mail, facsimile, or postal mail transmissions. With voice mail, the real estate mortgage owner calls the central controller  200  and leaves RENO data in aural form. The RENO information may be transcribed into digital text at the central controller  200 , or may alternatively be made available to potential investors in the aural format. In a mail enabled embodiment, the central controller  200  acts more like a router, directing RENOs to the potential investors, and creating multiple copies of RENOs when necessary. The RENOs may also be posted to bulletin boards or web pages operated by the central controller  200 . 
     As noted, the central controller  200  supports a plurality of transmission methods, allowing for a wide variety of formats of RENOs. Some formats may be changed, however, before further processing by the central controller  200 . By way of example, the RENOs may be transmitted by mail in paper form, may be scanned and digitized using optical character recognition software to create digital text. These embodiments are more fully described in the off-line embodiment described later. 
     Referring now to  FIG. 6 , illustrated therein is a method of processing a RENO in the central controller  200  once the real estate mortgage owner has transmitted the RENO. When the RENO is received, the central controller  200  validates all information entered by the real estate mortgage owner to ensure that the monetary amounts and all conditions are justified. This occurs before the central controller  200  makes the RENO available to potential investors. 
     At step  600 , the central controller  200  extracts real estate property information from the 
     RENO. At step  610 , central controller  200  submits property information for data validation to the real estate information system  160 . One function of this submission is to validate the stated real estate value, existing debt, and property condition set forth in the RENO. The central controller  200  essentially checks to see if there is evidence to support the RENO assertions to investors. 
     At step  620 , the real estate information system responds to the data validation, indicating whether all information has support evidence, or whether there is reason to believe that the information is inaccurate. If there is cause to believe that the information is not accurate, data supporting this cause is transmitted to real estate mortgage owner at step  630 . 
     The real estate mortgage owner then has the opportunity to update the information or provide support for the original information. Where the RENO property information is updated or support is transmitted, central controller  200  then resubmits the request for data validation at step  610 . At step  640 , the central controller  200  requests a credit agency  190  to validate mortgagee&#39;s personal information, such as social security, credit scores, debt, income and other information, which may be extracted from the RENO. At the step  650 , if the personal information is not accurate as disclosed in the RENO, an indication of the inaccuracy is transmitted to real estate mortgage owner at step  655 . As with the real estate information, the real estate mortgage owner has the opportunity to correct or validate the information. Once the real estate mortgage owner has validated or corrected the personal information, central controller  200  then resubmits the request for data validation to the credit agency  190  at step  640 . 
     At the step  660 , the central controller  200  validates if sufficient income is available to cover all debt obligations. If the income is not sufficient to cover debt obligations as disclosed in the RENO, an indication of the amount shortage is transmitted to the real estate mortgage owner at step  665 . The real estate mortgage owner has the opportunity to correct or validate the information, or alternatively, to lower the mortgage in the amount required to meet requirements. Once the real estate mortgage owner has met sufficient mortgagee income requirements, central controller  200  then resubmits the request for income validation at step  660 . If personal information income is sufficient, at the step  670 , the central controller  200  validates if there is a sufficient equity in the property for RENO amount. If the property equity is not sufficient to cover the mortgage amount required as disclosed in the RENO, an indication of the amount shortage is transmitted to real estate mortgage owner at step  675 . The real estate mortgage owner has the opportunity to correct or validate the information or alternatively to lower the mortgage in the amount required to meet requirements. Once the real estate mortgage owner has met minimum equity requirements, central controller  200  then resubmits the request for equity validation at step  670 . 
     With the validation/correction processes transpiring, the central controller  200  may check the RENO to see if it has expired at step  680 . If expired, the RENO is rejected at step  690  and returned to the real estate mortgage owner. If the RENO has not yet expired, it is accepted at step  695 . 
     Referring now to  FIG. 7 , there is illustrated one method of activating and making public a RENO in accordance with embodiments of the invention. Specifically, the central controller  200  activates the RENO and makes it available to potential investors via the RENO system  211 . 
     At step  700 , a unique tracking number is added to the RENO. Additionally, the RENO system  211  timestamps the RENO at step  710  and stores the RENO in the RENO database  265 . The RENO database  265 , in one embodiment, contains a record for each RENO and includes fields such as status, property information, tracking number, timestamp, detail notes offer, expiration date, conditions, and real estate mortgage owner ID number. 
     The status field, in one embodiment, has values of “pending,” “active,” “expired,” and “completed.” A status of “pending” means that the RENO is not currently available to potential investors. This may be the case because the RENO is either still being processed by central controller  200 , or perhaps the real estate mortgage owner has temporarily suspended the RENO. 
     An “active” RENO becomes available to potential investors and can be bound. An “expired” RENO can no longer be bound. Once the entire RENO has been purchased by investors, the RENO is given a status of “completed.” 
     After being stored at step  720 , the RENO may go through a series of processing steps. One step, if necessary, is language translation. Language translation may include either creating an equivalent RENO in a standard language for the system, or translating the RENO to a common language that is viewable by investors. Language experts at central controller  200  provide the translation. Alternatively, automatic translation software such as Systran Professional, manufactured by Systran Software, may be used. Many bi-directional language combinations are available, including English to/from French, Italian, German, Spanish, Portuguese, and Japanese. Another step, if necessary, is to edit for typographical and other errors. The central controller  200  may also again verify the information in the RENO with various third party systems  170 . 
     At step  730 , the status of the database record for the RENO is set to “active.” At step  740 , the real estate location information of the RENO is extracted from the property information field. At step  750 , the RENO is posted in an appropriate real estate location area. This allows, in one embodiment, the RENO system  211  to display the RENO only to the most appropriate investors. In a World Wide Web environment, the RENO system  211  has a web page for each real estate location or area. Thus, all RENOs for San Diego real estate, for instance, would be displayed on the San Diego web page. This presentation makes it much easier for potential investors to find appropriate RENOs, as they can go right to the real estate location of interest. 
     In an alternative embodiment, the RENO is electronically mailed to potential investors, either individually or in groups. Potential investors may optionally elect to receive all RENOs, only those RENOs in their real estate location area, or a subset of RENOs representing a particular investor specified condition. For example, an investor might request that all RENOs over $500,000 for San Diego be sent to them. 
