A mortgage guaranty insurance policy is described having periodically
adjusted premiums, the determination of said premiums being partially
based on loan seasoning; and a claim settlement option chosen from
the following: immediate lump-sum settlement, principal and interest
payments being maintained for a fixed period prior to loan payoff,
principal and interest payments being maintained until loan payoff
is demanded by insured, principal and interest payments until the
loan is paid off by the insurer. In one embodiment, the premium
paid by the lender comprises the sum of individual premiums assigned
to each loan in the insured portfolio, and each of said individual
premiums are each adjusted according to separate fixed schedules.
In another embodiment, the premium paid by the lender comprises
the sum of individual premiums assigned to each loan in the insured
portfolio, and said individual premiums are adjusted according to
the same fixed schedule. In another embodiment, at least one premium
adjustment includes a retrospective portion.
1. A method comprising: receiving, at a mortgage guarantor, a designation
of a first claim settlement type to be associated with a mortgage
portfolio; establishing a first mortgage insurance premium amount
to be charged, based at least partly on the first claim settlement
type; receiving, at the mortgage guarantor, a designation of a second
claim settlement type to be associated with the mortgage portfolio;
and establishing, if the second claim settlement type is different
from the first settlement type, a second premium amount based on
the selected second claim settlement type.
2. The method of claim 1 wherein the designation of the first claim
settlement type and the designation of a second claim settlement
type are both received from a mortgage owner.
3. The method of claim 1 wherein the portfolio comprises a collection
of mortgages to be insured.
4. The method of claim 1 wherein the portfolio comprises a single
loan to be insured.
5. The method of claim 1 wherein the first claim settlement type
is one selected from the group consisting of lump-sum settlement,
principal and interest payments being maintained for a fixed period
prior to loan payoff, principal and interest payments being maintained
until loan payoff is demanded by insured, principal and interest
payments until the loan is paid off by the insurer
6. The method of claim 1 wherein the first premium amount is based
on loan seasoning.
7. The method of claim 1 wherein the premium comprises the sum
of individual premiums assigned to each loan in the insured portfolio,
and the individual premiums are each adjusted according to fixed
8. The method of claim 1 wherein at least one premium adjustment
includes a retrospective portion.
9. A computer readable medium having stored therein computer executable
instructions to execute a method comprising: receiving, at a mortgage
guarantor, a designation of a first claim settlement type to be
associated with a mortgage portfolio; establishing a first mortgage
insurance premium amount to be charged, based at least partly on
the first claim settlement type; receiving, at the mortgage guarantor,
a designation of a second claim settlement type to be associated
with the mortgage portfolio; and establishing, if the second claim
settlement type is different from the first settlement type, a second
premium amount based on the selected second claim settlement type.
10. The computer readable medium of claim 9 wherein the designation
of the first claim settlement type and the designation of a second
claim settlement type are both received from a mortgage owner.
11. The computer readable medium of claim 9 wherein the portfolio
comprises a collection of mortgages to be insured.
12. The computer readable medium of claim 9 wherein the portfolio
comprises a single loan to be insured.
13. The computer readable medium of claim 9 wherein the first claim
settlement type is one selected from the group consisting of lump-sum
settlement, principal and interest payments being maintained for
a fixed period prior to loan payoff, principal and interest payments
being maintained until loan payoff is demanded by insured, principal
and interest payments until the loan is paid off by the insurer.
14. The computer readable medium of claim 9 wherein the first premium
amount is partly based on loan seasoning.
15. The computer readable medium of claim 9 wherein the premium
comprises the sum of individual premiums assigned to each loan in
the insured portfolio, and the individual premiums are each adjusted
according to fixed schedules.
16. The computer readable medium of claim 9 wherein at least one
premium adjustment includes a retrospective portion.
 The present application is a continuation-in-part of and
claims priority from U.S. patent application Ser. No. 09/972,564,
entitled renewable Repriced Mortgage Guaranty Insurance, filed on
Oct. 4, 2001, which itself claims priority to U.S. Provisional application
having Ser. No. 60,238,244, filed on Oct. 5, 2000.
FIELD OF INVENTION
 This invention relates to Mortgage Guaranty Insurance. More
particularly the present invention relates to a mortgage guaranty
insurance policy that has particular features such as periodic repricing
and unique claim settlement options.
 Mortgage guaranty insurance protects the mortgage lender
from financial losses resulting from a borrower's default in paying
a mortgage. Mortgage guarantee insurance transfers the risk of a
mortgage default from the lender to the insurer. Typically, mortgage
loans that have an excessive risk are likely to be insured. One
common category of mortgage for which a mortgage guaranty insurance
policy is often is issued is the low down payment mortgage. Experience
has shown a strong correlation between the percentage of borrower
equity in a property and the likelihood that a borrower would default
on a mortgage secured by that property. For example, borrowers having
little or no equity in a property tend to default more than those
having ten percent or more equity, since the lower equity borrower
stands to lose less through default.
 Without mortgage guaranty insurance, lenders typically require
a down payment of no less than 20 percent of the purchase price
of the secured property. With mortgage guaranty insurance, a lender
is willing to lend a greater proportion of that purchase price.
