The present application claims priority from U.S. patent application No.12/689,132 filed on month 18, 2010 and provisional patent application No.61/145,938 filed on month 20, 2009, which are hereby incorporated by reference in their entirety.
Detailed Description
Asset type and "Z capital Structure"
"insurance assets" and "Z capital structure" are features of certain DOOR tools. The emphasis of these features is on distinguishing between the two types of assets that a homeowner may have in a house. First, there is a "committed asset". The name derives from the fact that, in most applications, the asset results from a cash investment made by a homeowner on a house: first payment, principal loan expenditure, added value due to improvements resulting from cash financing, and the like. In conventional mortgage financing houses, this type of asset is only one type. It is located at the top of the debt layer of the capital structure and is susceptible to the first loss.
In "zero assets based on capital structure" (referred to as "Z capital structure" for short), committed assets take precedence over assets of the DOOR tool investor. At the same time, the Z capital structure dictates that any upgradings of the house flow to the asset investor, not the homeowner. The homeowner's committed equity is located in a more protected location, similar to the second mortgage in the priority clause, and as shown in fig. 1, the lower elements of the figure are more preferred, and the homeowner's committed equity plus all mortgage loan debts constitute a "priority block" that leverages the investor's equity.
The investor is a "remaining value claimant" in the Z capital structure, who obtains all the value remaining after paying all the debts and committed assets. Committed assets do not participate in the division of house upgradings and are therefore similar to secondary debts. As if the homeowner had no assets at all. This is the term "capital structure based zero assets". However, the term "committed equity" is convenient to use because in many applications the "investment" of the homeowner on the premises is important. It is also vulnerable to loss risk and corresponds to "assets" that investors pay in many of the recommended asset financing tools. (to illustrate the status of "asset credentials" in these recommendations, assume a house is purchased at $200,000, with the first mortgage $160,000, asset credentials $20,000, first payment $20,000. assume that asset credentials have a 25% upgrad.neglecting possible upgradings of the mortgage principal balance, a prioritized linear schedule of payouts at the point of sale of the house is that the first mortgage person charges the $160,000 principal balance, the asset credential holder charges $20,000 of the investment, the homeowner withdraws its $20,000 first payment, and then the homeowner and asset credential holder share a premium of $200,000 on an 75/25 basis.)
In many of the variations discussed herein, the homeowner is not involved in any house appreciation, but has a second asset, the "insurance asset". Traditional capital structure of committed assets to suit ownership of the house: the committed asset is similar to the second mortgage. But the insurance asset is not. In contrast, an insurance asset is a contractual commitment made by one party (typically an investor) to pay the other party a percentage of the value of the house when selling the house. (the scheme that imposes spending responsibility on investors is "typicality" only in the sense that most homeowners want to be payees rather than payees
An insured asset is "insured" in the sense that the investor needs to pay the homeowner a given percentage of the value of the house when selling it, even though the final amount exceeds the investor's assets on the house. In this case, the investor must face more money in selling the house and the amount is very close to the policy payout amount, which alleviates the impact of poor market conditions on the homeowner. It is worth emphasizing that insurance assets are not based on a percentage of a particular capital structure layer. The capital structure is irrelevant. If the house is ultimately sold with a price value below the principal balance of the first mortgage right, there is no asset in the conventional capital structure sense, but the investor still must pay the homeowner a given percentage of the house's value.
The stake of ownership of insurance assets does not mean that the homeowner is completely isolated from market forces. If the insurance asset is 10% of value, the amount of money to be paid is higher if there is profit on the house rather than loss. The effect of this scheme is to create a non-leveraging equity to the house for the homeowner. This pushes the homeowner to a "in the market" position regardless of whether the rate is high or low. Even if the lever bin is moderately lowered in price, the house owner cannot be broken up, and if the price is raised, the house owner has a certain proportion of benefits. Thus, an insurance asset scheme is of potential value whether the objective is to give the homeowner a market position in the property or not to suffer from the inherent risks in leverage. This scheme shifts these risks to investors.
The discussion herein identifies subclasses of DOOR tools by adding appropriate prefixes to "DOOR". The "Z-DOOR" tool is thus a DOOR variant in which the Z capital structure just described is present.
To make the Z-DOOR scheme more specific, we assume an example. A person purchases a house at $200,000 without first paying, but instead financing the transaction with $160,000 first mortgage and $40,000Z-DOOR tool. First, the individual has no commitment to the property, but over time the individual's principal repayment for the mortgage loan amounts to $10,000, which reduces the principal balance from $160,000 to $150,000. These principal expenditures create a $10,000 commitment asset. The priority block, consisting of committed assets plus mortgage debts, remains the same size, i.e., $160,000. The disbursement is simply to move the components of the priority block toward committed equity and away from debt. Assume that the percentage of insured assets is 10% when selling a house. Table 3 illustrates the separation rules for a number of different sales scenarios. (Table 3 is the same as Table 2, but is reproduced here for the convenience of the reader.)
TABLE 3 results from four sales scenarios-Z capital Structure
The "insurance" aspect is quite clear in two cases where the selling price is $155,000 or less. In both cases, the investor does not earn anything when selling the house as a residual value claimant, even though the return amount of the original investment is not. The investor eventually makes a payment to the homeowner, which guarantees the homeowner's return.
Priority block loan status
The role of the priority block is to "loan" the homeowner to the investor. The above example assumes that the loan is non-recourse. To the extent that the house value at the time of sale is less than the priority block "principal", the homeowner or mortgage owner funding a portion or the entire priority block representing the homeowner is subject to an associated loss. Investors are not responsible for making up the deficit.
In some DOOR variants, a scheme where part or all of the priority block loans are retrospective is useful. The letter "TR" indicates that the entire priority block loan is a scheme of recourse- "full recourse". In this scenario, the investor provides the homeowner with the amount to complete the "collateral guarantee" to the mortgage owner funding any portion of the priority block. The final situation of the Z capital structure in this example is very different from the previous section, as shown in Table 4 below.
TABLE 4 four sales cases-complete recourse priority block loan
As shown by certain DOOR variants discussed below, there are many useful possibilities between the two extremes of non-recollecting and fully recollecting. To avoid excessive letter labels in the tool name, assume that the non-retrospective case is the default case, which is not represented by letters or abbreviations.
Adjustment, period&Embedded option
The DOOR tool allows for dynamic adjustment of quantities such as insurance assets, commitment assets, and periodic transfer payments between homeowners and investors. Defining a particular DOOR variant involving dynamic adjustments requires elaborating algorithms to determine attributes, quantities, and adjustment timing. Dynamic adjustment is different from static schedules. However, a DOOR tool that is not dynamic may contain predetermined changes in certain parameters. For example, initially, one tool may include a schedule detailing how the percentage of insurance assets changes over time. Such static schedules are not affected by the evolution of random variables such as interest rates or intrinsic rates. The dynamic adjustment itself may include changes in the schedule. For example, the change may be an annual appreciation of insurance assets in favor of homeowners, but the profitability is adjusted annually based on the economic conditions at the beginning of the year.
The dynamic adjustment may be periodic, random, or selective. The dynamic adjustment may be of a number of different frequencies, for example, yearly, quarterly, monthly or daily. One type of useful random adjustment may include triggering a change to the tool's terms when a key parameter reaches a particular value. The parties may choose to change certain tool terms, thereby triggering adjustments to other terms to compensate. The examples herein include the case of all three adjustment schemes. In many cases, the same tool includes more than one protocol.
Each dynamic adjustment includes changing the tool terms to reflect the new conditions. There is an initial "adjustment" object-the tool terms at the time the tool is created. In the case of a static tool, these initial terms specify all expected changes in tool parameters. It is worth remembering that static tools limit the periodic dynamic tool sequence, where the adjustment period becomes longer and longer. The DOOR tool typically terminates when the house is sold. When the period is long enough, the probability of making an adjustment becomes small going to zero, since it is likely that the house will inevitably be sold before the adjustment is made. Thus, in practice, the tool clauses are set once at the time of their creation.