     In embodiments where RENOs are being transmitted to investors, it is important to note that there are a number of hardware options for investor interface  400 , some of which have been noted above in the description of  FIG. 4 . Suitable investor interfaces  400  include fax machines, PDAs with wireless connections, beepers, or pagers. For example, an investor in England may instruct the central controller  200  to “beep” him whenever a RENO appears for a New York property. The investor may request that the central controller  200  provide details of the RENO over the beeper network. Alternatively, the investor may request that the central controller  200  inform the investor to log on to the central controller  200  for further details. 
     Turning now to  FIG. 8 , illustrated therein is one procedure for RENO maintenance in accordance with embodiments of the invention. At step  800 , the RENO system  211  searches the RENO database  265 . At step  810 , the expiration date field of each database record is compared to the current date. If the expiration date of the RENO is earlier than the current date, the status of the RENO is changed to “expired” at step  820 . The maintenance process is completed at step  830  once all “active” RENO database records have been examined. 
     Turning now to  FIG. 9 , illustrated therein is one embodiment of a method by which a potential investor selects a RENO in accordance with the invention. At step  900 , the potential investor logs onto the central controller  200  using the network interface  450  of the investor interface  400 . At step  910 , the potential investor selects an appropriate real estate location area. For example, an investor may select the Portland, Oreg. area when it is experiencing a real estate boom. As such, the investor may search the Portland real estate area in hope of finding an appropriate RENO. 
     At step  920 , the potential investor browses the list of available RENOs (i.e. those with a status of “active”). The RENOs, in one embodiment, are listed with minimal details. Additional information is available where selected by the investor or where the potential investor is interested in purchasing a particular RENO. Continuing with the Portland, Oreg. RENO example from the preceding paragraph, a corresponding RENO might be listed as “Portland, Oreg.--5%--15years--$200,000.” 
     At step  930  the potential investor selects a specific RENO. The potential investor may request additional data at step  940 . In one embodiment, each RENO is hyperlinked to a separate web page. That web page may provide complete details or information. Upon accessing the web page, the potential investor may click on the RENO and be immediately transferred to a page or pages of supporting detail. This supporting detail may include a picture of the real estate parcel, mortgage details, historic price data for the area, sales statistics, comparable sales information, and so forth. In an alternate embodiment, the RENO is electronically transmitted directly to the investor. Transmission methods include electronic mail, fax, telephone, beeper, or other communication means. 
     Turning now to  FIGS. 10 and 11 , illustrated therein is one method by which an investor participates in RENO in accordance with embodiments of the invention. At step  1000 , the potential investor selects the RENO to be committed to. At step  1005 , the RENO system  211  receives the investor purchase commitment  120  from the potential investor. The RENO system  211  then timestamps investor purchase commitment  120  and authenticates the identity of the investor using membership system  209 , as well as verifying his probable capacity to deliver the necessary funds at step  1020 . The timestamp allows the RENO system  211  to determine the order in which investor purchase commitments  120  are to be processed. If two investor purchase commitments  120  are received within a few seconds of each other, the timestamp allows the 
     RENO system  211  to decide which was received first. Alternatively, the timestamp may be appended to the investor purchase commitment  120  at the time it is transmitted from investor interface  400 , using the clock  435  of the investor interface  400 . 
     Authentication of the investor&#39;s identity involves the central controller  200  extracting the unique system ID from investor purchase commitment  120  and looking up the investor&#39;s identity in the investor database  260 . Information in the investor database  260  then provides an indication of the investor&#39;s ability to deliver the required funds in case of purchase commitment  120 . Before an investor can complete an investor purchase commitment  120  in amount of $1,000, for example, central controller  200  must authenticate that the investor has $1,000 in available funds. If necessary, central controller  200  may verify that the investor can provide the specific funds required by contacting the bank interface  180 . In another embodiment, the investor incorporates the investor purchase commitment  120  into the RENO. The investor may further sign the RENO by adding an electronic signature or other indication. This indication could be a digital signature, or could involve adding a symbol or indicia representative of the investor. 
     The RENO system  211  then verifies the status of RENO at step  1030 , determining whether or not the status of the RENO is “active” at step  1040 . If the RENO is currently “active,” a unique tracking number is added to the investor purchase commitment  120  at step  1060 . The RENO system  211  then stores investor purchase commitment  120  in the purchase and sale commitment database  268  at step  1070 . If the status of RENO is not “active” at step  1040 , the central controller  200  refuses the investor purchase commitment  120  and transmits the investor purchase commitment  120  back to the potential investor at step  1050 . 
     Turning now to  FIG. 11 , illustrated therein is one embodiment of a RENO completion process in accordance with embodiments of the invention. The RENO completion process begins at RENO processing step  1100 . The central controller  200  checks the validity of the RENO at step  1110 . The central controller  200  processes payments when sufficient amount of investor purchase commitments  120  have posted for a specific RENO, or where the RENO reached the expiration date. The central controller  200  may additionally process payments where the real estate mortgage owner has agreed to any amount less than the original RENO amount. In such a case, the RENO may retain its status of “active” until a sufficient number of investors have responded. Once a sufficient number of investors have responded, the status of the RENO is changed to “clearing.” 
     At step  1120 , the clearing system  213  processes the investor payment information and the approval code for the selected RENO in case of purchase commitment  120 . This information and approval code is transmitted to the bank interface  180  for a withdrawal of funds initiated by investor when completing the investor purchase commitment  120 . Once the payment transfer is completed at step  1130 , the RENO is completed and bound, and the RENO has become a note contract between the real estate mortgage owner and investor. The binding process requires that the status of RENO  110  be changed to “completed,” thereby preventing subsequent investors from committing to already sold RENOs. The binding process also requires that the unique investor identifier be added to the RENO. At step  1140 , the central controller  200  sends a transaction confirmation  130  to the investor and real estate mortgage owner. 
     In accordance with embodiments of the invention, there are many methods by which the provider of the system may generate revenue. In one embodiment, a flat fee is charged for every RENO that is submitted. There may also be flat fees for a predetermined number of RENOs submitted within a given period of time, thereby allowing investors to subscribe to the service much in the same manner as they might subscribe to a newspaper. 
     In another embodiment, the central controller  200  calculates a percentage of the amount paid by investors or received by real estate mortgage owners. Upon calculation, the central controller  200  may actuate a program to retain that percentage amount. Alternatively, methods and apparatuses of the present invention may be deployed without a payment feature. 