The availability of mortgage guaranty insurance makes smaller down
payments possible and eliminates a major obstacle to a transaction
that benefits the consumer (e.g., a home buyer) and the lender.
Typically, such mortgage guaranty insurance policies are maintained
until the outstanding principal has fallen below a percentage (e.g.,
80%) of the purchase price.
 The traditional mortgage guaranty insurance product is usually
a borrower-paid, fixed premium insurance, with the cost or premium
set at the time of loan origination. The traditional policy terminates
only if canceled by the insured or for non-payment of premium. A
principal advantage of this traditional product is that the terms
of the coverage are certain, as long as the premiums are paid, for
the life of the coverage. This certainty facilitates the origination,
sale and resale of mortgage loans.
 There is a need for new mortgage guaranty insurance products
that allow a better allocation of risks between the loan guarantor
(e.g., the insurer) and lender (e.g., mortgage owner). A principal
disadvantage of the traditional product is that the terms are usually
tied to a single loan of a single borrower and typically fixed at
the time of origination for the lifetime of the insurance coverage.
This traditional approach limits the opportunities to initially
allocate and periodically reallocate risks among mortgage insurer,
mortgage lender, or mortgage owner in a manner that can be structured
to meet the needs and performance of the individual parties to a
transaction and so thereby also promote the efficiency of the mortgage
 The risks associated with a mortgage guaranty application
fall into seven major categories:  The morale hazard of a
lender taking less care with underwritten loans because of the insurance.
 The adverse selection hazard that the insured will only insure
the riskiest loans.  Bad risk persistency where lower credit
quality loans tend not to prepay or refinance because of difficulties
and/or costs encountered in taking a new loan.  Interest rate
increases leading to increased risks of loan default.  Changes
in economic conditions (e.g., unemployment) other than interest
rates may affect default rates.
 Interest rate changes affecting the profitability of the
loans aside from default represent lost financial opportunities
that are typically uninsured (e.g., prepayment reducing lender's
income stream; lost lender reinvestment opportunities if interest
rates increase).  Heterogeneity of mortgages in a rate classification,
increased loss variability increases the risk
 In the traditional mortgage guaranty arrangement, the insurer
bears the financial risks associated with the morale hazard, adverse
selection, bad risk persistency, loan defaults due to interest rate
increases, changes in economic conditions, and risk heterogeneity.
The insured bears the non-default financial risks associated with
interest rate changes.
 The traditional system involves much market inefficiency.
It allocates risks that are at least partially under the control
of the lender (e.g., morale hazard, adverse selection bias, risk
heterogeneity) to the insurer and thus substantially reduces the
incentive of the lender to control such risks. Therefore, the insurer
must charge a higher premium and/or impose stricter underwriting
requirements to manage any resulting unmitigated risks. The traditional
system also places the burden or benefit of changing economic conditions
as they affect the mortgage default rate upon the insurer. The traditional
system also places the burden of lost investment opportunities and
prepayment-related decreases in portfolio yields upon the insured.
The traditional mortgage guaranty insurance premium inherently reflects
these additional sources of risk according to their invariant allocation.
 There is also a need to allow mortgage owners to optimize
the cash flow from their investment, as well as the need for mortgage
guarantors to have the ability to control loss payments to protect
solvency during times of high mortgage default rates.
 The traditional claim process on private mortgage insurance
begins with the guarantor's receipt of notification from the loan's
owner or servicer of a default on an insured loan. Default is typically
defined in the primary master policy as the failure by the borrower
to pay, when due, an amount at least equal to the scheduled monthly
mortgage payment under the terms of the mortgage. Borrowers usually
may cure defaults by making all delinquent loan payments, penalties
and costs inccured as a result of the defaultor by selling the property
and satisfying all amounts due under the mortgage.
 Defaults that are not cured result in foreclosure by the
loan owner and a claim to the guarantor. Under the terms of the
master policy (or other agreement), the loan owner may typically
be required to file a claim with the guarantor no later than 60
days after it has acquired good and marketable title to the underlying
property through foreclosure. The claim amount includes (i) the
amount of unpaid principal due under the loan; (ii) the amount of
accumulated delinquent interest due on the loan (excluding late
charges) to the date of claim filing; (iii) expenses advanced by
the loan owner under the terms of the master policy, such as hazard
insurance premiums, property maintenance expenses and property taxes
to the date of claim filing; and (iv) certain foreclosure and other
expenses, including attorney's fees. Such a claim amount is typically
subject to review and possible adjustment by the guarantor.
 After the claim has been filed, the guarantor typically
may have the option of either (i) paying the coverage percentage
specified on the certificate of insurance (usually 15% to 30% of
the claim), with the loan owner retaining title to the underlying
property and receiving all proceeds from the eventual sale of the
property or (ii) paying 100% of the claim amount in exchange for
the loan owner's conveyance of good and marketable title to the
property to the guarantor, with the guarantor selling the property
for its own account. The guarantor typically opts for the claim
settlement option costing it the least.