Why is it beneficial to do a periodic dynamic adjustment? Although there are various reasons, the reasons that are worthy of introduction first are: dynamic adjustment may eliminate a variety of different options or reduce their value to a negligible level. This serves to make tool evaluation simpler, reduce moral risk issues associated with strategic option enforcement, eliminate conflict of interests when investors have non-recourse contact with homeowners, and enable an open financing pool to be maintained.
When there is a term, the actual value of the tool may tend to deviate from its true value. Consider now a conventional first mortgage loan. Such mortgage loans include a set of embedded options, most notably, the homeowner's default options and the homeowner's prior repayment. These options complicate the evaluation of the mortgage under the control of the mortgage owner. If the mortgage pays the principal balance to eliminate the mortgage, the true value of the mortgage is the amount of principal available to the mortgage owner. This value is only realized before the expiry if the mortgage has paid in advance. If interest rates drop low enough, there is an incentive for the homeowner to re-fund, i.e., execute options to pre-repay an existing mortgage and replace it with a new option. In this case, the original mortgage that is still valid is worth a higher value than the principal payable amount for the mortgage owner. That is, the mortgage owner obtains interest payouts for the remaining principal balance at a rate higher than the market rate. Thus, the present value of interest and the predetermined principal payout is expected to exceed the remaining principal balance.
Advance payments may also occur for other reasons. The homeowner's situation may be good and may move to another city. The advance payment in this case causes financial deterioration of the homeowner. The mortgage interest rate for the new room may be higher than for the old room because the interest rate has increased. Advance payment is a complex phenomenon. The pre-repayment act by the homeowner is undesirable and may even make it more complicated. So the homeowner does not re-fund when they should. The same is true in the sense of the default option, i.e., the homeowner chooses to stop paying the mortgage loan, with the result that the house is handed over to the mortgage owner. The existence of pre-repayment and default options, as well as the complexity of the homeowner's activities associated with these options, make mortgage loan evaluation difficult. If the homeowner appears "rational", i.e., defaulting and making a payment in advance just in line with his economic interests, the mode of defaulting and making a payment in advance is foreseeable in any economic environment. Although the evaluation may not be simple, it may be straightforward. Since the homeowner is irrational, the assessment model must rely on past patterns of behavior to predict future default and pre-repayment trends. There is no guarantee that past patterns of behavior will persist under different economic conditions in the future, which creates additional complexity and uncertainty.
The difficulty of evaluation will reduce the sustainability of an open financing pool, a scheme in which new investors will join the financing pool once it is initially created. The proportion of any new investor is determined to be divided into the need to evaluate the existing assets in the financing pool. If the evaluations are impractical, uncertain or very costly, it can be difficult to run an open financing pool. Instead, a series of investment guarantors are required, each of which shares the investment made at a particular point in time.
Static asset tools that include static DOOR variants also typically include appropriate embedded options. Consider now a typical asset tool. One finances $200,000 for a house purchase, with $160,000 for the first mortgage, $40,000 for the asset instrument, and no first payment. It is assumed that under the conditions of contracting the asset instruments, the instrument investors obtain a specified share, i.e., a 50% rise in house value. Suppose the house value drops to only $160,000. The true value of the asset instrument at this point, i.e., the amount of money that the investor can obtain when selling the house, is close to $ 0. However, if the homeowner is excluded from selling the house in the near future, the tool has a significant option value from the investor's standpoint. The investor will first receive a full $40,000 incremental price on a $160,000 basis and 50% of the total incremental revenue beyond $200,000. The homeowner has a strong incentive to sell a house and buy an equivalent house nearby, thereby offsetting the option of the investor. In fact, the homeowner has a "strategic option-on-sale" that is worthwhile if the value of the investor's option (assuming it has not been sold recently) exceeds the remaining value by a sufficient amount from the true value. Strategic selling of options is similar to default options in mortgages, but there is no "default" triggering event similar to a mortgage, suspending repayment of the necessary interest and principal expenses. The house is sold without violating the terms of the contract and thus the asset credentials are cleared. The asset investor obtains the amount specified by each term in the voucher. (thus, there is no credit rating impact for the homeowner, as opposed to a default in a mortgage loan.)
Often, the terms in the asset tool hinder the ability of homeowners to obtain strategic sales results through re-financing. For example, the expenditure necessary to redeem a credential should be a maximum between the actual value of the credential and the initial investment amount. In the above example, the homeowner must pay $40,000 to redeem the credential.
As with prior repayment and default options in mortgage loans, the potential return generated by strategic option sale enforcement changes the analytical calculation of events such as moving to another city and encouraging purely strategic behavior.
Strategic selling of options can create interest conflicts when the investor has a trust or other trust relationship with the homeowner. One example is a foggy-fund guarantor who finances the premises of an employee who the guarantor manages his/her foggy with an asset credential. When the true value is much lower than the option value of the investor, a claim-fund guarantor such as a trustee will recommend the homeowner to return the asset credentials, but the claim-fund guarantor such as the investor will bear the loss caused by the behavior.
In general, there are benefits to reducing embedded options to a negligible amount or eliminating them altogether. Doing so simplifies the evaluation, allows an open financing pool to be maintained, eliminates moral risk issues with strategic option enforcement, and mitigates any relevant benefit conflicts when the investor has other non-financial relationships with the homeowner who obtained the investment funds.
How does the periodic dynamic adjustment work in this task? Consider now the situation of a traditional mortgage in an ideal environment, which includes a full loan and full competition consistent with the terms decision. Under these assumptions, the true value of the initial mortgage must equal its actual value to the parties. The true value is the initial principal balance, i.e., the amount of credit. Initially, the default and advance repayment rights are valuable, but the mortgage terms compensate the borrower to provide the option to the homeowner. Typically, mortgage interest rates will be higher for these options, and other characteristics such as point in time will also be accounted for in the compensation. This balance is rapidly broken as interest rates and rates change. The true value deviates from the actual value.
The same applies to static asset tools that include static DOOR variants. In market trading, the true value and the actual value should be equal at first, but this equation does not persist. One way to address this situation is to make adjustments in the tool clauses to reconstruct the equations. After each round of adjustment, the actual and true values again tend to deviate. However, by making periodic adjustments of the appropriate frequency, the actual value can always be kept close to the true value. In general, periodic dynamic adjustments recreate a "market deal" by equating actual value to true value, which is one way to reduce or diminish the value of embedded options. If the homeowner terminates the tool by executing an embedded option, the homeowner cannot obtain more value than is needed to repeat the transaction in the current market situation.
It should be noted that not all investors will agree on the true or actual value of the tool. In particular, different tax waivers may lead to different evaluations. Some investors are "marginal" for a particular tool. They would be willing to pay more market price for the instrument because they enjoy the net revenue they do not enjoy from the "marginal" investors setting the price. References herein to equating actual value to true value are made on a pre-tax basis. The pre-tax prices that contain interest rates are affected by tax because they reflect the tax profile of the marginal investor. There is a need to take into account taxation as part of the dynamic adjustment process, a problem which will be discussed later in this document in the taxation section.
Neutrality and net funding balance
The DOOR tool is "continuous and strictly neutral" if the actual value is always equal to the true value. This very pure neutral form is not a real object. Even if the adjustment process continues without leaving a time gap for the true value to deviate from the actual value, the data required for the process is neither continuous nor error-free. There are inevitable approximation factors. Thus, the terms "neutral" and "neutrality" are used somewhat broadly herein to imply a near continuous and strict neutrality. The accuracy of the approximation is uncertain, but depends on the details of the DOOR variant and its application.
