|
Insurance Abstract
Systems and techniques for combined insurance packages to address
consumer concerns that mortgage insurance is difficult to cancel
are described. A system and method according to one aspect of the
present invention receives notification that a mortgage insurance
policy is to be canceled, automatically inquires if a customer has
obtained an appraisal as part of the cancellation process, and provides
for customer reimbursement up to a predetermined limit where it
has been. Such appraisal reimbursement may be combined with any
appropriate type of mortgage insurance, and may be marketed in conjunction
with the marketing and insurance packages including a combination
of mortgage insurance and one or more other insurance components.
Insurance Claims
1. A method for providing customer reimbursement for an appraisal
obtained by a borrower to cancel mortgage insurance, comprising
the steps of: receiving notification from a loan servicer that the
loan servicer's requirements for canceling a mortgage insurance
policy have been met as a result of a loan to value ratio drop;
and automatically notifying the borrower covered by the mortgage
insurance policy that reimbursement is available if an appraisal
was obtained to cancel the mortgage insurance.
2. The method of claim 1 further comprising the step of receiving
verification of entitlement to reimbursement from the borrower.
3. The method of claim 2 wherein the verification of entitlement
comprises proof of the cost of the appraisal.
4. The method of claim 3 wherein the proof of the cost of the appraisal
comprises a credit card receipt, a canceled check, or a copy of
a paid invoice.
5. The method of claim 2 further comprising the step of reimbursing
the borrower for the cost of the appraisal up to a predetermined
limit.
6. The method of claim 5 wherein the predetermined limit is established
on a region by region basis to reflect actual appraisal costs by
region.
7. The method of claim 5 further comprising the steps of: storing
the predetermined limit established on a region by region basis
in memory; and electronically retrieving from memory the predetermined
limit for the region in which the appraisal was performed.
8. The method of claim 1 wherein the step of automatically notifying
the borrower further comprises printing a letter to the borrower,
said letter including an appraisal reimbursement application form
pre-populated with information identifying the borrower and the
mortgage loan.
9. The method of claim 1 wherein the step of receiving notification
from the loan servicer further comprises electronically receiving
a mortgage insurance certificate number, information indicating
that said mortgage insurance certificate should be canceled, and
a coded indicia indicating the reason for cancellation is the loan
to value ratio drop.
10. The method of claim 1 wherein the step of receiving notification
from the loan services further comprises the step of electronically
receiving a MISMO code indicating the reason for mortgage insurance
cancellation, recognizing the MISMO code with a programmed computer,
and automatically generating a borrower notification letter by the
programmed computer.
11. A system for reimbursing a customer for an appraisal obtained
to cancel mortgage insurance, the system comprising: means for receiving
notification from a loan servicer that the loan servicer's requirements
for canceling a mortgage insurance policy have been met as a result
of a loan to value ratio drop; and means for automatically notifying
the borrower covered by the mortgage insurance policy that reimbursement
is available if an appraisal was obtained to cancel the mortgage
insurance.
12. The system of claim 11 comprising means for receiving verification
of entitlement to reimbursement from the borrower.
13. The system of claim 12 wherein the means for receiving verification
of entitlement to reimbursement from the borrower comprises means
for receiving data establishing the cost of the appraisal.
14. The system of claim 13 wherein said data establishing the cost
of the appraisal is credit card receipt data, canceled check data,
data from a copy of a paid invoice.
15. The system of claim 12 comprising means for reimbursing the
borrower for the cost of the appraisal up to a predetermined limit.
16. The system of claim 15 wherein the predetermined limit is established
on a region by region basis to reflect actual appraisal costs by
region.
17. The system of claim 16 further comprising: a memory storing
the predetermined limit established on a region by region basis;
and means for electronically retrieving from the memory the predetermined
limit for the region in which the appraisal was performed.
18. The system of claim 11 further comprising a printer for printing
a letter to the borrower, the letter including an appraisal reimbursement
application form; and means for pre-populating the letter with information
identifying the borrower and the mortgage loan.
19. The system of claim 11 further comprising means for electronically
receiving a mortgage insurance certificate number, information indicating
that said mortgage insurance certificate should be canceled, and
a code indicating the reason for cancellation is loan to value ratio
drop.
20. The system of claim 11 further comprising means for electronically
receiving a MISMO code indicating the reason for mortgage insurance
cancellation, automatically recognizing the MISMO, and automatically
generating a borrower notification letter.
Insurance Description
FIELD OF THE INVENTION
[0001] The present invention relates generally to systems and techniques
for marketing and providing financial service products. More particularly,
the invention relates to systems and techniques for providing mortgage
insurance having an appraisal reimbursement feature whereby customers
are reimbursed for the cost of an appraisal used to cancel their
mortgage insurance.
BACKGROUND OF THE INVENTION
[0002] The purchase or financing of a home by a consumer is a substantial
transaction. Consumers often take a mortgage to finance a portion
of the purchase price of the home. The mortgage loan is typically
quite large and is expected to be repaid over a period that may
extend for many years. A continuing risk of borrower default is
present during the repayment period. In addition, a default and
foreclosure is a costly event for the mortgage holder, typically
involving some months of missed interest payments, fees, possible
depreciation of the property securing the mortgage, and sale expenses.
Lenders require some protection against the costs of default. Such
protection may come in the form of a significant down payment by
the borrower. Where the down payment is at least 20% of the value
of the property, the lender does not finance more than 8.0% of the
value of the property and experience has shown that this "equity
cushion" is usually sufficient to cover expenses associated
with default and foreclosure. In such a case, the loan to value
ratio ("LTV") is 80%.
[0003] However, many borrowers wish to finance a larger proportion
of the value of the property. Traditionally, lenders who finance
more than 80% of the value of a property require a borrower to pay
for private mortgage insurance in order to protect the lender. Such
insurance is typically necessary in order to sell a mortgage loan
to investors if the loan exceeds 80% of the value of the property.
Private mortgage insurance covers the shortfall in the value of
the property below the amount owed in the event of default and foreclosure.