 There are two reasons that the traditional method of settling
claims in full with a single lump sum payment is sub-optimal for
both the guarantor and the loan owner. First, it makes the payment
at a time when it may not be optimal for reinvestment. If interest
rates are falling it can reduce the duration and value of the loan
owner's mortgage portfolio when it would provide maximum inconvenience
 Second, if market conditions are such that there are many
defaults, foreclosures and claims, it could affect the solvency
of the guarantor. Even if solvency is not impaired, guarantors may
be forced to exit the market, reducing the availability of mortgage
loans. Mortgage guaranty insurance therefore becomes unavailable
exactly when it should be most available to help rebuild the market.
This happens because mortgage guaranty insurance is bound to the
condition of the mortgage markets. This consequence of the traditional
lump-sum approach is a source of instability in the industry. Insurance
products should be insulated to the extent possible from the business
cycles of the contingency insured. Otherwise, the insurance product
may exacerbate business cycles rather than mitigate them.
 Therefore, there is a need for a business method that approaches
mortgage guaranty insurance according to the underlying risks, more
flexibly allocates those risks according to the needs and loss experiences
of the parties as well as changing economic conditions, helps the
insured to optimize the cash flow from its mortgage portfolio and
allows the mortgage guarantor to mitigate losses during times of
high mortgage default rates. There is also a need for a business
method that more effectively buffers the mortgage guaranty insurance
and mortgage lending business cycles.
SUMMARY OF THE INVENTION
 A mortgage guaranty insurance policy is described having
periodically adjusted premiums, the determination of said premiums
being partially based on loan seasoning; and a claim settlement
option chosen from the following: immediate lump-sum settlement,
principal and interest payments being maintained for a fixed period
prior to loan payoff, principal and interest payments being maintained
until loan payoff is demanded by insured, principal and interest
payments until the loan is paid off by the insurer.
 In one embodiment, the premium paid by the lender comprises
the sum of individual premiums assigned to each loan in the insured
portfolio, and each of said individual premiums are each adjusted
according to separate fixed schedules.
 In another embodiment, the premium paid by the lender comprises
the sum of individual premiums assigned to each loan in the insured
portfolio, and said individual premiums are adjusted according to
the same fixed schedule.
 In another embodiment, at least one premium adjustment includes
a retrospective portion.
BRIEF DESCRIPTION OF THE DRAWINGS
 FIG. 1 is a flowchart showing a method for calculating a
mortgage guaranty insurance premium.
 FIG. 2 is a flowchart showing a present invention method
for settling claims.
 FIG. 3 is a system capable of performing a present invention
DETAILED DESCRIPTION OF THE INVENTION
 The subject invention is a mortgage guaranty method and
product which allows allocating risks among the mortgage owner and
mortgage insurer by matching premiums more closely over time to
the degree of a default or interest rate risk. The insured's risk
sharing is thereby shifted to varying extents from loss variability
to premium variability.
 In one embodiment of the present invention a lender-paid,
guaranteed renewal mortgage guaranty insurance is presented having
fully delegated underwriting, periodic repricing based on changes
in loan characteristics, with retrospective rating, and claims settlement
options being selectable by the insured both at the time the policy
is written and at the time a claim is made.
 As in the typical prior art mortgage guaranty insurance
policy the coverage is cancelable by the insured, which allows the
insured to change policies in a competitive marketplace for insuring
 Repricing facilitates the insurance of loans of any age
or seasoning, thus allowing the allocation of underlying risks and
maintaining risk classification homogeneity.
 Retrospective ratings reduce risk to the insurer by causing
premium adjustments to reflect both the actual loss experience and
the claims settlement options selected by the insured. Delegated
loan-level underwriting is a policy feature affecting the risk of
default. However, periodic portfolio repricing and the retrospective
rating used in repricing the coverage serve to mitigate the morale
hazard. In this application, "periodic" includes a regular
interval such as annually, monthly, every six months, etc., but
also is intended to include irregular intervals, such as if a policy
is typically repriced every six months, but is repriced off-schedule
one or more times, such as at the fifth month since the last repricing
event, or the eighth month since the last repricing event, or at
any other time. The repricing may be done on any of several schedules,
including but not limited to: for each individual loan whenever
its characteristics change in some material way, a fixed interval
for each individual loan, with different loans not necessarily having
the same fixed repricing interval, and a fixed intervals for all
insured loans, the actual schedule of the fixed intervals for all
insured loans being primarily dependent on the origination date
of each loan. Finally, repricing may also be performed at one time,
for all loans owned by a particular loan owner. Under this scenario,
all loans under a given loan owner would be repriced at the same
time, regardless of when a given loan originated.
 Optionally, the coverage provides claims settlement options,
which allow allocation of interest rate risks between the insured
and insurer. Claims settlement options of various types will be
discussed in later paragraphs.