"net-out balance" is a necessary and sufficient condition for neutrality and is a key concept in the application and definition of neutral DOOR variants. If the terms of the tool reflect the relative contributions of the house owner and the DOOR investor considered the joint speculator, then there is a net contribution balance. One way to achieve this balance is to adjust the rate at which insurance assets are added value and several DOOR variants discussed below use the insurance asset account as the remaining balance. In these variations, it is common for homeowners to net positive contributions to gambling activities that do not take into account insurance assets. The premium value of insurance assets that are beneficial to the homeowner compensates for the net funding. The funding base rates continue to fluctuate over time along with economic conditions and house value. The dynamic tool incorporates periodic adjustments that react to these changes by producing corresponding changes in the premium rate of the insurance asset.
If the adjustment process is accurate enough and frequent enough, the tool will continue to reflect "market trading". If not, the homeowner or investor receives a net profit and the actual value of the tool deviates from the true value. If terminated immediately, the investor may be willing to invest more, or not invest an amount equal to the amount the tool can produce. In this sense, a net investment balance is a neutral requirement. It is also a sufficient condition. If the parties are conducting a market transaction, it is not beneficial to either party to terminate the instrument and rewrite the terms while preserving the form of the transaction. The new transaction is the same as the old transaction and the "re-financing" transaction fees are wasted. One or both parties may wish to change the transaction form from one DOOR style to another. But if all choices are neutral, then the parties will only swap from one market transaction to another. There may be too many consumers or producers doing so, but neither party can make a profit by canceling a poor-market transaction or by keeping a better transaction. Existing trades are "in the market" because the associated embedded options are of no value.
Achieving net-financing balance requires calculating various fees and profits for homeowners and investors in affiliated enterprises. Rather than attempting to resolve all relevant contributions, considerations are limited to a few major factors expressed in terms of instantaneous flow rates in units of time of year. These interest rates correspond toThe term "single compound" refers to a single compound in which time is measured in years. If y (t) is a single recombination rate over time t; then y (t) dt represents an increase in the amount over an infinitesimal small period of dt years. If the investor is faced with an infinitesimal constant loan rate i after the tax, then with continuous repayment, the increasing value of the constant interest rate y (t) y in the year results at the end of the yearThe amount of additional value of. For purposes of this discussion, income taxes are ignored at both the homeowner and investor level.
Four elements are sufficient to catch key features and produce a stylized but rich model:
r: total rent. Since the house is owned by the owner, the "rent" is implicit or "assumed" and represents the consumer value of the house to the occupants.
m: mortgage loan interest.
d: physical depreciation in dollars. It is assumed that the homeowner or investor always pays the amount to maintain the building in the same physical condition at the time of purchase.
p: property tax
Temporal variations that may occur in interest rate are suppressed by not writing these elements as a function of time. These four rates describe the main features of the rental housing situation held by the conventional investor. Ignoring the possibility of an implicit rent own by the owner, which may be different from the case of a direct rent, the investor's immediate total cash flow interest rate is: f-r-m-d-p.
Several variables t that change over time play an important role. Some random and some deterministic or controlled by the homeowner, investor or both:
h (t): the market value of the house.
M (t): mortgage principal balance. (for simplicity, only the case of only one mortgage loan is considered, ignoring the possibility of a second mortgage right, house credit line, etc.)
Mv(t): the mortgage value. (general M due to the value of the Embedded Pre-Payment and default optionsv(t) ≠ M (t). It should be M on the assumption that there is no multipoint or one-time compensation to the mortgage owner and any value deviation between when the mortgage terms are signed and the initial time is ignoredv(0) In the case of M (0). That is, the value of the prior repayment and default options by the mortgage person (homeowner) is not offset by the higher interest rate paid to the mortgage person. )
Ip(t): percentage of insured assets.
I (t): is beneficial to the increase of insurance assets of the homeowner. I (t) ═ Ip(t)H(t)。
C (t): the "principal" amount of the committed asset. (this amount is similar to the principal due of the second mortgage right-this is not obtained at the sale of the house unless the sale price is very high.)
Cv(t): the value of the committed asset. Cv(t) is less than or equal to C (t). At selling house tsWhen, if M (t)s)＜H(ts)＜[M(ts)+C(ts)]Then Cv(ts)＝[H(ts)-M(ts)]＜C(ts). If H (t)s)＜M(ts) Then Cv(ts)＝0。
P (t): the amount of the priority block. Note that even if h (t) < m (t) + c (t), p (t) ═ m (t) + c (t). Thus, P (t) is the lever "principal" amount provided by the homeowner to the investor.
LP(t): the "loan value ratio" of the priority block. L isP(t)＝P(t)/H(t)。
E (t): the real value of the investor's assets on the house. E (t) h (t) -p (t).
Three mobilization rates play an important role in defining certain DOOR variants. These liquidity rates describe the actual or assumed flow of funds between the homeowner and the investor.
ip(t): the available mortgage interest rate at time t is in the case of mortgages that do not have default or advance repayment rights, other than when selling the house. Such a mortgage has an indefinite period and will only expire when the house is sold or at some other specific event. This time being non-recourse to the investor. i.e. iP(t) is dependent on factors such as H (t), P (t) and LP(t) and the like.
if(t): the non-risk interest rate, i.e., non-default risk interest rate, of the loan, the random repayment time of which is equal to the expected life of the house as a productive asset, assuming that the current building is maintained in a fully functional state, i.e., the owner pays money to make repairs necessary to offset depreciation.
x (t): the homeowner who administers the DOOR tool's contractual or permitted transfer payment to the investor. X is negative if the investor pays the homeowner. The payment amount does not correspond to a conventional market limit such as a rent or interest. Instead, these transfer payments are a means for adjusting the terms of the DOOR tool to complete the transaction that needs to be conducted between the investor and the homeowner.
Elements such as H (t) are random. These elements, as well as changes in deterministic elements, such as the instantaneous change in house value "dH", are represented using the standard terms of random differential equations during an infinite period of time dt.
How does neutrality be achieved after mastering all of these components? There are many ways in which this can be done and a number of different schemes are described below, each being a defining element of a DOOR variant or style.
However, there are three common aspects:
first, it is important to assess the relative contributions of the parties. Exactly why the funding depends on the tool terms. For example, suppose a houseThe principal is burdened with all mortgages. The homeowner then directly disburses the funds comprising priority block p by committing to the asset and acting as a mortgage. Because of the flow interest rate ipIt is useful to describe the profits that investors make on leverage. The investor cannot default to a priority block or pay in advance. Thus, ipIs a reduced hypothetical mortgage interest rate to account for the absence of default or prior repayment options. (the homeowner has both options associated with the mortgage borrowing, but the borrowing is one aspect of how the homeowner finances the priority block
Second, if there is a balance in the funding, neutrality is achieved by offsetting the contractual subsidies. In some variations below, the most critical cancellation tool is the insurance asset percentage. This tool is useful when the house value of a homeowner rolling out or in is a desired aspect of the solution. But a solution using other accounts as the remaining balance elements is sometimes preferable. For example, the use of promissory transfer payments between homeowners and investors as a residual balance is a powerful way to produce DOOR variants with desirable characteristics.
Third, neutrality cannot persist without dynamic adjustment. As the value and economic parameters of the house change, the original offsetting contract subsidies no longer achieve neutrality. While in certain variations the tool works best if there is no adjustment or if adjustments are infrequent, neutrality is beneficial in many cases.
A more detailed description of how neutrality is achieved is later explained in the discussion of the first variant (ANZIE-DOOR). The letter "N" in the name indicates that it is intended to make the tool neutral. Before defining and discussing ANZIE-DOOR, it is necessary to account for the nature of the particular maintenance agreements and numerical simulations that form the basis of some examples herein.