     Turning now to  FIG. 12 , illustrated there are the remaining steps of RENO process completion. In the case of the investor purchase commitment  120 , at step  1201 , the real estate mortgage owner signs binding documents specified by the RENO terms and conditions. At step  1210 , payment information and an approval code are processed by clearing system  213  and transmitted to the bank interface  180  for deposit of funds. At the step  1220 , the central controller  200  sends transaction confirmation  130  to the real estate mortgage owner and the investor. At step  1230 , the status of the RENO is changed to “completed” and the transaction is complete. 
     In one embodiment of the invention, communications between investors take place across electronic networks, with the central controller  200  acting as a liaison, broker, or communication web server. To provide liquidity for real estate notes sold through the system, embodiments of the invention provide investors with a mechanism for selling the real estate notes at any time. To sell or buy notes, the investor first logs on to the central controller  200  and creates an investor sale offer (ISO)  140  or investor purchase offer (IPO)  145 . The ISO or IPO is then made available to potential investors by posting on a web page presented by the central controller  200 . The central controller  200  may additionally provide periodic maintenance to ensure that active ISOs or IPOs have not expired. The central controller  200  may monitor the ISOs and IPOs for matches. Where a match is found, the central controller  200  completes transfer of real estate notes from one investor to another. The central controller  200  additionally transfers payments between buyers and sellers at the time of real estate notes transfer. 
     Turning now to  FIG. 16 , illustrated therein is one method by which an investor formulates the ISO or the IPO in accordance with embodiments of the invention. At step  1600 , the investor logs on to the central controller  200  using the investor interface  400 , thereby establishing a communication link with the central controller  200 . It should be noted that the investor may be any of an individual, a corporation, a partnership, a government, or other entity. In one embodiment, the central controller  200  has a page on the World Wide Web, thereby allowing the investor to provide information through the interface of conventional web browser software such as Internet Explorer, manufactured by Microsoft Corporation. 
     At step  1610 , the potential investor selects an appropriate real estate note using real estate note query  138 . An investor, for example, who lives in Boston and wants to diversify his real estate investment portfolio, may wish to invest $10,000 into residential real estate mortgages located in Austin, Tex. At step  1620 , this potential investor browses the list of available real estate notes in the Austin area. Real estate notes may be listed with minimal details, with additional information available only where the potential investor requests such information. An Austin, Tex. real estate note might be listed as “Austin, Tex.--5%--Jan. 15, 2027--$125.” As shown in box  1615 , the investor may search real estate notes in accordance with a multitude of parameters. These parameters may include property address, residential or commercial description, note terms, mortgage amount, parcel value, note rate of return, and so forth. 
     At step  1630  the potential investor selects a specific real estate note. Where additional information is required, the investor may request such additional data at step  1640 . In one embodiment, each real estate note listing is hyperlinked to a separate web page that provides complete parcel/mortgage/note details. This detail may include a picture of the underlying real estate parcel, mortgage amount, historic price data for the area, ISOs and IPOs open for that note, and so forth. In another embodiment, real estate note details are electronically transmitted directly to the investor. Transmission means include electronic mail, fax, telephone, beeper, or other communication devices. 
     As indicated in box  1645 , the real estate note listing may include a provision that the note can be re-purchased. Additionally, the listing may include a note term, a total note rate of return, a mortgage amount, or other terms that constitute conditions or covenants of the real estate note. Such conditions may have been defined when the RENO was issued. 
     In one embodiment, the pricing system  210  provides investors with an accurate value of the specific note. In order to value the note, the pricing system  210  needs a derived value of the real estate parcel and current debt to income ratio and credit score for a parcel owner. To establish the value of the real estate parcel at any given time, in one embodiment the pricing system  210  uses a weighted combination of one or more local real estate price indexes and provided by automated valuation system from the real estate information system  160 . When the original RENO was issued, the value of the property is partially derived based on a last record sale of the real estate parcel and adjusted based on change in one more local real estate price indexes and partially based on value derived by automated valuation systems. The derived value, in one embodiment, defines an unbiased starting point for deriving the future value of the property at later time. Over the term of the note a derived value of the parcel will fluctuate. In addition, the pricing system  210  may provide the term structure of the note and value of the note considering current and future interest rates. 
     At step  1650 , the investor chooses to issue either the ISO or the IPO for a specific real estate note. After the necessary information has been provided, a form is displayed on the video monitor  430  of the investor interface  400 . This form may be an electronic contract with a number of blanks to be filled out by investor. Each blank represents a condition of the ISO or the IPO. The investor simply fills in the blanks. 
     At step  1660 , the investor adds an expiration date, amount and price to the ISO or the 
     IPO, if desired, or chooses to execute transaction at prevailing price. This selection allows the investor to post the ISO or the IPO without worrying that he will later be bound when needs may have changed or his offer price has not been matched. 
     At step  1670 , the investor attaches his name or a unique system ID number to the ISO or the IPO. This unique system ID, in one embodiment, is received from central controller  200  when the investor registers for the service. Alternatively, the unique system ID is chosen by the investor and then registered with central controller  200  by phone. The central controller  200  maintains a database of investor unique system ID numbers in the investor database  260 , and issues (or allows) only unique numbers. If less security is required, the investor&#39;s social security number could serve as the unique ID number since it has the advantages of being both unique and easily remembered. 
     The investor then transmits the identifier to the central controller  200  at step  1680 . The investor does this by clicking a “send” button located on the screen. At step  1690 , boilerplate or form language is added to the ISO or IPO to complete them. The boilerplate language is pulled from the contract detail database, which stores such paragraphs. 
     As an alternative to a networked interface, such as a World Wide Web-based interface, the investor may also transmit the ISO or the IPO data via electronic mail, voice mail, facsimile, or postal mail transmissions. With a voice mail embodiment, the investor calls central controller  200  via telephone and leaves the ISO or the IPO in audio form. The ISO or the IPO may be transcribed into digital text at the central controller  200 , or may be made available in audio format. In a postal mail embodiment, the central controller  200  acts more like a router, directing the ISO or the IPO to the potential investors, thereby creating multiple copies of the ISO or the IPO if necessary. The ISO or the IPO may also be posted to bulletin boards or web pages operated by central controller  200 . 
     In one embodiment, the central controller  200  supports a plurality of transmission methods, allowing for a wide variety of electronic IPO or ISO formats. Some formats may be changed, however, before further processing by central controller  200 . For instance, the ISO or the IPO may be transmitted by mail in paper form, or may be scanned-in and digitized using optical character recognition software to create digital text. 