[0004] Consumers often do not attach a high value to private mortgage
insurance and seek to avoid having to pay for it. Mortgage insurance
protects the mortgage holder, not the consumer, and consumers often
do not see how they benefit by paying for insurance to protect another
party. Accordingly, consumers are receptive to arrangements that
allow them to avoid paying for mortgage insurance. One such arrangement,
which has proven highly popular, is a financing arrangement under
which the borrower receives a first mortgage loan for 80% of the
value of the property and a second mortgage loan for 10% of the
value of the property. The borrower contributes the remaining 10%
of the purchase price in cash. Under such an arrangement, the holder
of the first mortgage finances 80% of the purchase price, and therefore
does not need to be protected by mortgage insurance.
[0005] One disadvantage of financing using simultaneous first and
second mortgage arrangements is that such arrangements are typically
available only to borrowers with exceptionally good credit ratings,
often manifested by a FAIR ISAAC AND COMPANY (FICO) score of 720-850.
A borrower with such a credit rating is likely to consider alternatives
to mortgage insurance, while a borrower with a lower credit rating
may accept mortgage insurance with reluctance.
[0006] Toward the end of overcoming such borrower reluctance, a
number of mortgage insurance products are marketed in which the
mortgage insurance premium is split between a portion paid at closing
and a portion paid on a monthly basis. When the LTV decreases from
95% or 90% to 80% or below, the borrower may be allowed to terminate
the mortgage insurance. Lenders and mortgage servicers have specific
requirements that must be satisfied before a borrower may cancel
mortgage insurance. These requirements often comprise the passage
of two or more years since the date of the loan origination, evidence
of the home's value showing borrower equity over 20%, and a good
payment history. The LTV can drop for a number of reasons. First,
the consumer can regularly pay the mortgage payments until the equity
in the home has built up above 20%. Second, a consumer may make
a lump sum payment of principle thereby increasing the consumer's
equity in the house and decreasing the principle owed on the loan.
Third, the value of the home can substantially appreciate. Some
combination of the above exemplary LTV reducing events may occur.
[0007] Where the LTV is reduced due to home appreciation, it is
typical for a lender or investor to require that the home owner
obtain an appraisal to establish the new higher value of the home.
Such an appraisal can cost several hundred dollars, and this cost
may be cited as yet another reason why consumers are reluctant to
purchase mortgage insurance. From a consumer's perspective, even
if the consumer's house appreciates in value so that mortgage insurance
is no longer required, the consumer is obligated to pay an appraisal
fee of several hundred dollars out of pocket which may only be recouped
over many months, or in the alternative may simply keep paying the
mortgage insurance. Warranted or not, one negative perception of
mortgage insurance is that it is difficult to cancel.
SUMMARY OF THE INVENTION
[0008] Among its several aspects, the present invention recognizes
that it is important to remove such sources of possible frustration
and address consumers' concerns about mortgage insurance cancellability
by providing customers with the assurance that they can cancel their
mortgage insurance in the future at no net cost to themselves. One
aspect of the present invention comprises a method of reimbursing
a customer for an appraisal performed to support a termination of
mortgage insurance. The process may suitably comprise the steps
of receiving an indication that a mortgage insurance policy is to
be terminated as a result of a drop in LTV, automatically contacting
the customer previously responsible for the mortgage insurance premium
payments to determine if the LTV drop was the result of an appraisal
obtained by the customer. If it was, the customer is reimbursed
for the cost of the appraisal up to a predetermined value.
[0009] An alternative aspect of the present invention provides
a system of reimbursing a customer for an appraisal performed to
support cancellation of mortgage insurance comprising means for
receiving an indication that a mortgage insurance policy is to be
canceled as a result of drop in LTV ratio, and means for automatically
contacting the customer to determine if an appraisal was obtained
by the customer as part of the cancellation. Upon validation of
the purpose and cost of the appraisal, the customer is reimbursed
up to a predetermined value.
[0010] A more complete understanding of the invention, as well
as further features and advantages of the invention, will be apparent
from the following Detailed Description and from the claims that
follow below.
BRIEF DESCRIPTION OF THE DRAWINGS
[0011] FIG. 1 illustrates a system for providing mortgage insurance
with an appraisal reimbursement feature according to an aspect of
the present invention;
[0012] FIG. 2 illustrates additional details of selected components
of the system of FIG. 1;
[0013] FIG. 3 illustrates an exemplary form used to enter coverage
parameters;
[0014] FIG. 4 illustrates an exemplary display used to present
coverage details and costs in response to submission of a set of
coverage parameters;
[0015] FIG. 5 illustrates an exemplary display used to present
a summary of coverage parameters in order to allow commitment to
a coverage package;
[0016] FIG. 6 illustrates a process of providing mortgage insurance
with an appraisal reimbursement feature according to an aspect of
the present invention;
[0017] FIG. 7 illustrates details of an appraisal reimbursement
process in accordance with an aspect of the present invention;
[0018] FIG. 8 illustrates an exemplary appraisal reimbursement
reminder letter;
[0019] FIG. 9 illustrates details of generating an appraisal reimbursement
welcome message as part of an alternative reimbursement process
in accordance with an aspect of the present invention;
[0020] FIGS. 10A and 10B illustrate details of the alternative
reimbursement process; and
[0021] FIG. 11 illustrates details of an exemplary process of handling
returned mail as part of the alternative reimbursement process.
DETAILED DESCRIPTION
[0022] FIG. 1 illustrates a system 100 for providing mortgage insurance
with an appraisal reimbursement feature according to an aspect of
the present invention. The system 100 preferably comprises a server
102, including a programmed processor 104, memory 106 and long term
storage 108. The server 102 suitably hosts various data repositories
and databases preferably implemented as data files hosted in the
long term storage 108, and modules, preferably stored in the long
term storage 108 and executed under the control of the processor
104. The server 102 preferably hosts a data repository 110 including
collected statistical information relating to risks involved in
providing insurance products. For mortgage insurance products, the
risks typically include the risk that a borrower will default on
a mortgage loan and that a loss will be incurred as a result of
such default.
