Patent ID: 8326746

Claim:
A computer system comprising a storage medium and a processor which executes engine instructions, the engine instructions comprising: a Monte Carlo simulation engine executed by the processor and configured to perform a primary beneficiary test to determine whether a variable interest entity holder is a primary beneficiary of a financial instrument collateralized by cash flows associated with one or more loans for multifamily housing, the Monte Carlo simulation engine including: a cash flow engine executed by the processor and configured to generate a set of default and/or prepayment curves representing one or more discrete cash flow scenarios for the one or more loans for the financial instrument, the default and/or prepayment curves representative of systemic risk associated with the financial instrument; the cash flow engine configured to generate the set of default and/or prepayment curves based on results received from: a market income growth module configured to determine an effective gross income at a national level to determine a net operating income and use the determined net operating income to calculate a debt service coverage ratio, capitalization rate simulations and property values along the default and/or prepayment curves; a loan termination module configured to calculate loan-level loss severities for defaulted loans from non deterministic inputs; a capitalization rate module that calculates multifamily property capitalization rates based on a ratio between a net operating income and a value of an underlying property; an idiosyncratic risk module executed by the processor and configured to convert the set of default and/or prepayment curves defined by the cash flow engine into a number of occurrences, which, at an aggregated level, mimic the default and/or prepayment curve from a systemic risk model; wherein the Monte Carlo simulation engine is configured to determine the primary beneficiary based on the results from the cash flow engine and the idiosyncratic risk module; wherein the one or more discrete cash flow scenarios includes foreclosure, delinquency or modification, prepayment and active to maturity; wherein the variable interest entity holder comprises a lender, investor, and guarantor; wherein the idiosyncratic risk module is configured to allocate greater risk to the guarantor compared to the risk allocated to the guarantor under the systemic risk associated with the financial instrument when the investor is in a first position of loss and the guarantor is in a second position of loss; wherein the idiosyncratic risk module determines a share of risk of variability associated with the cash flows being associated with at least one of the lender, investor and guarantor.