     Referring now to  FIG. 17 , illustrated therein is a method of validating and publishing the 
     ISO or the IPO in accordance with embodiments of the invention. At step  1700 , the central controller  200  extracts real estate note information from the ISO or the IPO. At step  1710 , the central controller  200  chooses a validation path based on type of ISO or IPO. If offer is an IPO, the central controller  200  validates whether the necessary funds are available in the investor account at step  1720 . If funds are not available to cover the amount in the IPO, a balance amount required to complete the transaction is transmitted to the investor at step  1720 . Once additional funds have been deposited, and the ISO or the IPO is updated and transmitted, the central controller  200  then resubmits the request for validation at step  1700 . 
     If the offer is an ISO, the central controller  200  validates whether the investor owns the real estate note, and whether it is available in an account at step  1730 . If the investor does not own the corresponding real estate note, or if the corresponding real estate note is not available in the investor account, notice of such is transmitted to investor at step  1730 . Once the necessary real estate note is deposited and the ISO is updated and transmitted, the central controller  200  resubmits the request for validation at step  1700 . Additionally, the ISO or the IPO is checked to see whether expiration has occurred at step  1740 . If expired, the ISO or the IPO is rejected at step  1750  and returned to the investor. If the ISO or the IPO has not yet expired, it is accepted at step  1760 . 
     Turning now to  FIG. 18 , illustrated therein is one embodiment of a method with which an ISO or an IPO is activated and published in accordance with the invention. At step  1800 , a unique tracking number is added to the ISO or the IPO. The central controller  200  timestamps the ISO or the IPO at step  1810 , and then stores the ISO or the IPO in the investor offers database  270 . The investor offers database  270  contains a record for each ISO or IPO, and includes fields such as status, real estate note information, tracking number, timestamp, amount, price, expiration date, conditions, and original RENO unique ID number if available. 
     The status field has values of “pending,” “active,” “expired,” and “completed.” A status of “pending” means that the ISO or the IPO is not currently available to other investors. This may be the case while central controller  200  is still processing the ISO or the IPO, or where the investor has temporarily suspended the ISO or the IPO. An “active” ISO or IPO is available to other investors and can be executed. An “expired” ISO or IPO can no longer be bound. Where investors have completed the ISO or the IPO, the status is marked “completed.” 
     The status of the database record for the ISO or the IPO is set to “active” at step  1830 . At step  1840 , the real estate location information of the ISO or the IPO is extracted from the real estate property information field. At step  1850 , the ISO or the IPO is posted in an appropriate real estate location area. This posting allows the central controller  200  to display the ISO or the IPO only to the most appropriate investors. 
     In an on-line, networked environment, such as a World Wide Web environment, the central controller  200  has a web page for each possible real estate location area. Thus all ISOs or IPOs for San Diego, Calif. properties may be displayed on a corresponding San Diego web page. This makes it much easier for potential investors to find appropriate ISOs or IPOs as they are able to go precisely to the real estate location of interest. 
     In an alternative embodiment, the ISO or the IPO is electronically mailed to potential investors, either individually or in groups. Potential investors may elect to receive all ISOs or IPOs. Alternatively, the potential investors may elect to receive only those ISOs or IPOs in a pre-requested real estate location. Investors may elect to receive only a subset of ISOs or IPOs representing a particular condition. For example, an investor might request that all ISOs or IPOs under $100 in the greater metropolitan San Diego area be sent to them. 
     Where ISOs or IPOs are being transmitted to investors, it is important to note that there are a number of hardware options suitable for the investor interface  400 , some of which have already been recited. Some suitable investor interfaces  400  include fax machines, PDAs with wireless connections, beepers, or pagers. For example, an investor in England could instruct the central controller  200  to beep him whenever an ISO or IPO appeared for a New York property. The investor may further request that details of the ISO or the IPO be transmitted over the beeper network. The investor may request that a notice informing the investor to log on to the central controller  200  be sent as well. 
     Turning now to  FIG. 19 , illustrated therein is one method of maintaining ISOs or IPOs in accordance with embodiments of the invention. At step  1900 , the trading system  212  searches the investor offers database  270 . At step  1910 , the expiration date field of each database record is compared to the current date. If the expiration date is earlier than the current date, the status of the ISO or the IPO is changed to “expired” at step  1920 . 
     At step  1930 , the trading system  212  attempts to match “active” ISO to “active” IPO, and vice versa. If match is found, at step  1940  the trading system  212  records the ISO or the IPO match in the clearing database  290 . Where an entire amount requested by the ISO is covered by the IPO, the status of the selected ISO and IPO are changed to “clearing” status. Otherwise the ISO amount is reduced by IPO amount. 
     A new record stored in the clearing database  290  receives a unique tracking number and timestamp at step  1950 . The new record is marked “open”. The timestamp allows the central controller  200  to determine the order in which clearing should be processed. If two ISO and IPO matches are found within a few seconds of each other, the timestamp allows the central controller  200  to decide which was first. If no match is found, the trading system  212  proceeds to step  1960 . The maintenance process is completed at step  1960  once all “active” ISOs or IPOs database records have been examined. 
     Turning now to  FIG. 20 , illustrated therein is a process by which matched clearing records in the clearing database  290  are processed in accordance with embodiments of the invention. The completion process begins at step  2000 . This process clears records that have a status of “open.” 
     At step  2010 , buyer payment information and an approval code for the selected clearing record is processed by the clearing system  213 . Additionally, funds are transferred from the buyer account to the seller account. Once payment transfer is completed, at step  2020  the clearing record is completed and the IPO is bound, turning the IPO into a legally binding contract between the investors in the transaction. At step  2030 , the clearing system  213  sends a transaction confirmation  130  to the investor. A sale confirmation  150  is then sent by the clearing system  213  to the investor at step  2040 . At step  2050 , the central controller  200  verifies whether the amount requested by the ISO has been met. If the entire ISO amount has been covered by the IPO, then the ISO status is changed to “completed” and the appropriate investor unique ID number is added to the underlying RENO. 
     The binding process requires that the status of the IPO be changed to “completed.” The binding process also requires that the corresponding IPO investor unique ID number be changed on the corresponding RENO to reflect a new owner of the real estate note. If only a partial amount of the amount requested by the ISO is covered by the IPO, the central controller  200  at step  2070  adds the appropriate IPO investor unique ID number to the RENO record associated with the ISO. At step  2080 , the clearing record status is changed to “completed.” 