[0023] The risk of loss related to mortgage insurance depends on
the risk that default will occur and, if default does occur, that
a sale of the property will realize less than the amount owing on
the mortgage. For job loss insurance, the risk may depend on the
amount and number of payments that may be made as a result of involuntary
unemployment of the covered party. Analysis of such risks involves
estimating the probability and duration of job loss, taking into
account the size and frequency of payments that are to be made and
the maximum number of payments to be made. For example, a job loss
insurance policy may specify that a borrower's mortgage payment
will be made for up to six months in the event that the borrower
becomes involuntarily unemployed during the first two years of the
loan. The risks related to such insurance depend on factors such
as the likelihood that the borrower will become unemployed, the
amount of each payment to be made, and the expected duration of
unemployment.
[0024] Statistical information for use by server 102 may be gathered
using a plurality of data collection sources 112. such as the sources
112A . . . 112N. There may be any suitable number of data collection
sources 112. The sources 112A . . . 112N may furnish the information
to the server 102 through a publicly accessible network 114, such
as the Internet. The data collection sources 112A . . . 112N suitably
provide periodically updated data related to risks being insured
against, costs of appraisal by region, statistics on customers seeking
appraisal reimbursement or the like. Such data may include loss
experience, industry reports and the like, and the data collection
sources 112A . . . 112N may take any of a number of forms, such
as computer workstations operated by data entry operators, connection
points for the reception of subscription data or the like. Once
the information is gathered and stored, it may be processed by a
risk evaluation module 116, in order to determine the risk of events
of interest, in order to design and price insurance products to
provide protection against such risks. The risk evaluation module
116 receives information describing the particular risks to be insured
against, and evaluates the risks using the received information
as well as information extracted from the repository 110.
[0025] The risk evaluation module 116 is particularly useful in
assembling packages of coverage. In some cases, protection provided
by insurance against a particular risk may mitigate a related risk,
and allow discounted pricing or added value for a package insuring
such related risks together. For example, the risk evaluation module
116 may suitably be used to evaluate a combined package including
a mortgage insurance component with a job loss insurance component
and appraisal reimbursement. The job loss insurance component may
be activated upon involuntary termination of the employment of a
covered party, and make the covered party's mortgage payment during
such unemployment, up to a specified maximum number of payments.
The mortgage insurance component insures the party servicing the
mortgage against default by the borrower. The appraisal reimbursement
reimburses a customer who pays for an appraisal used in canceling
mortgage insurance.
[0026] The risk evaluation module 116 may suitably be used to weigh
the overall costs involved in providing the package. The risk evaluation
module 116 may also be used to evaluate actual or proposed changes
in the various package components to determine the effects of the
changes on the overall risk, and therefore cost, of providing the
insurance components of the package. Such weighing of risks can
provide important information that can be used to price and design
services. For example, providing job loss insurance carries a cost
based on the analysis of the risks. If the job loss insurance makes
mortgage payments for the borrower during the borrower's unemployment,
the cost of providing the insurance can be expected to increase
as the maximum number of payments that can be made is increased.
On the other hand, the fact that mortgage payments will be made
during periods of unemployment decreases the risk of default. As
the maximum number of payments that can be received under the job
loss component increases, and especially as the number of payments
that can be received during a single period of unemployment increases,
the risk of providing the mortgage insurance component of the package
decreases. These risks, and their costs, can be evaluated and balanced
by the risk evaluation module 116 and the optimum terms for each
component of the package can be chosen. The server 102 may also
host a package terms development module 118, used to assemble a
package including various components. Details of the coverage components
may be stored in a coverage components database 120. The package
terms development module 118 may accept specified criteria as inputs
and use data provided by the risk evaluation module 116 to design
package terms meeting the specified criteria.
[0027] One exemplary criterion is competitiveness with other products.
A provider of a package including mortgage insurance can be expected
to want to price the product so that it will be competitive with
other mortgage insurance products. The package terms development
module 118 may be designed to allow a product designer to specify
a desired price, for example, and then to develop a set of terms
that can be offered at the specified price. This approach to development
of terms may suitably include evaluating the cost of each component
using the risk evaluation module 116. Evaluation is performed by
submitting component terms to the module 116, receiving risk and
cost information relating to those terms and progressively adjusting
the terms of the package components, either singly or in combination
until a package meeting the specified criteria is developed. If
no package can be developed meeting the specified criteria, the
module 118 may return information describing criteria that can be
met.
[0028] In accordance with the present invention, the long term
storage 108 further includes a customer appraisal reimbursement
module 119 which is utilized in conjunction with the package terms
development module 118 to provide mortgage insurance with appraisal
reimbursement. As further described below in connection with the
discussion of FIGS. 7-11, the customer appraisal reimbursement module
supports the reimbursement of customers for the costs of an appraisal
used in canceling mortgage insurance up to a predetermined limit.
The predetermined limit may be a single nationally applied limit,
such as $500, or different limits may be stored by region so that
different costs apply in more expensive regions than in less expensive
regions. If desired, appraisal reimbursement data may be obtained
and stored in data repository 110, or stored in a separate appraisal
reimbursement data depository, and accessed by the customer appraisal
reimbursement module. For example, appraisal cost data can be collected
and stored by region for use in evaluating what rate of reimbursement
should be provided. As a further example, rate data for the rate
at which consumers take advantage of appraisal reimbursement by
region or over a predetermined period, such as two years, five years,
or the like may be collected and stored for use in evaluating how
to price the appraisal reimbursement part of the package, what portion
of the appraisal to reimburse, or the like.
[0029] According to one aspect of the invention, a detailed description
of the reimbursement package is provided to a borrower as part of
the closing documents. After the loan closes, an appraisal reimbursement
notice is sent to the borrower by the mortgage insurer. If the property
appreciates sufficiently, the borrower may initiate mortgage insurance
cancellation. To this end, the borrower obtains an appraisal and
submits it to the loan servicer. In doing so, the borrower must
comply with the applicable mortgage insurance cancellation and appraisal
acceptance policies. Where appropriate, the loan servicer notifies
the mortgage insurer of cancellation.