 Table 1 below summarizes features of one embodiment: TABLE-US-00001
Feature Description Lender-paid Permits repricing without affecting
amounts paid by the borrower to cover the owner's cost of insurance
Annually This aspect may be coupled with an annual repricing renewable
interval, but not necessarily. Guaranteed Provides insurability
likely to be demanded by large renewable investors. Reassures investors
especially until a competitive market for covering seasoned loans
is developed. Periodic Given popularity of regular business and
repricing accounting/reporting cycles in commerce, periodically
allocates risk and maintains risk classification homogeneity Retrospective
Reduces risk to the insurer by adjusting premium to rating reflect
actual experience. Delegated Part of the risk allocation process
loan-level underwriting Claims Allows the insured to manage its
mortgage portfolio settlement duration and increase portfolio value
in response to options changing interest rates. Allocates interest
rate risk between insurer and insured
 In another embodiment of a mortgage guaranty insurance according
to the present invention, the insured is allowed to choose a method
of claims settlement. Having the choice provides the insured with
an opportunity to optimally balance interest rate risk, return maximization,
and portfolio stability. Claims settlement choices optionally include
the traditional lump-sum payment to receiving the principal and
interest payments as though the loan remained in force to full amortization.
There are several options in between. Choices include, but are not
limited to:  Immediate lump-sum settlement (traditional, in
the field of Mortgage Guaranty Insurance)  Maintain principal
and interest payments for a fixed period, known at policy issue,
prior to loan payoff  Maintain principal and interest payments
for a fixed period, unknown at policy issue, prior to loan payoff
 Maintain principal and interest payments for a pre-defined
period, unknown at policy issue, prior to loan payoff, e.g. portfolio
duration at the time of the claim  Maintain principal and
interest payments until loan payoff demanded by insured  Maintain
principal and interest payments until the loan is paid off by the
insurer at a time of its choosing.
 Each settlement offer requires an adjustment to the estimated
claim cost because the timing of claim payment stream affects its
present value. Some of these adjustments can be made using standard
discounting techniques; however, some require adjustment using option
theory known to those of ordinary skill in the art.
 In an alternative embodiment, the insurer chooses which
settlement option to apply to a claim.
 Describing yet another embodiment of the present invention,
FIG. 1 is a flowchart showing a Method for Calculating a Mortgage
Guaranty Insurance Premium. As will be appreciated by those of ordinary
skill, this method has many features desirable to insurance carriers.
For example, the method ensures that premium collected match the
degree of risk at the time. Using the prior art methods, in the
first few years, the premiums charges to the insured exceed the
levels justified by the risk. During years four through six, the
premiums charged are not adequate to support the levels justified
by the risk. Following year six, the premiums charged again exceed
the levels justified by the risk.
 In this application, reference may be made to something
being based `partly` on something else. For example, a premium may
be partly based on loan seasoning. It is expected that this phraseology
will indicate that loan seasoning either the only factor considered,
but may also be one of many factors. Thus, `partly` should be interpreted
to indicate that the referenced term is included, but there may
be others also included.
 A second feature of the method of FIG. 1 is that risk and
adverse selection is minimized due to the present invention premiums
being consistent with the extent to which the insured portfolio
is statistically different from the lender's insurable portfolio.
 Other features of the method of FIG. 1 include the use of
prospective and retrospective rate adjustments, the optional use
of current Loan to Value (LTV) ratios, the use of credibility factors
to combine experience based on small samples with experience based
on larger samples, the use of geographic and/or regional economic
data, and the use of resale indices to estimate current LTV ratios.
 Referring to FIG. 1, the method begins at block 10 where
portfolio and loan rating criteria and credibility standards are
selected. Example rating categories include, but are not limited
to Loan seasoning, Loan geographic location and/or economic conditions
at any or all of the local, regional and national levels, the loan
owner's historical default experience and/or prospective loan owner's
historical default experience, the difference to which the loan
owner's portfolio of loans insured by the specific guarantor/insurer
differs from the loan owner's total insured portfolio and total
loan portfolio, the optional use of current Loan to Value (LTV)
ratios, the use of credibility factors to combine experience based
on small samples with experience based on larger samples, and the
claim settlement option selected.
 Table 2 includes further optional risk rating categories.
TABLE-US-00002 TABLE 2 1. Loan information 2. Loan provisions 3.
Property location 4. Loan origination date 5. Interest rate 6. Loan
original principal amount 7. Fixed/adjustable rate mortgage (FRM/ARM)
8. Term 9. Payment frequency 10. Other provisions, e.g., balloon
payment, interest only 11. Points 12. Lender's loan number 13. Loan
acquisition - originated or purchased 14. Loan disposition - sold
or kept in originator's portfolio 15. Original LTV 16. Loan origination
date 17. Loan acquisition date, if applicable 18. Date loan paid
off, if applicable 19. Purpose of Loan - investment, residence etc.
20. Loan History since origination 21. Age (loan seasoning) 22.
Interest rate and payment amount changes for adjustable rate mortgages
(ARMs) 23. Dates of late payments 24. Number of days payment was
late 25. Filing date for notice of default if applicable 26. Date
foreclosure started, if applicable 27. Date of foreclosure sale,
if applicable 28. Property characteristics 29. Appraised property
value 30. Property address, including street name, number and zip
code 31. Property type 32. Single-family residence 33. Manufactured
housing 34. Mobile home 35. Condo 36. Units 37. Borrower information
38. Name, address, SSN, other appropriate identification 39. Credit
status A, B, C etc. 40. Date credit status determined 41. Credit
rating score, converted to a quality percentile 42. Date of credit
rating score 43. Loan payment history, if applicable 44. Fraud history,
if applicable 45. Insurance characteristics 46. Coverage depth 47.