Maintenance protocol
The DOOR tool scheme creates an asset class ownership split for multiple parties. Therefore, it is necessary to specify the division rules of the contract into maintenance costs and the physical depreciation and depreciation of the building. These two terms are closely related, as maintenance directly counteracts depreciation.
The variant discussed below places maintenance responsibility on the homeowner. Under such regulations, failure to properly fulfill the obligation may result in a corresponding amount of money being deducted from the homeowner's insurance and commitment assets at the time of sale. Suppose that painting a house costs $4,000, and a maintenance contract requires the homeowner to do so periodically. If the homeowner does not do so, then at the time of sale the $4,000 specified in the contract is deducted from the insured funds amount belonging to the homeowner.
This maintenance responsibility results in the output of money to goods if the house maintenance specified by the terms covered by the contract is not performed. This feature alleviates some of the very easily induced problems in conventional mortgage loans and most property investment schemes, assuming that the coverage is fairly comprehensive. If a mortgage house is dropped in price so that very little or no assets remain, the owner would anyway reduce the power to maintain the house. Any maintenance costs may be beneficial to the mortgage owner, not the homeowner. When this situation progresses to the point where the homeowner has decided to default to a mortgage loan, the power to maintain the home is reduced to zero. The default to do so is a significant cause of a dramatic drop in value associated with the loss of redemption rights. Typical scenes (sometimes real) include robberies, such as stripping of copper tubing, and vandalism, where the homeowner is no longer looking and taking protective measures.
In the example of asset credentials, this situation is generally worse. The same motivational issues, and even more general issues, exist when the house value reaches the level of the first mortgage balance. Asset credentials typically involve an upgradeability division rule, i.e., an added value for the division of the premises by the homeowner and investor. Under such rules, the homeowner gains less profit when selling the house than the cost of maintaining the house. Homeowners maintain houses for consumer reasons, such as keeping houses painted to keep life enjoyed in a clean house. However, there is an incentive to reduce maintenance costs as a sales plan.
Even with mortgage loans, the incentive problem is compounded by the combination of the owner's solution to adding actual insurance assets with fairly comprehensive maintenance responsibilities. Even if the homeowner violates the mortgage loan and the house eventually "shrinks" when sold, i.e., has a value below the principal of the mortgage loan at which payment is due, the insurance assets still generate considerable equity for the homeowner. The equity is lost by changing from one division to another when the house is not maintained, so that the homeowner has the right economic incentive. The homeowner will want to spend money on maintenance as long as at least one dollar profit is generated per dollar spent. Homeowners of course wish to avoid the situation of downward spiraling physical damage in traditional investment schemes, which usually occurs prior to the loss of redemption rights stage. The new scene is that armed homeowners drive away potential robbers or vandals. Thus, the goal is to deliver the house in good condition at the end of the contract to maximize the insurance asset interest that should be.
The maintenance liability scheme is not automatically effective. The nature of this responsibility must be defined and there is a possibility of disputes when selling the house. A balance is struck between clarity and comprehensiveness. Even including detailed listings such as painted and piped are substantially incomplete. On the other hand, the contractually defined maintenance responsibilities now exist in several different forms. Rental contracts typically impose obligations on tenants to maintain a house, and pay a deposit as a guarantee based on security requirements. There are a very large number of "house guarantee" insurance contracts. These contracts typically involve many major house elements such as electricity and pipelines. The house owner pays a premium and the insurer pays the fees specified by the contract required to maintain the particular house element. Clearly, a maintenance liability scheme is commercially viable. It is also worth noting that conventional homeowner insurance involves some maintenance and repair, particularly some work that may be necessary due to accidents. As is often done in mortgages, the maintenance liability scheme may include mandatory insurance. Mandatory insurance may combine and even expand the coverage typically available in house guarantee policies and conventional homeowner policies.
The fact that the maintenance liability scheme is necessarily incomplete means that for many DOOR variants the depreciation is divided into two parts. Some relate to the terms involved in the maintenance liability or related insurance. This part is usually the responsibility of the homeowner. The second part remains. In many DOOR variants of the Z-DOOR tool that include the entire subclass, investors are residual value claimants and suffer depreciation losses that are not remedied by the homeowner's responsibility. This reality means that implementing a DOOR tool usually requires an excellent resolution of the "depreciation flow", i.e. d as defined above. At least d can be split into two components, dhAnd diI.e. as a depreciation process of the homeowner and investor liability, respectively. For simplicity, this analysis is omitted in a number of examples that supplement the DOOR variants described below.
Numerical simulation
Many of the examples presented herein look at DOOR variants from a stylistic, heuristic perspective.
One of the main options in modeling is to specify the house pricing process. The examples herein assume that the room price H follows geometric Brownian motion with a constant drift amount α and a constant volatility σ:
dH＝αHdt+σHdZ。
the pricing process is particularly simple and the resulting simulation is easy to understand.
As an example of a "reference model", the geometric brownian motion used is one in which σ ═ 09 and α ═ 07+ σ ═2And/2 is 7.405%. This value of α yields a result of approximately exactly 7% geometric mean return, which is a useful feature when comparing the case of 7% fixed return with random yield. The yield of the fixed reward roughly corresponds to the average reward in the random scheme.
These values also contain "realistic" factors. The annual rise arithmetic mean of the rate indicators of federal housing investment agencies ("FHFAs") in several different metropolitan statistical areas ("MSAs") centered in the range of 3% to 9% between 1976 and 2008. Thus 7.4% of this number is moderately higher, that is, not much higher than a MSA such as atlanta, chicago or st louis, but strictly lower than a MSA such as boston, los angeles, new york or san francisco. (FHFA was not considered an indicator of the Federal House administration office ("OFHEO") until recently, in the next half of 2008, FHFA became the regulatory committee of Fannie Mae and Freddie Mac and absorbed OFHEO.)
The standard deviation of the annual FHFA MSA return is distributed in the range 3% to 11%. Since the rates of each MSA between 1976 and 2008 are not completely related, these index-based standard deviations are lower than the average standard deviation of the individual houses in the corresponding MSA. Therefore, it cannot be said that the annual rate of change 9% used in the reference model represents a moderately high fluctuation rate on the basis of being at the upper part of the range of 3% to 11%. However, the figure of 9% rate of change produced an interesting example for us to use. In particular, using this fluctuation rate and 12,000 simulations in each example, a fairly broad set of final prices over the long term interest rates would result. The randomly treated seeds in each example were identical because some of the examples needed to be compared to each other. As a result, each example is based on the same simulated sample of 12,000 price paths.
The minimum and maximum intervals, which include most of the historical results. Thus, the reference model generated example provides an intuitive understanding of the range of possible outcomes for a variety of DOOR tools.
There is another very important assumption about the operation of the model. I.e. the room price does not follow geometric brownian motion. In particular, the room price profit time series is auto-correlated and exhibits random fluctuations. However, for purposes of this discussion, it is sufficient to utilize a price generation process that produces results within a suitable range of results within each stage. Furthermore, the geometric brownian motion is particularly well understood, giving an easy to interpret example.
In order to fully define the reference model, two final elements need to be specified. First, as described below, the results of a DOOR tool may be a function of the tool's life expectancy. The reference model assumes a poisson process with a 10-year average length that is independent of the geometric brownian motion that generates the room price. This process will be described in detail below. The average length of 10 years corresponds to a medium length of 7 years, i.e. a value representing the realism of the duration of ownership of the house and the duration of the "long" investment of the ownership.
The second element to be specified consists of two critical interest rates. One of which is the risk-free interest rate for a longer period and the other is the sum of the intermediate risk-free interest rate and the risk premium. The benchmark model assumes that all relevant risk-free interest rates are unchanged over a time and deadline span calculated in.05 years. That is, the risk-free interest rates remain in a flat time frame during these example periods. Given the goal of creating a clear and simple example, a more realistic model may include a time-variable, random deadline structure, but the assumed flat, constant deadline structure still applies.