[0030] For example, the Mortgage Industry Standards Maintenance
Organization (MISMO) has promulgated standard cancellation codes
for notification of mortgage insurers of mortgage insurance cancellation
as follows: code 1 (payoff) indicates cancellation as a result of
a mortgage being paid in full, code 2 (LTV drop) indicates cancellation
as a result of LTV drop, and code 5 (other) is a catchall category
for cancellations as a result of other reasons. Codes 3 and 4 are
reserved and not presently used. Thus, a mortgage servicer may notify
the mortgage insurer that the mortgage insurance for a particular
borrower for an identified mortgage should be cancelled for codes
1, 2 or 5. This information may be provided by letter, fax, email,
electronic data interface (EDI) or the like. By way of example,
a mortgage servicer may use a first operator computer 122 to send
the above information to a second operator computer 122 at the mortgage
insurer. The second operator computer 122 may be suitably programmed
to automatically recognize codes 2 and 5 as codes for which appraisal
reimbursement may be applicable. For code 1, appraisal reimbursement
is recognized as not applicable.
[0031] Upon recognition of one of the codes 2 or 5, a letter may
be automatically generated including a reimbursement application
for use by the borrower if appropriate. One example of such a letter
is shown in FIG. 8 and discussed below. The letter including the
reimbursement application is sent to the borrower. The borrower
submits this application and proof of the cost of the appraisal,
and the mortgage insurer validates the application and issues appraisal
cost reimbursement to the borrower.
[0032] The system 100 may suitably be accessible to operators using
computers such as the operator computer 122, allowing the operator
to develop packages by submitting desired criteria and receiving
descriptions and cost information for packages meeting the desired
criteria. Operators may suitably include employees of a mortgage
insurance company, developing packages for marketing to consumers.
In addition, employees of a lender having a business relationship
with an insurance package provider may be given operator access
in order to develop packages for the lender.
[0033] It may also be desired to offer consumers direct access
to product information. Consumers, such as prospective borrowers,
may be allowed to review information relating to products generally
available and priced according to standard criteria. For example,
a package may provide six months of job loss protection in combination
with mortgage insurance and appraisal reimbursement, and may be
priced based on the loan amount and the loan to value ratio of an
insured mortgage. In addition, it may be desired to offer products
designed based on individualized criteria furnished by consumers.
Therefore, the system 100 may be accessible to consumer operated
computers, such as a consumer computer 124, in order to allow a
consumer to obtain product information and to provide individualized
information.
[0034] Both the computers 122 and 124 may suitably gain access
to the server 102 through the Internet 114, with appropriate security
and authentication measures being taken in order to distinguish
between classes of users of the system 100. For example, it is highly
desirable to distinguish an internal operator using the computer
122 from a consumer using the computer 124, because the operator
can be allowed much greater access to system features than can a
typical consumer. Suitably, the system 100 includes an operator
interface module 126 and a consumer interface module 128. The operator
interface module 126 is preferably designed to offer a more efficient
interface to an experienced user and to offer greater flexibility
of operation. For example, the module 126 may allow an operator
to construct packages to be offered for sale and to design displays
and discussions about these packages. By way of example, an employee
of a mortgage insurer using operator computer 122 may access the
system through operator module 126 to generate descriptive material
to describe the conditions upon which appraisal reimbursement is
available, the amount of reimbursement available, answers to frequently
asked questions, or the like.
[0035] The consumer interface module 128 preferably includes an
easy to use interface adapted so it may be used by a relatively
inexperienced user. Interface module 128 allows access that is restricted
to a controlled set of information that is relevant to the consumer's
specific needs or is of a general educational and promotional nature.
The consumer interface module 128 preferably allows access to educational
and promotional information that may be extracted from an information
database 130 by the module 128 for presentation to the consumer.
The educational and promotional information may include general
descriptions of various kinds of insurance and their value. The
educational and promotional information may also include descriptions
of various products and packages that are available.
[0036] The consumer interface module 128 may allow the consumer
to submit information describing the consumer's needs. The consumer
interface module 128 may suitably provide the consumer with forms
allowing submission of information describing the consumer's needs.
The consumer interface module 128 submits the information to the
package terms development module 118. The package terms development
module retrieves appropriate products from appropriate modules,
such as the risk evaluation module and the customer appraisal reimbursement
module 119, and the component database 120. It then assembles a
package and transfers information relating to the package to the
consumer interface module 128 for presentation to the consumer.
[0037] Preferably, any identifiable information provided by a consumer
is protected using suitable security techniques, such as public
key encryption. The consumer interface module 128 suitably receives
information using information entry forms presented as hypertext
pages. For example, in the case of mortgage insurance, a form might
require information such as desired loan amount, property value,
property address and the like, as well as, general selections for
the type of insurance package desired. This information may be stored
in a consumer information database 132 for retrieval and use in
developing insurance packages based on requirements submitted by
the consumer and for storing package information relating to a consumer.
[0038] Once the package has been designed, and the risk and cost
information for the package determined, the consumer interface module
128 may compute a price for the package and pass it to the consumer
computer 124, preferably by constructing a hypertext page presenting
the information and passing it to the computer 124 for display.
Package details may also be stored in the consumer information database
130. Price computation may suitably be based on standard factors
applicable to all consumers, such as the amount of the loan, the
loan to value ratio and the particular product desired. If desired,
however, the system 100 may be programmed or designed so that individual
risk calculations are performed for individualized consumer information.
If that is the case, the consumer interface module 128 may be used
to submit information provided by the consumer to the package terms
development module 118, which invokes the risk evaluation module
116 to determine risk and cost information and develop suitable
package terms and pricing.
[0039] If desired, a consumer may be permitted to commit to coverage
once the coverage details have been examined. In that case, the
consumer may indicate a desire to commit to a coverage package and
the coverage details may be assembled by a package negotiation module
138. The coverage details may suitably be stored in a consumer information
database 132 and a completed package database 160.