Claims settlement plan 48. Other relevant information 49. Local
economic indicators 50. Examples 51. Mortgage interest rates 52.
Unemployment statistics 53. Real estate value trends 54. Local real
estate market conditions 55. Local foreclosure rates 56. Regional
economic indicators 57. Examples 58. Unemployment statistics 59.
Regional real estate value trends 60. Regional real estate market
conditions 61. Local foreclosure rates 62. Other economic statistics
and trend forecasts 63. General economic conditions 64. Examples
65. Unemployment statistics 66. Regional real estate value trends
67. Regional real estate market conditions 68. Local foreclosure
 At block 12, national and regional rates are developed.
Prior art approaches have operated using a single rate per class
for an entire country. However, according to the present invention,
regional rates are developed, in order to better match the rates
used to the geographic location of either the loan owner or the
borrower, whichever is deemed most relevant to the insurer. Basing
rates on geographic location is a novel feature that may be used
alone or in combination with other aspects of the invention, or
with the prior art, while remaining within the intended scope of
the present invention. An alternate embodiment would be to use a
regional economic index score in addition to or in place of geographic
location. These scores are available from services including Economy.com.
 One way of developing rates is using the pure premium method
(computing losses divided by exposure, for each class). However,
those of ordinary skill in the art having the benefit of this disclosure
will be readily able to develop rates using a number of different
methods within the scope of the present invention.
 During the process of developing class relativities, it
may become necessary to use data from a wide variety of sources.
Some sources contemplated by the inventor include HMDA reports,
aggregated to the appropriate level of detail, HUD/FHA data quarterly
and other HUD/FHA reports, Fannie Mae and Freddie Mac reports, Mortgage
Bankers Association (MBA) reports, Mortgage Insurance Companies
of America (MICA) reports, Company Loss Data, Resale value indices
from Fannie Mae or Freddie Mac or Case-Schiller-Weiss or other indices
whether developed or in development.
 At block 14, class relativities are developed. As known
to those of ordinary skill, a class relativity is a ratio of one
class rate to a base class. Examples of classes include loans seasoned
less than two years, a geographic region (for example, the southwestern
portion of the United states, the northeastern portion of New Mexico,
etc.), an economic region (for example, the portions of the San
Francisco Bay Area referred to as "Silicon Valley"), etc.
An example base class would be the class of fixed rate loans with
the least seasoning, lowest original LTV, and longest term, aggregated
to the national level.
 Those of ordinary skill in the art will readily understand
how to choose a base class, and how to ratio other classes to the
base class, in order to determine class relativities. The classes
themselves are one novel aspect of the present invention. For example,
using geographic regions as classes and using economic regions as
classes is not seen in prior art mortgage guaranty insurance policies,
and their associated methods of determining premiums.
 At block 16, guarantor expense ratios are developed. These
expense ratios are merely the ratio of costs associated with running
the insurance business divided by the earned premium amounts or
other amounts appropriate to the ratemaking calculation, for the
periods being analyzed.
 At block 18, an actuarial analysis of the loan owner's default
experience is performed, both for the portfolio to be insured, and
for the loan owner total insurable portfolio. In some cases, the
portfolio to be insured will be the same as the total portfolio,
since the entirety of the loan owner's portfolio is to be insured.
In other scenarios contemplated by the invention, larger loan owners
may insure different parts of their portfolio with different insurers.
In this situation, an actuarial analysis is performed on the loan
owner's total insurable portfolio, and also on the portfolio to
be insured by this insurer.
 At block 20, loan default rates for the prospective insured
are estimated using standard actuarial methods. Credibility factors
reflecting the accuracy of the national, regional and local lender
data are applied to the portfolio to be insured, the loan owner
total insurable portfolio and the regional and national rates. Credibility
factors represent the reliability of the data. In a system where
credibility factors range from 0 to 1, a zero may indicate total
unreliability, whereas a credibility factor of 1 would indicate
total reliability, in that system. Those of ordinary skill in the
art would be able to develop similar systems without departing from
the scope or purpose of the present invention.
 At block 22, the pure premiums are computed and loaded using
standard actuarial methods, resulting in class rates.
 At block 24, the premium is applied by multiplying the class
rates by the outstanding loan balances, resulting in the premium
payable for the given loan. For each loan intended to be within
the insured portfolio, the premiums are added together at block
26, resulting in the premium to be paid to insure the entire portfolio.
 At block 28, for years where prior year rates had been computed
and are in place, adjustments may be made, resulting in a retrospective
premium adjustment. The retrospective premium adjustment is computed
using the following formula: RA=MIN(C, MAX(A,B))-EP-RP,
 Where  RA=retrospective premium adjustment 
EP=Earned Premium (premiums paid for which the term has expired)
 RP=Prior Retrospective premium adjustments (usually zero)
 A=Minimum Premium payable, based on insured selection 
C=Maximum Premium payable, based on insured selection  B=(ELC+RC+PEC+Actual
Losses*Loss Expense Load)*(1+premium tax rate)  Where 
ELC=Excess Loss Charge, the premium to cover losses above the maximum
payable by the insured. This is calculated using standard actuarial
techniques of calculating excess of loss premiums.  RC=Risk
Charge, the risk charge for the policy, obtained using the factors
from the premium calculation  PEC=Policy Expense Charge, the
cost of issuing and maintaining the policy, including company overhead.