     As with the RENO system, there are many methods by which the providers of the ISO and IPO system might generate revenue. In one embodiment, a flat fee is charged for every ISO or IPO that is matched. There may also be flat fees charged to cover a predetermined number of ISOs or IPOs over a given period of time, thereby allowing investors to subscribe to the service much as they would subscribe to a newspaper. In another embodiment, the central controller  200  calculates a percentage of the amount paid by investors. In such a scenario, the central controller  200  retains a percentage of that amount. Alternatively, the method and apparatus of the present invention may be employed without a payment feature. 
     Turning now to  FIG. 21 , illustrated therein is one method for processing note payments in accordance with embodiments of the invention. Such payments may be associated with the particular RENO. The payments may be in the form of monthly, quarterly, or yearly cash distributions. At step  2100 , the RENO system searches the RENO database  265  for RENOs that pay payments. At step  2110 , the RENO system  211  confirms whether a selected RENO pays payments. If no payments are paid with a RENO, the RENO system  211  returns to step  2100  and continues searching the RENO database  265 . If payments are required, at step  2120  the RENO system  211  checks to see if current payments have been paid. If the required payments have been paid, at step  2150  the RENO payment maintenance process is complete. If payments were not paid, at step  2130  the RENO system  211  processes the RENO payments by withdrawing money from the real estate mortgage owner account database  275  and depositing it into accounts of the appropriate investors on record with the RENO in the investor account database  276 . At step  2140 , RENO system  211  notifies real estate mortgage owner of RENO  110  and investors on record of payments processed. At step  2150 , RENO  110  payments maintenance is complete. 
     Turning now to  FIG. 13 , illustrated therein is one embodiment of a method by which the central controller  200  establishes the investor account database  276  and real estate mortgage owner account database  275  in accordance with the invention. At step  1300 , the investor or real estate mortgage owner selects his preferred method of payment. Preferred methods might include personal checks, electronic bank funds transfer, digital money, and so forth. At step  1310 , the investor or real estate mortgage owner transmits payment data corresponding to his preferred method of payment to the central controller  200 . As indicated at step  1315 , such payment data might include bank account number. These payment methods are merely illustrative. It will be clear to those of ordinary skill in the art having the benefit of this disclosure that many equivalent payment methods may also be used. If the investor or real estate mortgage owner wants to pay by debit card, for example, payment data would include his debit card account number, expiration date, name on the card, and security pin. For electronic funds transfer, payment data includes bank information and an account number. At step  1320 , the central controller  200  stores payment data and payment preferences in payment database  285 . 
     At step  1330 , the central controller  200  establishes the investor account database  276  and the real estate mortgage owner account database  275 . These databases are used to store money transferred by the investor or real estate mortgage owner. The databases may include a pointer to an account belonging to the investor or real estate mortgage owner that exists outside the system. The investor may transfer money to the central controller  200  to be stored in investor account database  276 , which would operate like a conventional checking account. The central controller  200  sends a check to the real estate mortgage owner that is written against investor account database  276 . Alternatively, the central controller  200  may electronically move the funds directly from the investor account database  276  to the real estate mortgage owner account database  275 . 
     At step  1340 , the central controller  200  contacts the payment system to confirm that account numbers are valid. An investor is thus unable to make investor purchase commitments  120  with no credit available in the investor account database  276 . Account information may also be embedded in the RENO, the investor purchase commitment  120  or the investor sale commitment  125 , thereby allowing the central controller  200  to complete payment once RENO  110  is completed. 
     Another method of payment involves procedures using digital cash. The central controller  200  looks up the investor&#39;s electronic delivery address in the payment database  285 . This address is transmitted to the clearing system  213 , with the digital cash being downloaded from the investor. The central controller  200  updates the payment database  285  to indicate that payment has been made. This address might be an electronic mail address if the digital cash is to be transferred by electronic mail, or it may alternatively be an Internet Protocol address capable of accepting an on-line transfer of digital cash. This electronic delivery address is sent to the clearing system  213 . The digital cash is downloaded to the investor account database  276  or directly to the investor. The central controller  200  then updates payment database  285  to indicate that payment has been made. Using these digital cash protocols, it is possible for the investor to include payment along with investor purchase commitment  120  in electronic form. The practice of using digital cash protocols to effect payment is well known in the art and need not be described here in detail. For reference, refer to Daniel C. Lynch and Leslie Lundquist, Digital Money, John Wiley &amp; Sons, 1996; or Seth Godin, Presenting Digital Cash, Sams Net Publishing, 1995. 
     While the networked, on-line embodiments of the invention describe a protocol in which investors make payment immediately upon making a purchase commitment  120 , other embodiments may be implemented where payment is delayed until the RENO has been completed. Alternatively, payment may be delayed until some predetermined date. Partial payments and installment payments are also supported by the system. 
     The escrow account database  299  allows payment to be delayed until the RENO, ISO or IPO is completed. This delay may occur while the real estate mortgage owner completes delivery of the RENO, or while the investor completes delivery of real estate note and funds. The central controller  200  establishes records in the escrow account database  299  as temporary holding records. When the investor makes purchase commitment  120  for a RENO, funds are transferred from the investor account database  276  to the escrow account database  299 . Only after the real estate mortgage owner executes the RENO are funds transferred from escrow account database  299  to real estate mortgage owner account database  275 . The investor may transmit a digitally signed release message to the central controller  200 , thereby authorizing the release of the escrowed funds to the real estate mortgage owner. On the other hand, when the real estate mortgage owner accepts in investor sale commitment  125  for a RENO, funds are transferred from the real estate mortgage owner account database  275  to the escrow account database  299 . Only after the investor executes the RENO are funds transferred from escrow account database  299  to investor account database  276 . The real estate mortgage owner may transmit a digitally signed release message to the central controller  200 , thereby authorizing the release of the escrowed funds to the investor. 
     In another embodiment, the investor makes a partial payment when the purchase commitment  120  for a RENO made. The investor then completes payment when the RENO is completed. The fraction of the offered price of the RENO, in one embodiment, is to be paid upon binding the purchase commitment  120 . The price is stored in the payment database  285  when the purchase commitment  120  is bound. The central controller  200  releases this portion of the funds at step  1120 , and then releases the remaining portion after the RENO is completed at step  1201 . The partial payment made may be non-refundable. This would allow the central controller  200 , for example, to accept other investor purchase commitments  120  as back up commitments. 