[0040] FIG. 2 illustrates additional details of the server 102,
showing additional details of the risk evaluation module 116, the
package terms development module 118 and customer appraisal reimbursement
module 119, the operator interface module 126, the consumer interface
module 128 and the package negotiation module 138. The risk evaluation
module 116 suitably includes a coverage data interface module 202,
allowing the submission of data such as a set of coverage requirements.
The risk evaluation module 116 further includes a risk data retrieval
and processing module 204, allowing extraction of data from the
repository 110 in response to inputs received by the coverage data
interface module 202 and processing of the information in order
to compute risk information for a particular aspect of coverage,
for example. The data retrieval and processing module 204 is able
to compute risk information for each aspect of coverage in a package.
[0041] For example, the coverage requirements may include providing
mortgage insurance for a loan of $200,000 at 6.0% and including
a job loss protection policy covering up to a maximum of six months
of payments during a period of unemployment of a borrower occurring
within the first two years after closing. If the monthly payment
for such a loan is approximately $1200, then the maximum payment
under the job loss protection component of the package would be
$7200. The data retrieval and processing module 204 computes the
cost of the mortgage insurance component and the job loss component
by taking the possible payments and factoring in the risk that the
payments will need to be made. In the case of the job loss component
of the policy, the maximum payout of $7200 would be relatively unlikely
because it would require a full six months of unemployment. Smaller
payouts would be more likely, and the module 204 suitably uses data
from the repository 110 to evaluate the costs of coverage, taking
into account the potential payouts and their probability.
[0042] In addition, the presence of the job loss component of the
package affects the likelihood of payment under the mortgage insurance
policy. The risk data retrieval and processing module 204 computes
the cost of the mortgage insurance and then discounts this cost
by taking into account the reduced likelihood of default on the
mortgage due to the job loss component of the package. This discounted
cost of the mortgage insurance component is combined with the calculated
cost of the job loss component to determine the overall cost of
the package.
[0043] The cost information is then submitted to an optimization
module 206. The optimization module 206 evaluates the various aspects
of a package and then makes modifications to various parameters
of the aspects of the package and examines the effects of the modifications
on the overall cost of the package. Such modification and examination
can result in improvements to the package at no cost or a relatively
small cost, or can even result in a combination of increased protection
at a lower overall cost of the package.
[0044] To continue the previous example, the optimization module
might examine the effects of extending the maximum number of payments
under the job loss component from six to seven. Analysis of this
extension would be accomplished by increasing the potential number
of payments to seven and submitting this increased number to the
risk data retrieval and processing module.
[0045] The optimization module 206 continues to make and evaluate
adjustments according to a predetermined arrangement. For example,
adjustments may be made so as to minimize overall costs, adjustments
may be made so as to achieve the maximum number of payments possible
under the job loss component of the package without increasing overall
package costs, or adjustments may be made so as to achieve the maximum
number of payments possible under the job loss component of the
package while staying within a specified cost constraint. The optimization
module 206 then returns information describing the overall cost
of providing the package, the cost associated with each package
component and the parameters of each package component once optimization
has been accomplished.
[0046] The package terms development module 118 includes an external
interface 210 and a package component assembly module 212. The external
interface 210 receives inputs such as descriptions of desired features
of a coverage package. The desired features may suitably include
desired areas of coverage, overall package pricing and the like.
The package component assembly module 212 retrieves coverage components
from the database 120 and submits the coverage criteria and the
coverage components to the risk evaluation module 116. The package
component assembly module 212 then receives optimized package terms
from the risk evaluation module 116 and returns the package terms
using the external interface module 210.
[0047] The operator interface module 126 includes a command interface
module 220 and a controlled interface module 222. The command interface
module 220 allows direct access to various elements of the server
102. For example, the command interface module 220 allows the operator
to examine the coverage component database 120 directly and to submit
various coverage components and criteria to the risk evaluation
module 106 in order to assemble a package. The controlled interface
module 222 allows operation in a prescribed way using forms assembled
from a form database 224, and with information presented to the
operator by the assembly and presentation of forms and displays.
[0048] The consumer interface module 128 includes an information
display interface 230, providing access to educational and promotional
information. The information display interface 230 allows access
by the consumer to the information database 130, suitably through
a sequence of hypertext pages with links to appropriate information
in the information database 230. The consumer interface module 128
also includes an information and command entry interface 232. The
information and command entry interface 232 provides a relatively
tightly controlled mechanism for the consumer to provide information
to the system 100 and to issue commands in order to receive specific
coverage package information and, in appropriate circumstances,
to select coverage for a specific requirement. The information and
command entry interface 232 preferably operates through the presentation
of forms to the consumer for data entry and submission of selections
and commands and through the presentation of forms and displays
for presentation of information to the consumer.
[0049] The package negotiation module 138 includes a package parameter
interface module 240, for receiving information describing components
required in a package. This information may suitably come from the
operator interface module 126 or the consumer interface module 128
or the customer appraisal reimbursement module. Where customer appraisal
reimbursement is selected as part of the package, customer appraisal
reimbursement module 119 provides suitable details, such as borrower
notifications, predetermined maximum appraisal reimbursement amounts,
and the like. While it is presently preferred that this feature
be offered at no charge to the borrower to allay borrower concerns
regarding the difficulty of cancellation of mortgage insurance,
it will be recognized that this feature could also be offered as
an option to be paid for by the borrower. Additionally, once the
customer has purchased a product with appraisal reimbursement, he
or she might further use the consumer interface module 119 to review
lender policies governing mortgage insurance cancellation, to obtain
a list of certified appraisers stored in data repository 110, to
review the terms of the appraisal reimbursement feature, or the
like.
[0050] The package negotiation module 138 further includes a package
assembly module 244, for assembling various components selected
by an operator or consumer. For example, the parties to a set of
package components may be a consumer and a package provider.