 In an alternate embodiment, rather than determining individual
class rates and then multiplying those class rates by the outstanding
loan balances and summing them, a weighted average of the class
rates may be determined, and then the total outstanding portfolio
balance may be multiplied by the weighted average, to determine
the portfolio premium to be paid.
 When it becomes necessary to adjust premiums, such as at
a time for policy renewal, the method of FIG. 1 uses loan balances
for the current year, estimated values are updated with projected
resale factors, company expense charges are updated Use policyholder
renewal rates calculated above and prior policy year rates to calculate
rate adjustments for all rate classes, using standard actuarial
 An exemplary actuarial formula for a mortgage guarantee
insurance according to the present invention is shown below, and
is based upon those used by life insurance actuarial methodologies:
A x = t = 1 .omega. - x .times. v t .times. * t .times. q x * C
.function. ( t ) ( 1 )
 where  A.sub.x present value of the insurance 
t=elapsed time  X=Seasoning  .omega.=the oldest possible
seasoning. 30 years is typical.  q.sub.x=P(a mortgage with
seasoning x will foreclose during the year)  .sub.t|q.sub.x=P(a
mortgage with seasoning x will foreclose between t and year t+1
years in the future)  C(t)=The claim factor for year t 
v.sup.t=The discount factor for t periods
 C(t) is the amount of claim payable in year t. This means
it includes all of the costs that arise from economic and other
conditions; that is, all items that affect claim amount in a random,
unpredictable fashion. Examples include the impact of ARM rate adjustments,
changes in P(loss) due to changes in borrower creditworthiness.
 Because t = 1 .omega. - x .times. t .times. q x = 1 , it
is a probability density function (pdf). It also means that A.sub.x
is an expected value. It is possible to combine the discount factor
and the claim factor so that equation (1) becomes A x = t = 1 .omega.
- x .times. t .times. q x * C .function. ( t ) ( 2 ) This is the
equivalent of an insurance of 1 using a discount function C(t).
 In another method of the present invention, claim costs
are adjusted to reflect the present value of the payment stream
that replaces the prior art lump-sum payment. The adjustment to
the claim costs reflects that claim payment is spread out over a
period that may range up to the original mortgage term.
 Methods of the present invention include claims settlement.
Under prior art methods, the loan owner forecloses on the mortgage
and files a claim with the insurer. The guarantor then settles the
claim either by paying the coverage amount specified in the contract,
or by paying the total loss and taking title to the mortgaged property.
 A present invention method of settling claims is shown in
FIG. 2. Referring to FIG. 2, the method begins at block 40 when
a Notice of Default is received by the insurer. Although receipt
of a Notice of Default is a normal beginning point in the claims
process, those of ordinary skill in the art will appreciate that
there may be many other similar claims process beginning points
that are within the scope and purpose of the present invention.
 At block 42, title to the property in default is transferred
to the insurer. At block 44, the insurer pays accrued interest and
costs incurred by the loan owner to date.
 At block 46, the insurer begins to pay the loan owner the
principal and interest that the defaulting borrower would have paid,
according to the schedule previously set forth in the loan terms.
This payment scheme continues until a time set forth in the insurance
policy. This time may be specified as a number of months after default,
a number of months after loan origination, or any other suitable
time. In an alternate embodiment, the insured and the insurer agree
at claim settlement that principal and interest payments will continue
until for a specific period of time. Those payments continue for
that time period at which time a lump-sum payoff is made by the
insurer to the loan owner.
 An exemplary claims settlement option selection process
according to one embodiment of the present invention will now be
 The loan owner prepares an application and provides underwriting
data, indicating the desired settlement options and conditions to
be included in the agreement. This application might be on paper,
or could alternatively be prepared using a computer system, networked
with other computer systems, or stand-alone.
 Settlement choice options may include the owner receiving
a percentage coverage or full property exchange in event of default;
a lump sum payment option such as a lump sum payment according to
the present value of the payment stream or commuted value of the
arrangement; a fixed payment term option determined when the policy
is written, renewed or renegotiated or determined at time of a claim;
a variable payment term subject to loan owner call, guarantor choice,
or a predetermined decision process or rule (e.g. the payment term
is chosen according to general or particular market and/or economic
conditions and/or other loan-related information). The application
information is then submitted by the loan owner to the mortgage
guarantor who processes the application for acceptance or rejection.
If the application is accepted, the guarantor provides a rate quote
and terms. The loan owner then reviews the rate and terms and may
either accept or reject them. In the event of loan owner acceptance,
the loan is accordingly insured with the guarantor. Thereafter,
as specified by the terms of the insurance contract, the loan, in
a preferred embodiment, is subject to periodic renewal and periodic
 Duration is a measure of the average (cash-weighted) cash
flow of an annuity or mortgage.
 It is calculated as follows: 1 B * t = 1 N .times. ( t *
PMT t ) ( 1 + i ) t
 B=Unpaid mortgage balance
 PMT=The amount of the payment at time t
 N=Number of periodic payments remaining in the mortgage
 t=The number of the current payment
 i=The current market periodic interest rate
 Portfolio Rate Adjustments
 The rate calculated for individual mortgages is adjusted
to provide for certain risks and costs incurred by the insurer.