     In yet another embodiment, the purchase commitment  120  describes the use of installment payments. The first payment is made when purchase commitment  120  is bound, followed by regular payments as specified in the conditions of the RENO. The dates at which payments are to be made are stored in the payment database  285 . 
     In one embodiment of the present invention, investors respond to the RENO not by binding it, but by making a counteroffer with modified and/or additional conditions. An investor, for example, might view a RENO offered with a 5% interest rate. The investor may be willing to make purchase commitment for 6% interest rate. As such, rather than passing on the RENO, the investor may wish to issue a counteroffer. This counteroffer is similar to the RENO except for the fact that the investor is binding the real estate mortgage owner instead of the real estate mortgage owner binding the investor. The counteroffer is also directed to a specific party (the real estate mortgage owner), unlike the RENO that is directed to a plurality of investors. 
     Turning now to  FIG. 14 , illustrated therein is a method for developing a counter offer in accordance with embodiments of the invention. At step  1400 , the potential investor selects a RENO for which he wishes to make a counteroffer. At step  1410 , the investor prepares the counteroffer with modified conditions. The investor follows the same process that the real estate mortgage owner uses to generate the RENO, as set forth in steps  500  through  580  of  FIG. 5 , selecting the terms and conditions as appropriate. Alternatively, the investor may be presented with an electronic copy of the initial RENO. The investor may then be allowed to edit those conditions that the investor wants to change. For example, the investor might take the real estate mortgage owner request for 5% interest rate and counteroffer with 6% interest rate. 
     At step  1420 , the investor attaches the tracking number of the RENO to investor counteroffer. The central controller  200  receives the investor counteroffer at step  1430 , setting the status to “active.” The central controller  200  then adds a unique tracking number to investor counteroffer at step  1440 , and stores the counteroffer in the RENO database  265  at step  1450 . The central controller  200  then extracts the tracking number of the RENO attached to investor counteroffer to determine to which real estate mortgage owner the investor counteroffer should be transmitted at step  1460 . 
     Turning now to  FIG. 15 , illustrated therein is one method by which the real estate mortgage owner responds to investor counteroffer in accordance with the invention. At step  1500 , the real estate mortgage owner decides whether to accept the investor counteroffer. If he does not accept, the investor counteroffer is transmitted back to the investor at step  1510 . If the real estate mortgage owner does decide to accept, a real estate mortgage owner acceptance  116  is transmitted to the central controller  200  at step  1520 . At step  1530 , funds are removed from investor account database  276  and placed in escrow account database  299 . At step  1540 , the status of investor counteroffer is changed to “completed.” Transaction confirmation  130  is then transmitted to the investor at step  1550 , and on to the real estate mortgage owner at step  1560 . Procedures for the completion of RENO are described in  FIG. 12 . 
     As noted above, in some embodiments of the invention, real estate mortgage owners and investors communicate in an off-line manner with central controller  200 . Rather than sending electronic mail or using web-based servers, real estate mortgage owners and investors use a telephone, fax machine, postal mail, or other off-line communication tool. 
     A real estate mortgage owner may use a telephone, for example, to generate the RENO. In one embodiment, the real estate mortgage owner calls the central controller  200  and is connected with an agent. The real estate mortgage owner provides the terms of the RENO, including the amount, expiration date, and other terms set forth above. The real estate mortgage owner also provides his unique user ID, password, or private key so that the central controller  200  can authenticate his identity via the membership system  209 . The agent puts this data into digital form by typing it into a terminal and then adds legal language to form the RENO. The RENO is then transmitted to the central controller  200  where it is made available to potential investors as described in the on-line embodiment. In an alternative embodiment, the real estate mortgage owner calls the central controller  200  and is connected with a conventional Interactive Voice Response Unit (IVRU), which allows the real estate mortgage owner to enter some or all of the terms of the RENO without the assistance of a live agent. 
     Potential investors may also use a telephone to browse RENOs, or to make investor purchase commitments  120 . The potential investor calls the central controller  200  and selects a real estate location. The central controller  200  then converts the text of each RENO into audio form, reading the entire list to the potential investor. At any time during the reading of the RENOs, the potential investor may press a combination of keys on his telephone to select a RENO for purchase commitment. The investor enters investor ID number and is authenticated by the central controller  200  using the membership system  209  prior to making a purchase commitment  120 . Potential investors may also enter parameters before having the list of RENOs read to them. An investor, for example, might request that all RENOs with an interest rate of 6% or more be read, skipping any RENO with a lower interest rate. Real estate mortgage owners and investors may also communicate with an agent at the central controller  200  through faxes or postal mail. The agent receives the message and proceeds to digitize it and form RENO as described above. 
     In the previous embodiments, authentication of the real estate mortgage owner and investor involves checking the attached ID or name and comparing it with those stored in the investor database  260  and real estate mortgage owner database  255 . Although this procedure works well in a low security environment, it can be significantly improved through the use of cryptographic protocols. These protocols not only enhance the ability to authenticate the sender of a message, but also serve to verify the integrity of the message itself. Such techniques shall be referred to generally as cryptographic assurance methods, and will include the use of both symmetric and asymmetric keys as well as digital signatures and hash algorithms. 
     The practice of using cryptographic protocols to ensure the authenticity of senders, as well as the integrity of messages, is well known in the art and need not be described here in detail. For reference, refer to Bruce Schneier, Applied Cryptography, Protocols, Algorithms, And Source Code In C, (2d Ed, John Wiley &amp; Sons, Inc., 1996). 
     Where using cryptographic protocols, all messages between the central controller  200  and the real estate mortgage owner interface  300  or investor interface  400  may be authenticated and encrypted using well-known methods and software. For example, when the central controller  200  is configured as a web server, conventional communications software such as the Internet Explorer web browser from Microsoft Corporation may be used to secure exchange messages between the central controller  200  and the real estate mortgage owner interface  300  or investor interface  400 . 
     As mentioned previously, embodiments of the present invention may provide anonymity for both real estate mortgage owners and investors. Such anonymity, in one embodiment, is accomplished by eliminating all references to the names of the individuals and businesses for all transactions. A real estate mortgage owner, for example, may include his unique ID number in the RENO rather than his name, thereby preventing the investor receiving the RENO from discovering the real estate mortgage owner&#39;s identity. This is desirable where the real estate mortgage owner, for example, does not want his neighbors about his desire to refinance his real estate mortgage. In a similar manner, investors may also want to keep their identity a secret. An investor might not want the public to know that they are investing in certain real estate mortgages. 