ANZIE-DOOR
Many of the features of ANZIE-DOOR have been described above. In the abbreviation "ANZIE," N "represents the goal of maintaining neutrality," Z "represents the application Z capital structure, and" IE "represents the presence of insurance assets. "A" stands for annual dynamic adjustment. Annual adjustments still make the example easy to understand, although more frequent adjustments may be required to keep the tool near neutral.
FIG. 2 is a schematic block diagram illustrating the profitability of the ANZIE-DOOR scheme in accordance with the present invention; FIG. 3 is a schematic block diagram illustrating a deficit condition of the ANZIE-DOOR scheme in accordance with the present invention; FIG. 4 is a schematic block diagram illustrating a net funding analysis in accordance with the present invention.
The main element not yet described is the running of the dynamic engine, i.e. the algorithm for annual adjustments. As discussed previously, there are many ways to adjust and achieve neutrality. Different ways result in a tool that is suitable for different purposes. Accordingly, the discussion of the present invention in this regard begins with a preliminary description of the ANZIE-DOOR design.
General purpose
ANZIE-DOOR has many possible applications, but it is particularly suitable for: (i) the worker houses; (ii) owners with little total wealth but fair income, including most U.S. owners, as well as some families and individuals with little income and little wealth; and (iii) young employees with higher income, who just started to increase wealth. Employee homes involve workers such as teachers, firefighters, and police, who need to face high residential costs relative to their income within or near the community in which they are located. But there are public subsidies for these workers living at their work sites.
Many american owners devote most of their wealth to their houses and bear a large amount of mortgage debts. Furthermore, local room rates tend to be associated with local economic conditions. When local economies are low, income decline and unemployment generally coincide with the decline in property. Anyone who has spent a little time in the road of the capital investment will recognize that this investment strategy is almost the worst case. Homeowners tie most or all of their wealth into a single asset that is highly financed, and the negative outcome of that asset is associated with a negative human capital outcome. This strategy lacks diversity at all, and amplifies risk as opposed to insuring employment or income risk.
ANZIE-DOOR addresses this situation by allowing the homeowner to invest little or no money into the house. The homeowner increases ownership rights through the appreciation of insurance assets. Cash deposits can be used to invest in stocks, bonds and other instruments to create intellectual assets based on the economic condition of the homeowner. The increasing component of insurance assets allows homeowners to stand steady heels in the housing market years later. This component is a percentage of the house value. Once it reaches the 15-20 percentage point, the homeowner is presumably able to use the conventional funds on the next set of premises if needed. Furthermore, because insurance assets are in percentage units, they avoid the impact of uncontrolled housing markets and rates. In the former case, the homeowner has the benefit of a very steady rate regardless of how high the rate is rising, so the homeowner can "profit from it". On the contrary, even in the case where the conventional capital structure-based assets are zero and the house value ends up being below the mortgage balance, the homeowner assumes a great responsibility.
In addition to being an intelligent financing tool, ANZIE-DOOR inherits all the excellent characteristics resulting from neutrality: (i) there is no incentive for strategic sales or defaults; (ii) there is no conflict in interests when the investor has trust or other contact with the homeowner; (iii) since the value is equal to the true value, evaluation becomes simple; (iv) as a result of (iii), an open financing pool is easily created. ANZIE-DOOR involves a fairly comprehensive commitment maintenance responsibility for homeowners. Because insurance assets are often rapidly increasing and asset instruments or variations can be designed to ensure their rapid increase, homeowners have a strong incentive to change from one division to another to maintain a house even when conventional (capital structure-based) capital positions are not reached in the house.
The Z capital structure plus the priority block loan leaves the investor with a very dangerous position in the house, i.e., the same risk that the existing system imposes on the house owner. This dangerous location is a very valuable versatile tool. For many years, economists and investment specialists have learned that homeowner self-use property is a type of return asset that is relatively independent of the major investment types (stocks, bonds, commercial properties and rental properties) available to institutional investors. The problem is that there are not enough tradable instruments available in quantity for the homeowner's own property to provide a wide variety of instruments on a large scale. ANZIE-DOOR and some related DOOR variants are powerful tools for investors who need to be in a particular region, city or neighborhood. It is easy to share the DOOR tool at the desired site to successfully invest.
Dynamic Engine-implementation of neutrality in time
Achieving neutrality in a dynamic fashion requires that there be a balance of funding and revenue between the investor and the homeowner in each session. This balance depends on the details of the DOOR tool. The discussion in this section focuses on the specific balancing achieved with ANZIE-DOOR, but the discussion also serves as a general introduction to "dynamic engines" that periodically bring DOOR tools back to neutral. The dynamic engine is a feature that makes the DOOR tool very flexible. Many aspects of the tool are periodically variable, but regardless of the nature, the dynamic engine makes adjustments to reconstruct a "market trade" between the homeowner and the investor.
Balance of funding
ANZIE-DOOR requires the homeowner: (i) funding the "priority block" portion of the capital structure; (ii) the depreciation cost is made up to the extent required by the maintenance contract; and (iii) paying property taxes. For simplicity, it is assumed that the maintenance contract is sufficient to cover all depreciation costs. The homeowner obtains the amount of the resident's rent. It is convenient to define a "net rent", the flow variable being equal to the total rent minus the depreciation and property tax:
n: net rent. n-r-d-p.
Net rent is the profit that the homeowner has taken after being offset by depreciation and property tax liability. In the case of a pure rental property, the net rental is equal to the amount of money acquired by the investor/landlord, corresponding to the rental cash flow before financing costs such as collateral interest are considered. All returns for the house equal the net rent plus the premium. Both elements are random. Let ν (t) equal the expected annual rate of increase of net rent (roughly equal to the ratio of (net rent)/(price)), and let α (t) equal the expected annual rate of increase at time t. Then the expected total annual rate of return at this time is:
ρ(t)＝ν(t)+α(t) (1)
the expected rate of return includes market-driven risk premiums.
At set point time taWhat is the balance of financing and revenue between the homeowner and investor within the following year? The homeowner receives net rental benefits but also provides funds for the priority block. Suppose H (t)a)＞P(ta) That is, the house value is greater than the amount of the priority block, and the investor obtains all the upsets as a remainder claimant while also taking on the risk of a loss to the trade. The insurance asset account is located on the boundary line and represents the proportion of house value that the homeowner should receive at the time of sale of the house as compensation for the previously accumulated net contributions.
In ANZIE-DOOR, the appreciation rate of insurance assets is a balancing factor in achieving neutrality. Neutrality requires that the share value for each participant be equal to its true value during operation of the DOOR tool. If this equation holds true for the investor, then it must also hold true for the homeowner. (achieving neutrality on a pre-tax basis, as described herein.)
So that it is sufficient to pay attention to the investor. There are two real value factors for investors: investor liability under an insurance asset account; and assets of investors who are remaining value claimants in return based on capital structure. Considerations may be narrowed down to the expected return of the investor's remaining equity, leaving the insurance asset account aside. The investor liability associated with the account is exactly equal to the amount of the liability at the time of sale of the house: a specific percentage of house value. The insurance asset account is thus to the left of the boundary line. In any event the insured asset account should conceptually be at that location as it represents compensation for past net contributions due. For neutrality, it is important that the projected appreciation of the insurance assets offset the projected imbalance in relative contributions associated with the premises themselves.