[0051] Once commitments for a package have been negotiated, the
package negotiation module 138 suitably stores commitment information
in the completed package database 160 of FIG. 1. Suitably, the database
160 includes a record for each package for which a coverage agreement
has been negotiated. The record for a package suitably includes
details of each coverage component of the package, the effective
coverage date for the package, the cost information for each component
and for the package as a whole, the date and time at which commitment
occurred and the identities of the parties to the package.
[0052] FIG. 3 illustrates a form 300, allowing submission of information
to the system 100 in order to allow risk and cost assessment for
a specific set of circumstances and return of information describing
available coverage for the specified set of circumstances. The form
300 may suitably be presented by the operator interface 126 or the
consumer interface 128, and may take the form of a hypertext page
for display using a browser hosted on a computer such as the operator
computer 122 or the consumer computer 124 of FIG. 1. The form 300
includes a caption 302, a property and loan information entry area
304, including fields 306A-306D for property address information,
fields 306E-306G for loan information and a scrolldown list 308
for the loan type. The loan type is typically one of a relatively
small number of available loan types, including fixed and adjustable
loans having various parameters, so that a scrolldown menu is appropriate
for entering this information.
[0053] The form 300 also includes a job loss information entry
area 310, including fields 312A-312D and 312E-312H for entry of
information about homeowners to whom the job loss protection is
to apply, and a selection button 313 to select customer appraisal
reimbursement information or to select a package including such
reimbursement. The form 300 further includes exemplary information
areas 314 and 315, and a "submit" button 316. A user enters
the requested information in the appropriate fields and clicks the
"submit" button to pass the information to the package
terms development module 218. The sample information supplied in
fields 306A-G, 308, 312A-H, 314 and 315 is provided as an example
of a submission screen for a computer based system for applying
for mortgage insurance with appraisal reimbursement, and should
not be deemed to limit the scope of the subject invention.
[0054] This submission may suitably be accomplished by electronically
transmitting the information to the consumer information database
132 of FIG. 1, where the information is accessible to the package
terms development module 118. The package terms development module
118 retrieves the submitted information from the database 132, develops
general parameters for the package to provide the coverage required
in light of the information and invokes the risk evaluation module
116 to assess the risk and cost of the required coverage and to
adjust the parameters for risk and cost optimization. The risk and
cost of the coverage are computed through analyzing the costs and
likelihood of default on the mortgage and the likelihood and cost
of payment under the job loss protection component of the coverage,
taking into account the fact that the job loss protection lowers
the risk of default.
[0055] Adjustments to various parameters of the package are tested
to determine their effect on the overall cost.
[0056] FIG. 4 illustrates a display 400, generated after a set
of terms for a coverage package has been generated by the package
terms development module 118, as a result of processing the information
provided in form 300 of FIG. 3. The display 400 may suitably be
presented in the form of a hypertext page for display by a hypertext
browser hosted on a computer such as the computer 122 or 124. The
display 400 includes a caption 402, a mortgage insurance coverage
section 404, a job loss information entry section 406 including
information entry fields 408-422, and a "Submit" button
424. The mortgage insurance coverage section 404 displays previously
stored information submitted by a consumer or otherwise submitted
in relation to a transaction. This information includes property
address and mortgage information. The mortgage insurance coverage
section further displays coverage information computed by the package
terms development module 118. Here, this information is the annual
and monthly premium for the coverage package, as well as the maximum
number of payments that will be made in the event of job loss. In
addition, the maximum amount of appraisal reimbursement is shown
for the market that the customer is in. In the example, shown in
FIG. 4, the customer will be reimbursed up to $500 for an appraisal
used in canceling the mortgage insurance.
[0057] The display 400 can also be used to enter into a commitment
for coverage on the terms described. Thus, the job loss information
entry section 406 includes information entry block 408-422 for entry
of information not previously submitted, and a "Submit"
button 424 to submit the information and indicate a desire to commit
to coverage as described in the section 404. The information section
426 includes additional details, such as the identities of the parties
providing the coverage components, together with a link 428 allowing
the display or printing of further information. For example, further
details of appraisal reimbursement can be obtained by clicking on
the link 428.
[0058] FIG. 5 illustrates an exemplary display 500, presented after
activation of the "Submit" button 424 of FIG. 4. The display
500 includes a coverage description area 502, presenting details
about the proposed coverage package, in order to give a user an
opportunity to review the package before entering into a commitment.
The display 500 also includes a "Confirm" button 504 and
a "Cancel" button 506. If the user activates the "Cancel"
button, no commitment information is submitted and a suitable display
is presented indicating that no coverage package has been entered
into. If the "Confirm" button 504 is activated, commitment
information is stored in the database 132 of FIG. 1 and the completed
package database 160 of FIG. 1 and relayed to responsible parties
for action. For example, a set of documents may be prepared for
inclusion in a loan package being prepared in connection with the
insurance package. This set of documents would describe the mortgage
insurance package including appraisal reimbursement, identify the
provider, and address the features of the appraisal reimbursement
component of the package, such as the maximum appraisal reimbursement
of $500 shown in FIG. 5.
[0059] FIG. 6 illustrates a process 600 of insurance package evaluation,
pricing and marketing according to an aspect of the present invention.
The process 600 may be carried out using a system such as the system
100 of FIG. 1. At step 602, risk information is collected for use
in evaluating risk to be insured. This information may take numerous
forms, such as direct loss experience of an insurer, actuarial data,
surveys, purchased economic data, or the like. The information may
come from numerous different sources, such as data entry operators,
subscription data services, harvesting of relevant information when
insurance losses are paid, and as many other sources as are suitable
and desired for use in assembling predictive data. At step 604,
the risk information is assembled and stored for convenient retrieval.
At step 606, information relating to various forms of insurance
that may be used to create combined insurance packages is stored.