 Loss Estimates
 These are estimates of the losses associated with a portfolio
of loans. Standard actuarial methods are used to calculate the estimated
losses to be incurred by the insured portfolio of mortgages, and
those of ordinary skill in the art would be able to develop similar
systems without departing from the scope or purpose of the present
invention. The calculation of incurred losses includes factors estimating
claim rates, estimated loss amounts, and the loss reserves required.
A factor is applied to reflect the claims payout option selected
by the insured.
 Expense Loading
There are three types of expenses:
 Allocated loss expenses that can be associated with a specific
claim (ALAE)  Unallocated loss expenses that support the claims
function but cannot be assigned to a specific claim (ULAE) 
General expenses & corporate overhead
 ALAE expenses are usually estimated by applying a factor
to the estimated losses, while ULAE and General expenses & corporate
overhead is estimated by applying a factor to the losses after adjustment
for ALAE. Those of ordinary skill in the art would be able to develop
similar systems without departing from the scope or purpose of the
 Credibility factors reflecting the accuracy of the national,
regional and local lender data are applied to the portfolio to be
insured, the loan owner total insurable portfolio and the regional
and national rates. Credibility factors represent the reliability
of the data. In a system where credibility factors range from 0
to 1, a zero may indicate total unreliability, whereas a credibility
factor of 1 would indicate total reliability, in that system. The
formula for adjusting rates for credibility is R=P*Z+N*(1-Z)
 Z=Credibility factor  R=Revised rate  P=Calculated
Portfolio rate before credibility is applied  N=Corresponding
national rate, or another appropriate regional rate believed to
be fully credible Those of ordinary skill in the art would be able
to develop similar systems without departing from the scope or purpose
of the present invention.
 Premium Taxes
Premium taxes are calculated by applying a factor to the premium
 Statutory Reserves
 Mortgage insurance regulation requires that a statutory
reserve be maintained that is 50% of earned premiums, which may
be drawn down when the ratio of losses to premiums earned exceeds
35%. The cost of this requirement is calculated by applying a factor
to the premium amount.
 Risk Charges
These are intended to ensure that the probability that losses exceed
a percentage of the statistically expected losses remains low. It
is calculated by applying a factor to the premiums calculated.
 Various embodiments of a system and method for managing
renewable repriced mortgage guaranty insurance, as described herein,
may be executed on one or more computer systems, which may interact
with various other devices. One such computer system is computer
system 100 illustrated by FIG. 3. Computer system 100 may be capable
of implementing a network-based renewable repriced mortgage guaranty
insurance service as illustrated by renewable repriced mortgage
guaranty insurance service 125. In the illustrated embodiment, computer
system 100 includes one or more processors 110 coupled to a system
memory 120 via an input/output (I/O) interface 130. Computer system
100 further includes a network interface 140 coupled to I/O interface
130, and one or more input/output devices 150, such as cursor control
device 160, keyboard 170, and display(s) 180. In some embodiments,
it is contemplated that embodiments may be implemented using a single
instance of computer system 100, while in other embodiments multiple
such systems, or multiple nodes making up computer system 100, may
be configured to host different portions or instances of embodiments.
For example, in one embodiment some elements may be implemented
via one or more nodes of computer system 100 that are distinct from
those nodes implementing other elements.
 In various embodiments, computer system 100 may be a uniprocessor
system including one processor 110, or a multiprocessor system including
several processors 110 (e.g., two, four, eight, or another suitable
number). Processors 110 may be any suitable processor capable of
executing instructions. For example, in various embodiments processors
110 may be general-purpose or embedded processors implementing any
of a variety of instruction set architectures (ISAs), such as the
x86, PowerPC, SPARC, or MIPS ISAs, or any other suitable ISA. In
multiprocessor systems, each of processors 110 may commonly, but
not necessarily, implement the same ISA.
 System memory 120 may be configured to store program instructions
122 and/or data 132 accessible by processor 110. In various embodiments,
system memory 120 may be implemented using any suitable memory technology,
such as static random access memory (SRAM), synchronous dynamic
RAM (SDRAM), nonvolatile/Flash-type memory, or any other type of
memory. In the illustrated embodiment, program instructions and
data implementing a network-based renewable repriced mortgage guaranty
insurance service, such as network-based renewable repriced mortgage
guaranty insurance service 100 described above, are shown stored
within system memory 120 as network-based renewable repriced mortgage
guaranty insurance service 125 and mortgage data 135, respectively.
In other embodiments, program instructions and/or data may be received,
sent or stored upon different types of computer-accessible media
or on similar media separate from system memory 120 or computer
system 100. Generally speaking, a computer-accessible medium may
include storage media or memory media such as magnetic or optical
media, e.g., disk or CD/DVD-ROM coupled to computer system 100 via
I/O interface 130. Program instructions and data stored via a computer-accessible
medium may be transmitted by transmission media or signals such
as electrical, electromagnetic, or digital signals, which may be
conveyed via a communication medium such as a network and/or a wireless
link, such as may be implemented via network interface 140.