During adjustmentTime taThe real value of the investor's assets in the property is E (t)a)＝H(ta)-P(ta). For E (t)a) In other words, the true value of the DOOR tool is made equal to the investor, regardless of the current balance in the insured asset account, the remaining terms necessarily yield E (t)a) Is equal to the expected return demanded by the market. E (t)a) Is a financing capital position. Below this bay is a "priority block loan" provided by the homeowner to the lender, where time t isaBalance of principal above equal P (t)a). What is the associated interest rate of the priority block loan? A mortgage is very similar to a mortgage loan, except that the mortgage owner (here the homeowner) and not the mortgage owner (here the investor) decides when the loan is terminated. The loan is terminated when the homeowner sells the house or clears the DOOR tool. The investor does not have a pre-repayment option. The loan is irretrievable to the investor, even if the house value falls below P (t)a) In contrast, the investor does not have to pay any balance, but only a partial breach of the option. The investor cannot choose to stop paying the homeowner for the "interest" or "principal" associated with the loan because these expenses are effectively committed to be managed by the DOOR tool in a "recourse" manner. The implication of the presence of the default option is that the investor has no responsibility for reimbursing the balance of the preferred block balance remaining when selling the house. The repayment time for the priority block loan is similar to the repayment time for a mortgage loan without prior repayment or default options. Thus, the interest rate available is i as defined aboveP(ta). As a rough approximation, it can be considered that this interest rate, in addition to the default value at the point of sale, is equal to the assumed interest rate of a 30-year fixed-interest-rate mortgage loan with its prior repayment and default options stripped. If L isP(ta) Moderately lower, e.g., 0.8 or less, then the market interest rate (perhaps a modest approximation) is that of the 10-year-old US treasury. If L isP(ta) is large, e.g., 1.0 or near or greater than 1.0, then a premium is required to reflect the increased risk of high interest credits to the mortgage owner (homeowner) to rate non-pursuit mortgages at the time of sale. The following is a thorough discussionThe question is what the interest rate used is.
Suppose the leverage ratio is equal to P (t) representing a fraction of the total house valuea) Then E (t)a) The required rate of return is:
ρP(ta)＝ν(ta)+α(ta)-iP(ta)LP(ta) (2)
house owner's investment iP(ta)LP(ta) But net rent v (t)a) To the homeowner rather than the investor. Thus, the net funding of the homeowner is:
γh(ta)＝iP(ta)LP(ta)-ν(ta) (3)
represents ρ (t)a)＝ν(ta)+α(ta) In a ratio of pih(ta) The amount of (c), i.e., the expected non-financing market return rate for the premise:
by adjusting the ratio to pi in a risk-adjusted manner during the sale of the househ(ta) The house return is converted into an added value of the insurance asset part in the house value acquired by the house owner, and the accumulation algorithm for controlling the house value added adjusts the time taThe ratio of pi in the following period of timeh(ta) Is distributed to homeowners. This algorithm will be described below. Due to pihIs a key driver of the rate of change of the percentage of insured assets and is therefore referred to as the "rate factor".
Accumulation algorithm
There may be a number of different accumulation methods, each defining a different DOOR variant. The goal in ANZIE-DOOR is to accumulate insurance assets for the homeowner, making the insurance assets equal to the percentage of house value in the secondary account representing the cumulative result of the homeowner's net contributions to the venture investment. As mentioned above, one aspect of the solution includes insurance. The leverage provided by the priority block "loan" affects the return of the investor, but not the insured capital position of the homeowner. If the final sale is low to some extent, the investor pays the homeowner an amount greater than the amount the investor obtained from the house financing position based on insurance asset insurances.
At the same time, the homeowner is not completely decoupled from fluctuations in the value of the house. These fluctuations can affect the homeowner because the insurance asset account delivers a specific proportion of the house value, rather than a specific amount of money. This dependence on house value is entirely relevant if the goal is to allow homeowners to benefit from the home market regardless of the trend of the home market. For example, if the percentage of insured property increases to 20%, the homeowner can actually benefit from having property equal to the conventional minimum first payment to ensure a "good loan". ANZIE-DOOR made it possible several years after having possession of a home ownership that did not require actual first-payment. This ensures that homeowners can benefit from the building market without requiring the homeowner to participate in a financial joke that invests most or all of their resources into a single financing-type investment.
There are two key aspects to the accumulation scheme in ANZIE-DOOR.
First, the goal in ANZIE-DOOR is to leave the purely housing value risk to investors to deal with. Thus, the rate of return for an insurance asset belonging to a homeowner is a deterministic equal value to the house return at risk (equal to the renter's added value), not the risk return itself. Therefore, this key rate of return is if(t), i.e. the risk-free interest rate of investment during the same (very long) period of time that the house is an asset. The algorithm will scale to pihIs assigned to the homeowner because of the ratio factor pihRepresenting the total return share of the homeowner based on their net contributions.
Second, the goal of ANZIE-DOOR is to divide the house into deliveries to homeowners via an insurance asset account, consistent with the algorithm dividing the total return per period of time into a total percentage of ownership when converted to a house sale.
Third, the accumulation protocol should be neutral. The homeowner should not have an incentive to prematurely terminate the DOOR tool in order to earn (or clear) insurance assets. The actual options of the homeowner's termination tool or the hypothetical options of the investor's termination tool should not be worth anything. Otherwise, the DOOR tool suffers from evaluation difficulties and has more unexpected costs associated with the homeowner's ability to terminate or delay terminating the tool.
By adjusting pihAnd if(t) to keep these parameters consistent with current market value, the ANZIE-DOOR accumulation scheme is near neutral. As indicated by "A" in the name, this tool requires an annual adjustment of the ratio factor pih. There is a method that can be applied to if(t) is treated the same way, i.e. with πhAdjusted together annually. However, if if(t) is based on market price, then by adjusting it more frequently (e.g., at the end of each trading day), it is easy and relatively cost-free to achieve greater value-add. Then, generally speaking, to add insurance assets in the ANZIE-DOOR, time t when the tool is created0Upper pair pihAnd if(t) performing an initial setting, and then in a time series t1，t2，…，tsOr one of them, where tsIs the end time. It is convenient to define the length s of each time segmenti＝ti-ti-1WhereinI.e. the time of payment of the tool. If the tool is terminated by selling the house, the repayment time is equal to the life of the house ownership, and if terminated by other events such as re-financing, the repayment time is shortened.
Termination time t in ANZIE-DOORsTime insurance assetsThe ratio of the components is as follows:
now consider pihIn the positive case, that is, the homeowner continues to pay a net. At this time, IpInitially 0 and increasing towards 100% over time. But never exceeds 100%. Rate of increase with pihOr ifIncrease of valueBut is increased. If the net funding of the homeowner is a greater proportion of the total payback πhOr if certainty of the return is of equal value ifHigher, the faster the value of the insurance asset will be added.
Application of equation (5) results in an accumulation scheme with the first two aspects. This scheme compensates for the net venture capital invested by the homeowner by allocating the appropriate house value share to the homeowner. By using the certainty of the return, etc., for the computational score, the present scheme ensures that homeowners, but not investors, do not suffer from the inherent risks in the house financing positions. Thus, homeowners tend to obtain a steady increase in the percentage of insured assets regardless of the direction or movement of the housing market.
There are many accumulation algorithms that can achieve the neutrality of the DOOR tool. The choice of algorithm depends on how the homeowner and investor wish to share the risk among them and on the tool they find ideal, which is one way for one party to compensate for the other's net funding. ANZIE-DOOR uses the insurance asset as a "residual account" to balance the contributions of the parties, calculated by equation (5) to arrive at the insurance asset. Other variants considered later herein share risk differently than ANZIE-DOOR, and some of them use different remaining accounts.