The information may suitably include risks to be covered by each
component, exclusions and limitations of each component, persons
who qualify for coverage, or the like. Suitable components for which
information is stored include mortgage insurance protecting a lender
in the event of default on a mortgage, job loss insurance, providing
for direct payment to a covered party or for payment or deferral
of mortgage payments or other debts in the event of job loss, and
borrower appraisal reimbursement. At step 608, marketing is performed
relating to combined packages of insurance. One suitable form of
package is a combined package of mortgage insurance and job loss
insurance with appraisal reimbursement. The mortgage insurance component
protects a lender in the event of default on a mortgage. The job
loss component provides payment of monthly mortgage payments owed
on a mortgage issued in connection with the package. Appraisal reimbursement
allows the homeowner to seek an appraisal and cancel the mortgage
insurance when the LTV has dropped as a result of home appreciation
with the knowledge that the cost of the appraisal will be reimbursed
up to a predetermined maximum.
[0060] Promotion may be accomplished by providing materials to
lenders, through direct consumer promotion, through establishing
websites providing promotional and educational information and by
numerous other means. At step 610, in response to the presentation
of information describing specific coverage needs for a package
of coverage components, evaluation of the risk and cost of delivering
each of the components is performed. Evaluation is accomplished
by examining the coverage desired and using the stored risk data
to compute the risks and cost of providing coverage on the terms
desired. In addition, the risk and cost of the package as a whole
is evaluated by taking into account the effect of each coverage
component on the risks and costs involved in providing the other
coverage components. At step 612, optimization of coverage parameters
is performed. Adjustment of parameters of the coverage package are
made and their effects on the risk and cost presented by the package
as a whole are evaluated.
[0061] At step 614, an optimized set of terms for a coverage package
is generated. At step 616, upon a receipt of an indication of a
decision to commit to coverage on the terms described, a summary
of the proposed coverage and terms is presented for confirmation.
If an indication is received that a commitment to coverage is not
desired, the process terminates at step 650. If an instruction to
commit to coverage is received, the process proceeds to step 618
and a coverage commitment is concluded and suitable documentation
is prepared and transmitted to responsible parties. The documentation
may come in the form of paper documents to be signed and returned,
in the form of electronic indications that coverage has been committed
to, or any other suitable form sufficient to document the existence
of an agreement. Coverage details are suitably stored in a database
record associated with a consumer to be covered, a marketer of insurance
packages on the terms that have been committed to, or any other
party entering into the coverage package. Coverage details relating
to each component of the package are provided to and may be stored
in a database record associated with the provider of that component.
[0062] While the present invention is disclosed above in the context
of aspects of an embodiment employing a specific system and exemplary
web pages, and in the context of the specific combination of mortgage
insurance with job loss protection and appraisal reimbursement,
it will be recognized that a wide variety of implementations may
be employed by persons of ordinary skill in the art consistent with
the above discussion and the claims which follow below. By way of
example, it will be recognized that mortgage insurance can be combined
with other types of insurance or financial products to the extent
that such combinations are deemed beneficial by consumers, and that
the appraisal reimbursement feature of the present invention can
be utilized in conjunction with a wide variety of mortgage insurance
products and implemented with a wide variety of systems that are
more or less automated.
[0063] FIG. 7 focuses on the aspects of appraisal reimbursement
process showing an appraisal reimbursement process 700 in accordance
with the present invention. The bulk of process 700 may be implemented
using a suitably programmed computer based system, such as system
100. At step 702, a borrower submits an appraisal for a house to
a loan servicer to support cancellation of the mortgage insurance.
For mortgage insurance cancellation, all of the loan servicer's
or mortgage investor's requirements for cancellation must be met
regarding seasoning, LTV, evidence of value, payment status and
the like. For example, a loan servicer or mortgage investor may
require that the customer have at least a two year history of on
time payments. After two years of on time payments, the LTV might
be required to be 75% to allow cancellation of the mortgage insurance.
As a further example, after five years of on time payments, a loan
servicer might allow cancellation of the mortgage insurance with
an LTV ratio of 80%.
[0064] In any case, once the loan servicer is satisfied that the
requirements for canceling the mortgage insurance are met, the servicer
notifies the mortgage insurer of cancellation. For example, the
loan servicer may utilize an operator computer 122 to notify the
mortgage insurer by email or by EDI. Typically, a loan servicer
will internally process and code the cancellation request. A first
code, such as MISMO code 1, might indicate that mortgage insurance
should be canceled as a result of payoff of the loan. A second code,
such as MISMO code 2, might indicate that the reason for cancellation
is "LTV drop". A third code, such as MISMO code 5, might
indicate some other reason. The notification typically includes
the date to cancel, reason to cancel, the mortgage insurance certificate
number, the loan number, and where to send any applicable premium
refund, typically the borrower. As noted above, LTV can drop as
a result of a combination of factors. At present, loan servicers
do not typically notify the mortgage insurer that the LTV drop was
as the result of home appreciation established through a customer
obtained appraisal.
[0065] Consequently, in step 706, since LTV can drop as a result
of a number of factors not involving a borrower obtained appraisal,
the mortgage insurer generates and sends an automatically generated
reminder letter to the borrower reminding the borrower of the appraisal
reimbursement feature. Where MISMO codes are utilized, a suitably
programmed operator computer 122 may receive that code and determine
where the MISMO code is 2 or 5 that appraisal reimbursement may
be appropriate. In that case, the reminder letter may be automatically
generated and printed using printer 123. An exemplary letter 800
is shown in FIG. 8 and discussed further below.
[0066] In step 708, where the LTV drop was a result of a borrower
obtained appraisal, the borrower submits a completed refund application
and supporting documentation to the mortgage insurer. For example,
a mortgage insurer may typically require proof of appraisal payment,
such as a canceled check, a credit card receipt, or the submission
of a copy of a paid invoice for the appraisal, along with the completed
refund application. The completed application would typically include
the borrower's name and address, and the appraiser's name and address,
but could include additional information as desired or required
by the mortgage insurer.
[0067] Finally, in step 710, the mortgage insurer receives the
borrower's submission, validates it, and issues a refund check.
The refund check is based upon the actual cost of the appraisal
up to some predetermined limit, such as $500, for example.