     Although using unique ID numbers can provide anonymity, security is heightened when the unique ID numbers are encrypted with a private key of the central controller  200 . In such an embodiment, anonymity is protected even where a database is stolen. 
     Alternate embodiments for anonymity include telephone messaging. When talking on the telephone, the identity of the real estate mortgage owner and investor could be hidden using conventional voice modification techniques. If the RENO or investor purchase commitment is in paper form, the form could be scanned using optical character recognition and translated into digital form, discarding any information that could be found in the original document. 
     Not all transactions require the transfer of money from the investor to the real estate mortgage owner or vice versa. In a barter transaction, the distinction between the real estate mortgage owner and the investor disappears, resulting in a contract for exchange between a first party and a second party. The first party posts the RENO and the second party posts a barter commitment to it. Instead of receiving cash, the first party receives real estate notes from the second party. A first party who wanted to post a RENO for a real estate mortgage in Boston, for example, could post that RENO offering to exchange the real estate note in Boston for a real estate note in San Diego. 
     Although the previous embodiments have described the delivery of real estate notes from real estate mortgage owner to investor, and also the delivery of money from investor to real estate mortgage owner, there will inevitably be disputes arising from some transactions, requiring follow-up activity to resolve these disputes. The present invention can support dispute resolution in two ways. 
     First, language may be included—perhaps as boilerplate or form language—into every 
     RENO. This language, in one embodiment, requires that both parties submit to binding arbitration of all disputes. Binding arbitration helps to avoid more costly and time-consuming legal battles. Additionally, liquidated damages may be set which specify damage amounts for particular infractions of the RENO. 
     Second, the central controller  200  can support the arbitration process by providing an arbiter for each dispute. Such arbitration might be required when real estate information in the RENO provided by the real estate mortgage owner to the investor does not act in accordance with the requirements of the RENO. An investor requiring owner-occupied parcel in a counteroffer, for example, might seek damages against an owner who leases property to tourists. Instead of seeking damages, the investor may seek a monetary reward, such as rebate or discount on the original RENO amount. In an arbitration involving real estate information, the investor may submit evidence to the central controller  200  along with the tracking number of the RENO  110 , thereby allowing the arbiter to establish whether the real estate mortgage owner has fulfilled the conditions of the RENO. 
     In an alternative embodiment, transaction data can be sent to third party arbiters outside the system. The central controller  200  may send a copy of the RENO, investor purchase commitment, or purchase confirmation to the arbiters. Cryptographic keys may also be provided to the arbiters if there are questions of authenticity or non-repudiation. 
     Turning now to  FIG. 22 , illustrated therein is one embodiment of a schematic block diagram illustrating a method of real estate notes sale management system for creating, marketing, and selling real estate notes in accordance with the invention. As noted above, but illustrated in general form in  FIG. 22 , in one embodiment, a central controller  2200  includes a pricing system  2210 , a real estate offering system  2220 , a trading system  2230 , a compliance system  2240 , and a clearing system  2250 . The pricing system  2210  is configured to process requests received by the networked, electronic, exchange apparatus for real estate mortgage based note offering prices. The pricing system  2210  is further configured to deliver one or more real estate mortgage based note offerings in response to the requests. 
     A real estate note offering system  2220  is configured to process real estate mortgage owner&#39;s request to initiate real estate mortgage based note offerings. A trading system  2230  is configured to process purchase and sale of the real estate mortgage based note offerings. A clearing system  2250  is configured to process financial transactions associated with the purchase and sale of the real estate mortgage based note offerings. A compliance system  2240  is configured to maintain a record of central controller transactions. 
     The real estate mortgage owner  2280  provides real estate parcel and mortgage data  2290  to owner interface  2260 . The owner interface  2260  submits the parcel and mortgage data  2270  to the central controller  2200 . In response, the central controller  2200  generates a real estate mortgage based note offer  2275  associated with the electronic real estate mortgage data, and makes the real estate mortgage based note offer  2275  available to the investor interface  2265 . Investors  2285  utilize the investor interface  2265  to view the real estate mortgage based note offer  2275 . The investors  2285  also use the investor interface  2265  to generate purchase commitments  2299 , which are submitted to the investor interface  2265 . The investor interface  2265  then communicates the purchase commitments  2278  to central controller  2200  for processing. 
     Now turning to  FIG. 23 , illustrated therein is a general embodiment of a method for creating, marketing, and selling real estate notes in accordance with embodiments of the invention. At step  2300 , a system hub, such as the central controller  2200 , receives electronic real estate parcel and mortgage data from the owner interface  2260 . In one embodiment, the electronic real estate parcel and mortgage data includes at least an address and the last recorded sale price and sale date, mortgage amount and credit score as shown at step  2310 . At step  2320 , the central controller  2200  generates and delivers the real estate mortgage based note offer  2275  to the investor interface  2265 . The central controller  2200  optionally adds a tracking number and time stamp to the real estate mortgage based note offer  2275 . At step  2330 , the investor  2285  reviews the real estate mortgage based note offer  2275  and may choose to purchase it. If the investor  2285  elects to purchase the real estate mortgage based notes offer  2275 , at step  2340  the investor  2285  creates a purchase commitment  2278  and submits it to the investor interface  2265 . The real estate mortgage based notes offer  2275 , in on embodiment, includes at least a minimum purchase amount, rate of return, term, and an offering duration as show in step  2350 . 
     The central controller  2200  validates the purchase commitment  2278  at step  2360 . Validation may be performed to determine whether the purchase commitment  2278  exceeds the maximum rate of return and minimum purchase amount of the real estate mortgage based note offer  2275 . Validation may also be performed to determine whether an offer duration has expired prior to receipt of the purchase commitment  2278 . In addition, at step  2360  the central controller  2200  validates the minimum purchase amount, rate of return and the offering duration against the purchase commitment  2278 . 
     If the purchase commitment  2278  passes validation, the central controller  2200  executes it at step  2370  by retrieving an electronic financial account identifier associated with the purchase commitment  2278  from the investor interface  2265  and executing an electronic transfer of funds via the electronic financial account identifier. The central controller  2200  optionally adds a tracking number and time stamp to the purchase commitment as well. If the purchase commitment  2278  is not valid, notice of this invalidity is communicated back to investor  2285  at step  2360 . 