To put ANZIE-DOOR in a number of different alternatives, it is worth a deeper focus on the nature of risk-sharing inherent in the particular algorithm defining the tool. A particularly clear interpretation of the algorithm may address "cash-out problems" in capital income taxes by considering apparently disparate roles. Most tax regimes require "cash out" events, such as sales, before taxes are imposed on capital revenues or taxes are allowed to be deducted on capital losses. This recurring requirement creates two problems: "locking" and "strategic stop-loss". Investors benefit by delaying the sale of assets with accumulated revenue ("locking") and advancing the sale of assets with accumulated loss ("strategic loss stop"). Delayed sales postpone the time value that taxes the revenue will generate money for the investor. Investors can earn interest from money that has been paid to the government within this time delay. "locking" occurs because investors keep profitable assets even though they believe they only earn return below market interest before tax. Investors only sell at a time when the expected loss in the pre-tax return is severe enough to offset the benefit of the delay. On the other hand, if a loss can be used to offset the revenue or other income of the change, then changing the loss to the current would typically reduce the tax burden. The taxpayer can "hedge" the loss by either immediately re-buying the sold asset or by buying a replacement asset that produces the same business characteristics, without making any business changes. If the repurchase asset share or replacement share is added, there is a counteracting cumulative revenue corresponding to the deficit of the change. Taxpayers can only delay paying for the revenue by delaying the sale of the asset. (modern duty free codes typically have provisions that make such "hedging sales" ineffective, but these provisions have limited effectiveness and have an attendant cost because of the impact on investors who do not reduce taxes for the purpose of purchase or sale.) if the value generated by early stop loss exceeds the transaction cost required to make the necessary transaction, then a "strategic stop loss" is worthwhile.
There is a similarity between the capital income tax scenario and the operation of the neutral DOOR tool. The tax rate of loss and gain in a capital gain scenario corresponds to a ratio factor of πhThe rate factor is the house return "tax rate" required by the DOOR tool to compensate the homeowner as a net sponsor of the venture investment. Insurance asset expenditures associated with the DOOR tool are not generated until sale or termination, since taxes associated with the asset are not generated until sale or other change events occur. If an investor desires to obtain satisfactory and risk-compliant returns of past accrued insurance assets, rather than taking money to invest, a "lock-in" is provided to the DOOR tool. If the opposite is the case, then the investor has a financial full incentive to terminate the DOOR tool. The latter behavior is similar to strategic stop loss. Similarity between capital income tax and neutral DOOR scenarios is what makes proposalsThe reason why the capital income tax program is linked. Although these schemes are not directly applicable to the DOOR case, they are believed to clearly and unambiguously exhibit the characteristics of the ANZIE-DOOR accumulation algorithm.
One approach in capital income tax design is to enforce a "stare" system by calculating the loss and gain of assets that taxpayers have been holding for tax accounting purposes on a frequency-periodic basis. In this system, taxpayers cannot defer the revenues and losses because all losses and revenues are automatically realized. After each price inquiry to the market, there is no tax loss or gain, and the option to trade (or hold) the asset for tax reduction purposes is of no value.
By imposing interest (billing) on taxpayers on slow-to-hand taxes (repayment) at a post-tax interest rate, the actual tax payment can be deferred to a later date and achieve the same result as a staring system. This method is proposed by Vickrey. (see, e.g., Vickrey, Averaging Incomes for Incomes Tax purposies, Journal of Political Econoomy, vol.47, pp.379-97(1939 at 6). The tax amount for a particular asset is accumulated in an account with two sections due: (i) post-tax interest charges based on account balances (billing); and (ii) the tax added (or proposed) to the account (billing) due to the current fluctuation in asset value. Tax account T in the Vickrey program was calculated using similar notation to Auerbach (see: A.J. Auerbach's retroactive Capital Gains tax, American econic Review, vol.81, pp.167-178 (3 months 1991)), and account for Taxation T in the Vickrey programsAt time s, it evolves according to the following difference equation:
whereinIs of value AsIs randomly reported over time s, rfFor risk free rate of return, τ is the tax rate. The first term on the right side of the equation represents interest charges for the existing balance, while the second term represents the tax result for the current profit or loss. When at time tsPaying the government by taxpayers when selling the asset
The Vickrey solution can begin working if the asset price path, past interest rates, and past tax rates are known. In this case, calculation can be performed based on past dataWhen asset price paths are unknown but asset holding times, past interest rates, and past tax rates are known, Auerbach, supra, creates a tax based on past data that eliminates strategic trades and locks. Equal to r for constant instantaneous risk-free rate during asset possessionfAnd flat period structure with constant tax rate equal to τ in a simplified case, the tax amount due when the property purchased at time 0 appears at time s is:
the tax amount is equal to the income of the asset which is continuously taxed according to the tax rate tau, the asset is added with value from the time 0 to the time s according to the risk-free interest rate, and the final value reaches As. Under this hypothetical price path condition, the asset value at time 0 is already:
insurance asset accounts are similar to tax accounts in the Vickrey scheme. The insurance asset account compensates for the past net contribution to the inauguration investment by the homeowner when selling the premises. These contributions are known and can be accumulated with interest into a "reconciliation account" and then paid the amount in that account to the homeowner at the time of sale of the house. In contrast, as is apparent from equation (5), ANZIE-DOOR uses a scheme similar to the Auerbach method: the insurance asset account is represented as an increased proportion of the house value. In the simplified taxation scenario described by equation (6), the ratio is equal to I.e. one component starting from 0 and increasing to 1 in an inverse exponential manner. As mentioned above, one goal of ANZIE-DOOR is to ensure that an orderly home owner who makes timely payments and performs the necessary maintenance on the house will still benefit from the building market for several years. To this end, a solution is provided in which homeowners accumulate a higher proportion of the value of a house over time. Regardless of the price surge or fall, homeowners have ensured and benefited a certain percentage of the house value. Tax accounts in the Vickrey scheme do not have this feature. If the house price is suddenly increased, even if the house owner is diligent for many years, the account will only become the house priceA negligible fraction of the value. If the asset depreciation is normalized over part or all of the asset holding time, the account may also end up being negative.
The Auerbach scheme smoothes the result of the Vickrey scheme relative to the asset price path by using a deterministic equal-valued Vickrey method. This type of approach effectively translates the associated risk-free rate of return into the yield of the risky asset. ANZIE-DOOR uses a similar approach to achieve the desired results: (i) homeowners who net-fund the inauguration investment gain a steady and gentle increase in the proportion of insurance assets over time; and (ii) a greater risk of return on assets is transferred to the investor.
It is worth explaining that the Auerbach scheme is a deterministic equal-valued Vickrey method. The core of the method is to use the assetsThe random return of (1) is decomposed into risk-free returns rfReward added with premium
Gordon (see: Taxation of corporation Capital Inc.: TaxReventure Versus Tax disparities, Quaterly Journal of Economics, vol.100, pp.1-27 (2 months 1985)) observed that the value of an investment being taxed is not affected by a Tax on a premium return for Capital that exceeds no risk return. This fact can be expressed by a deterministic equivalence operator V (-) following the Auerbach scheme. The operator converts the at-risk market price return to an equivalent no-risk return. Therefore, the temperature of the molten metal is controlled,and V (e) is 0. An intuitive way to think of this operator is to assume that there is a risk-free bond, possibly an ideal american's flatus bond, and note that this investment is an alternative to the inauguration investment. For example, a person may invest a predetermined amount in a risk-free bond and earn a reward rfOr investing as much money in the risky bond and earning a returnThe difference is reportedIs the premium return. The certainty of the premium return must be 0 when equilibrium is reached. Expected premium return The increased risk must be exactly compensated for.
Auerbach carefully notes that it is wrong to expect a premium return of zero. Which is equal to the marginal investor's required risk premium to bear the inherent risk in the random return. Unless the risk is completely dispersed in the economy, it isThe case (1). Auerbach proposition 1, page 170, shows that the necessary and sufficient conditions for a tax system called "asset holding period neutral", i.e., its certainty, etc., value is not related to the holding period or past asset price trend graph, are:
auerbach notes that this is a deterministic equal value Vickrey tax payment scheme, where accounts for taxation vary according to the following equation:
as previously described, in the Vickrey method, the tax account TSThere are two factors that increase: (i) increased interest in existing balances; and (ii) the taxation-responsible amount variation that occurs in the current fluctuation in asset value. The deterministic equivalence pattern of the equation converts this relationship into a change in the deterministic equivalence value. Just as if the asset earned a risk-free rate of return, interest accrues to the existing balance and taxes should be accrued. Similarly, in the ANZIE-DOOR scheme, insurance assets are added on the basis of applying a "tax rate" that compensates the homeowner for net financing to "make a profit" on the house, assuming a tax is assumed The rates add value at a suitable risk-free interest rate.