[0068] Turning to FIG. 8, this figure shows an exemplary automatically
generated letter 800 which may be suitably employed in step 706
of FIG. 7 to remind borrowers, whose mortgage insurance is being
cancelled due to LTV drop, of the appraisal reimbursement feature
of their mortgage insurance. The letter has an upper portion 810
and a lower portion 820, and this letter may be automatically computer
generated by a computer, such as operator computer 122 of FIG. 1,
and printed with the printer 123. The lower portion 820 of letter
800 may be detachable and filled in by the borrower as the application
for appraisal reimbursement. Alternatively, where a borrower elects
to be notified by email and provides an email address, the letter
800 may be a Word.TM. document attached to an email sent to the
borrower's computer, such as consumer computer 124, utilizing the
Internet 114. Further alternatives are to forward a web browser
form to the borrower, or to have the borrower access such a form
using a consumer computer, such as computer 124.
[0069] The top portion 810 of letter 800 provides the borrower
reminder, as well as, instructions or seeking reimbursement where
applicable. The bottom portion 820 of letter 800 provides a detachable
appraisal reimbursement application form which is preferably pre-populated
with the mortgage insurance certificate number in a field 825, as
well as other pre-populated information to speed processing by the
mortgage insurer and reduce the work of the borrower. Because a
copy of a receipt or invoice for the appraisal is to be submitted
in this exemplary embodiment, it is preferred that the appraisal
reimbursement request form be mailed or faxed with that supporting
document to the mortgage insurer.
[0070] However, it will be recognized that the letter 800 of FIG.
8 could also be replaced with an emailed form to be displayed on
a borrower's home computer, and this electronic form could be responded
to electronically by filling in the form and attaching a scanned
receipt or some other suitably reliable indicia of the cost and
payment of the appraisal. The form and proof of payment could then
be emailed back to the mortgage insurer. As one example, the mortgage
insurer could have a relationship with the loan servicer, whereby
the loan servicer would vouch for the cost of the appraisal as part
of its determination that the cancellation requirements had been
met, and then provide the borrower with a payment code which could
be emailed by the customer to the mortgage insurer. The code could
indicate both the identity of a trusted and reliable appraiser,
as well as the amount paid. As a further alternative, the loan servicer
could directly notify the mortgage insurer of the appraisal cost
as part of or in addition to its notification of cancellation due
to LTV drop in step 704. In this event, the process 700 would skip
directly to step 710 and the mortgage insurer would issue a refund
check.
[0071] Turning to FIGS. 9-11, FIG. 9 shows an exemplary process
900 for automatically generating an appraisal reimbursement welcome
letter. Process 900 may be implemented using any suitably programmed
computer system, such as operator computer 122, for example. In
step 902, a borrower closes on a loan including mortgage insurance
and the loan servicer enters the pertinent data in its systems.
In step 904, the loan servicer forwards loan information to a mortgage
insurer. In steps 906, 908, 910, and 912, the loan information is
processed, a welcome letter is automatically generated, and mailed
to the borrower. In step 914, the borrower receives the welcome
letter. In an alternative step 916, provision is made for the potential
for returned mail. For example, where mail is returned with a forwarding
address, the mail may be resent. If returned without a forwarding
address, the mortgage insurer can follow-up with the loan servicer
to obtain an up-to-date address, and update its records accordingly.
Further details of one suitable process 1100 are shown in FIG. 11.
[0072] FIGS. 10A and 10B show details of a process 1000 for appraisal
reimbursement. In step 1002, a mortgage insurance cancellation request
is initiated by a borrower or loan servicer. In step 1004, the loan
servicer approves cancellation based on investor guidelines. In
step 1006, if the criteria for cancellation have been satisfied,
the loan servicer informs the mortgage insurer of the cancellation.
At step 1008, the mortgage insurer processes the cancellation. In
step 1010, weekly reports are run to identify eligible requests.
In step 1012, it is determined that the request qualifies for appraisal
reimbursement. In step 1014, loan data is entered into a tracking
spreadsheet. In step 1016, a borrower is mailed an appraisal reimbursement
request form. In step 1018, the borrower receives the appraisal
reimbursement request form. In step 1020, the form is completed
and faxed or mailed with proof of payment. Finally, at step 1022,
the mortgage insurer receives the application from the borrower.
It is noted that, if at step 1012, it was determined that the request
did not qualify for appraisal reimbursement, then process 1000 would
proceed directly to step 1060 and end.
[0073] From step 1022, the process continues to step 1024 of FIG.
10B where it is determined if the borrower provided all the required
information for reimbursement. If yes, in step 1026, the request
is validated against the spreadsheet generated in step 1014. In
step 1028, it is determined whether the borrower qualifies for reimbursement.
At step 1030, the tracking spreadsheet is filled out. In step 1032,
a check request is filled out. In step 1034, the check request is
received and in step 1036, that request is processed. The check
is then mailed to the borrower in step 1038 and received in step
1040. In both FIGS. 10A and 10B, the potential for returned mail
is addressed in an optional step 1040 similar to step 916 of FIG.
9.
[0074] If at step 1024 it was determined that the borrower did
not provide all the required information, then in step 1042, a follow-up
letter is sent. In step 1044, the tracking spreadsheet is updated
to indicate that the follow-up letter was sent.
[0075] If at step 1028 it was determined that the borrower did
not qualify for reimbursement, then the spreadsheet is updated in
step 1046. For example, a drop in LTV might be as a result of a
lump sun payment by the borrower and the appraisal might be obtained
in connection with the borrower putting the home on the market.
In step 1048, a letter is sent to the borrower stating that he or
she is not eligible for reimbursement and explaining why that is
the case. In step 1050, the borrower receives the ineligibility
letter.
[0076] Finally, FIG. 11 illustrates a process 1100 of handling
returned mail.
[0077] While the present invention is described above in a variety
of contexts, it will be recognized that the systems and processes
can be more or less automated with a suitably programmed computer
automatically updating a tracking spreadsheet in response to appropriate
inputs from an operator, in response to scanning a piece of returned
mail, or receipt of electronic notifications from loan servicers
or borrowers, or the like. |