 In one embodiment, I/O interface 130 may be configured to
coordinate I/O traffic between processor 110, system memory 120,
and any peripheral devices in the device, including network interface
140 or other peripheral interfaces, such as input/output devices
150. In some embodiments, I/O interface 130 may perform any necessary
protocol, timing or other data transformations to convert data signals
from one component (e.g., system memory 120) into a format suitable
for use by another component (e.g., processor 110). In some embodiments,
I/O interface 130 may include support for devices attached through
various types of peripheral buses, such as a variant of the Peripheral
Component Interconnect (PCI) bus standard or the Universal Serial
Bus (USB) standard, for example. In some embodiments, the function
of I/O interface 130 may be split into two or more separate components,
such as a north bridge and a south bridge, for example. Also, in
some embodiments some or all of the functionality of I/O interface
130, such as an interface to system memory 120, may be incorporated
directly into processor 110.
 Network interface 140 may be configured to allow data to
be exchanged between computer system 100 and other devices attached
to a network (e.g., network 150), such as other computer systems
(e.g., network servers 180), or between nodes of computer system
100. In various embodiments, network interface 140 may support communication
via wired or wireless general data networks, such as any suitable
type of Ethernet network, for example; via telecommunications/telephony
networks such as analog voice networks or digital fiber communications
networks; via storage area networks such as Fibre Channel SANs,
or via any other suitable type of network and/or protocol.
 Input/output devices 150 may, in some embodiments, include
one or more display terminals, keyboards, keypads, touchpads, scanning
devices, voice or optical recognition devices, or any other devices
suitable for entering or accessing data by one or more computer
system 100. Multiple input/output devices 150 may be present in
computer system 100 or may be distributed on various nodes of computer
system 100. In some embodiments, similar input/output devices may
be separate from computer system 100 and may interact with one or
more nodes of computer system 100 through a wired or wireless connection,
such as over network interface 140.
 As shown in FIG. 3, memory 120 may include program instructions
122 configured to implement a network-based renewable repriced mortgage
guaranty insurance service, such as network-based renewable repriced
mortgage guaranty insurance service 100, and mortgage data 135,
comprising various data accessible by network-based renewable repriced
mortgage guaranty insurance service 125. In one embodiment, service
125 may include one or more elements illustrated in FIGS. 1, 2,
and 3. In one embodiment, service 125 may be configured to implement
the method described in FIG. 3. In other embodiments, different
elements and data may be included.
 Those skilled in the art will appreciate that computer system
100 is merely illustrative and is not intended to limit the scope
of the present invention. In particular, the computer system and
devices may include any combination of hardware or software that
can perform the indicated functions, including computers, network
devices, Internet appliances, PDAs, wireless phones, pagers, etc.
Computer system 100 may also be connected to other devices that
are not illustrated, or instead may operate as a stand-alone system.
In addition, the functionality provided by the illustrated components
may in some embodiments be combined in fewer components or distributed
in additional components. Similarly, in some embodiments, the functionality
of some of the illustrated components may not be provided and/or
other additional functionality may be available.
 Those skilled in the art will also appreciate that, while
various items are illustrated as being stored in memory or on storage
while being used, these items or portions of them may be transferred
between memory and other storage devices for purposes of memory
management and data integrity. Alternatively, in other embodiments
some or all of the software components may execute in memory on
another device and communicate with the illustrated computer system
via inter-computer communication. Some or all of the system components
or data structures may also be stored (e.g., as instructions or
structured data) on a computer-accessible medium or a portable article
to be read by an appropriate drive, various examples of which are
described above. In some embodiments, instructions stored on a computer-accessible
medium separate from computer system 100 may be transmitted to computer
system 100 via transmission media or signals such as electrical,
electromagnetic, or digital signals, conveyed via a communication
medium such as a network and/or a wireless link. Various embodiments
may further include receiving, sending or storing instructions and/or
data implemented in accordance with the foregoing description upon
a computer-accessible medium. Accordingly, the present invention
may be practiced with other computer system configurations.
 Various embodiments may further include receiving, sending
or storing instructions and/or data implemented in accordance with
the foregoing description upon a computer-accessible medium. Generally
speaking, a computer-accessible medium may include storage media
or memory media such as magnetic or optical media, e.g., disk or
DVD/CD-ROM, volatile or non-volatile media such as RAM (e.g. SDRAM,
DDR, RDRAM, SRAM, etc.), ROM, etc., as well as transmission media
or signals such as electrical, electromagnetic, or digital signals,
conveyed via a communication medium such as network and/or a wireless
 The methods may be implemented in software, hardware, or
a combination thereof, in different embodiments. In addition, the
order of method may be changed, and various elements may be added,
reordered, combined, omitted, modified, etc. Various modifications
and changes may be made as would be obvious to a person skilled
in the art having the benefit of this disclosure.
 The specific embodiments described in the specification
are not intended to limit the scope of the invention, but are only
meant to provide illustrative examples within the spirit and scope
of the invention. While particular embodiments of the subject invention
have been described, it would be obvious to those of ordinary skill
in the art that various changes and modifications to the subject
invention can be made without departing from the spirit and scope
of the invention. All such modifications are within the scope of