     Once the central controller  2200  executes the order it is delivered to the real estate mortgage owner  2280  at step  2380  via the owner interface  2260 . At step  2390 , the real estate mortgage owner  2280  may choose to accept the purchase commitment  2278 . Where accepted, the note purchase is completed at step  2395 . The real estate mortgage owner  2280  can issue a counteroffer as well. The central controller  2200  delivers any counteroffer to the investor interface  2265  at step  2330 . 
     Now turning to  FIG. 24 , illustrated therein is a method for early termination of RENO and completing final payments in accordance with embodiments of the invention. At step  2400 , a system hub, such as the central controller  2200 , receives request for a mortgage payoff from the owner interface  2260 . In one embodiment, the request for a mortgage payoff includes at least a payoff date as shown at step  2410 . At step  2420 , the central controller  2200  extracts original contract details from RENO, generates and delivers the payoff information to the owner interface  2260 . At step  2430 , the mortgage owner  2280  reviews the payoff information and may choose to pay it. If the owner  2280  elects to pay the note based on the payoff amount presented, at step  2440  the owner  2280  creates a final payment commitment and submits it to the owner interface  2260 . The final payment commitment, in on embodiment, includes at least a payment amount, date, and owner account identification as show in step  2450 . 
     The central controller  2200  validates the payment at step  2460  to determine if the RENO is paid in full. 
     If the final payment  2279  passes validation, the central controller  2200  executes it at step  2470  by retrieving an electronic financial account identifier associated with the payment  2279  from the owner interface  2260  and executing an electronic transfer of funds via the electronic financial account identifier. The central controller  2200  optionally adds a tracking number and time stamp to the payment  2279  as well. If the payment  2279  is not valid, notice of this invalidity is communicated back to owner  2280  at step  2460 . 
     Once the central controller  2200  executes the payment  2279 , it is delivered to the note investor  2285  at step  2480  via the investor interface  2265 . At step  2490 , the mortgage owner  2280  and note investor  2285  are notified. The note payoff is completed at step  2495  and set to be “archived”. Turning now to  FIG. 25 , illustrated therein is one method for processing note payoffs at the note expiration in accordance with embodiments of the invention. Such payoffs are associated with the particular RENO. At step  2500 , the central controller  200  searches the RENO database  265  for RENOs with a term date which has expired. At step  2510 , the central controller  200  confirms whether a selected RENO term has expired. If the note term is not expired, the central controller  200  returns to step  2500  and continues searching the RENO database  265 . If the note term is expired, at step  2520  the central controller  200  extracts all notes contract details from the RENO, including mortgage amount, rate of return and terms. 
     At step  2525 , the pricing system  210  derives a payoff amount in accordance with the rate of return and terms of RENO. At step  2540 , the central controller processes the payoff payments by withdrawing money from the real estate mortgage owner account database  275  and depositing it into accounts of the appropriate investors on record with the RENO in the investor account database  276 . 
     r At step  2560 , the central controller  200  notifies real estate mortgage owner of RENO  110  and investors on record of the payoff processed. At step  2570 , RENO  110  status is set to be “archived” and RENO contract is completed. 
     Embodiments of the present invention offer many advantages over prior art real estate mortgage financing solutions. A few of these advantages will be described here. 
     First, embodiments of the present invention do not rely on any one single financial entity to provide funds to the real estate mortgage owner. Instead, funds are provided by plurality of investors, each investor participating in the rate of return of the value of their notes holdings in the real estate mortgage. Second, embodiments of the present invention offer a fixed income return with risk diversification by allowing investors to pick and choose notes associated with multiple real estate mortgages. Third, embodiments of the present invention provide funds to the real estate mortgage owner in the event no other funding is available at best possible interest rates set by investors through an online auction. 
     Next, embodiments of the present invention in deal only with derived financial instruments and not real estate parcel property. Further, embodiments of the present invention do not offer trading of one financial instrument. To the contrary, a single real estate mortgage is subject to plurality of notes, which may be owned and traded by plurality of investors. 
     Next, embodiments of the present invention are not limited to institutional investors. Individual investors may participate just as do institutional investors. 
     Next, embodiments of the present invention do not employ mortgage pools. To the contrary, real estate notes are created for a single real estate mortgage associated with a single individual parcel or piece of property. Investors own these real estate notes, without complex financial instruments like mortgage pools. Additionally, embodiments of the present invention do not employ mortgage pools trenching. While some prior art systems have taught providing mortgage pools in exchange for payment, the present invention uses mortgage based real estate notes. Additionally, there are no third-party funds or pools of money required for notes. 
     While, some prior art solutions propose third-party strawmen who owns a home and permit the homeowner to “rent back” in exchange for financing, embodiments of the present invention leave the homeowner as primary and single owner of the property with the associated benefits attached, including tax deductions. Title does not change on the property. Instead, systems and methods of the invention record liens against a parcel that reflect the monetary and contractual obligations. At the same time the property title and ownership maintained by the property owner. 
     Further, as noted above, embodiments of the present invention deal with a method of creating a financial derivative on a single real estate mortgage with real estate notes and selling those notes to investors. The investors are then free to sell to others on an exchange. The present invention develops a multilateral buyer-seller driven system to exchange notes and works as a third party to administer notes issue and payoff distribution. By way of example, in addition do administering financing, the central controller of the present system can serve as a trusted arbitrator available to resolve any disputes, enforce established contracts and covenants, facilitate exchange of interests in notes, and thereby increase buyer and seller confidence in the system and real estate notes financing. 
     In the foregoing specification, specific embodiments of the present invention have been described. However, one of ordinary skill in the art appreciates that various modifications and changes can be made without departing from the scope of the present invention as set forth in the claims below. Thus, while preferred embodiments of the invention have been illustrated and described, it is clear that the invention is not so limited. Numerous modifications, changes, variations, substitutions, and equivalents will occur to those skilled in the art without departing from the spirit and scope of the present invention as defined by the following claims. Accordingly, the specification and figures are to be regarded in an illustrative rather than a restrictive sense, and all such modifications are intended to be included within the scope of present invention. The benefits, advantages, solutions to problems, and any element(s) that may cause any benefit, advantage, or solution to occur or become more pronounced are not to be construed as a critical, required, or essential features or elements of any or all the claims.