Another goal of ANZIE-DOOR is to make any early or late termination options worthless. Equation (5) is similar to the Auerbach scheme, which eliminates any tax-based incentive to delay earnings by postponing sales or to make losses occur early by strategic loss-stopping. It appears that this feature will continue to exist, thereby eliminating any opportunity to profit by early or late termination of the DOOR tool. This visual perception is wrong. There are two important differences between tax trading situations and housing financing situations. First, in the case of tax payment transactions, the taxpayer is faced with any tax rate established by the government. Second, the taxpayer cannot select an appropriate interest rate system for the tax account.
In the home financing example, the homeowner chooses to use a particular DOOR tool to finance the house and has the option to restock or terminate the tool by sale or otherwise. Thus, the homeowner is not tied to a specific rate factor or interest rate system contained in the existing DOOR tool for financing the house. Now consider the ratio factor. If the DOOR tool starts with a certain rate factor, rather than changing conditions, to get a more favorable rate factor, the homeowner has the incentive to re-fund. In the opposite case, selling the house and terminating the DOOR tool has a premium: homeowners must abandon businesses more profitable than those available in the market. Taxpayers cannot select an available tax rate, but homeowners can change the DOOR rate factor by rewarding. Similarly, when the market interest rate moves toward moving the original tool terms in a direction that is adverse to the homeowner, the homeowner can re-fund, thereby changing the available interest rate for the tool.
The neutral DOOR tool adjusts the rate factor and the available interest rate quite frequently to avoid option appreciation in either direction. This is in contrast to the Auerbach scheme of capital revenue tax, where the mechanism does not require any intermediate adjustments. In fact, it is designed to work when such adjustments are difficult or impossible to make, as the observed value before sale is costly or unacceptable.
Problem of interest rate
There are two very critical interest rates affecting the work of ANZIE-DOOR. Interest rate ipThe balance is the funding that the homeowner has made due to the priority block financing that provides leverage to the investor. As is apparent from equation (4), this level of interest directly affects the ratio factor πh。ipReflecting expected "mid term" repayment times that may be associated with the DOOR tool, and adjusting i similarly to the long-term mortgage interest ratepPre-sale default and pre-repayment options may be eliminated. The possibility of a prior repayment creates an average repayment time for mortgage loans that is 30 years and much shorter than the long 15 years. The average payment time observed in connection with these tools may be similar to the expected payment time of the DOOR tool. In DOOR, the investor has not paid or disqualified options in advance before the tool is terminated by sale or otherwise. If the DOOR tool is neutral, the homeowner also has no incentive to terminate the tool's financing. The time of payment for the instrument depends on the length of time of ownership or the circumstances that lead the homeowner to like another financial scenario. Similar factors play a significant role in the repayment period of a mortgage loan.
The second very critical interest rate is ifIt converts the risky house returns to deterministic worth rates. The interest rate is typically a long term interest rate reflecting the fact that the underlying household is likely to keep the production asset in the distant future.
In both cases, determining a ratio when creating a DOOR tool results in potentially selective incentive-type behavior. If the rate increases, the homeowner may wish to re-fund the DOOR tool to obtain a faster appreciation of the insured asset. The homeowner can retain any existing low-interest mortgage investment. The DOOR tool is separated from mortgages that fund part or all of the priority blocks. If the rate drops, the house is sold and the means of deployment gives up a business that is more favorable than the market. The homeowner would like to leave funds in the building and be able to arbitrage by refinancing the priority block with a loan reflecting the new low rate.
There are two conventional ways to invalidate the associated option values and behavior aberrations. First, i may be adjusted periodically with the ratio factorpAnd if. Second, these ratios may be adjusted more frequently. If they are a function of market interest rate, it is easy to adjust the rates at the end of each trading day.
ifAnd ipThe situation of (a) is different. Interest rate ifIs a deterministic equivalent return for the home, i.e., an asset that is independent of the owner's time of ownership of the asset or the time of payment by the DOOR tool. Interest rate ipReflecting the compensation of the investor's borrowing to the homeowner, the amount of compensation equals the priority block. The homeowner can terminate such a loan by refinancing or selling the home to the DOOR tool and can attempt to arbitrage by refinancing the priority block with a market loan. If control ifOr iPIs not fully compensatory, the DOOR tool is not a market deal, its actual value is not equal to its true value, and there is a potential for arbitrage.
First, the simpler i is discussedfThe case (1). As described above, for a general owner's own property, ifIs a deterministic equivalent interest rate for very long term investments. Assuming an almost flat deadline structure i for a zero face interest rate of 25 years or morefSimilar to the debt rate of the national rest of the united states over the 25 year period. This interest rate fluctuates over time, reflecting the expected actual interest rate and changes in distention. To achieve neutrality, ifMust always equal the actual deterministic equivalence ratio. (this is well understood in the Auerbach framework equation (7) must apply to each point in timec(s) while the instant interest rate used in the tax payment scheme described in equation (6) is iτ(s). Then the difference equation (6) that is time dependent and provides the evaluation operator results as:
unless ic(s)＝iτ(s), otherwise the condition in equation (7) does not hold. )
If ifEqual to the actual deterministic equivalence ratio at all times, there is no problem. Assuming the ratio factor is correct, the insurance asset percentage will always increase at the correct rate. There is no arbitrage opportunity or valuable embedded options. If the approximation ratios are close enough, then the associated deviation from neutrality is small and any embedded options have very low value, so that any economic impact, such as impact on re-financing or liquidity decisions, is negligible.
ipThe situation is more complicated. This variation in interest rate is not equal to the volatility rate of the house returns unless the house value is equal to the priority block. In contrast, ipIs a virtual variable financing rate between the homeowner and the investor that implies a loan equal to the priority block. Thus, the homeowner ("lender") controls the DOOR tool and the repayment time for the implied loan. The investor (the "borrower") has no speaking right on the repayment time and only participates in And wherein. Furthermore, there is an information asymmetry. The homeowner may know that the time of ownership may be short, meaning that the DOOR tool and associated implied loan may have only a short payoff time, but the investor generally does not know the homeowner's idea that may affect the tool's payoff time.
To simplify the discussion, assume that the homeowner funded the entire priority block with committed assets. That is, there is no mortgage loan. This step is conceptually legal, as financing decisions related to priority blocks are clearly different from implied loans. Mortgage financing involves an agreement between the house owner and the third party lender. But not directly to the investor. Instead, the implied loan is part of the DOOR tool terms between the homeowner and the investor. (some secondary phenomena include mortgage financing, which is an element in DOOR-neutral calculations, and these secondary phenomena are discussed separately below)
Apart from the insurance asset account, the investor keeps track of the capital positions of the premises. The implied loan is "non-recourse". If the house value falls below the amount of the priority block, the loss falls on the homeowner. The investor does not have the right to level his house until it is sold and must pay the loan "interest" until it is sold.
Suppose the parties know the expected date of sale. Then the investor's position will be the sum of two parts: have a grand option with a strike price equal to P (priority block size), plus the responsibility of paying the priority block interest at the available risk-free rate until sale. (Recall that P is the "principal due" on the priority block, not the intrinsic or actual value of the block.P $80,000, for example, means that the homeowner has a first $80,000 sales revenue
Option price-flattening relation for european options
c＝H+p-Pe-iτ-R
Where c is the bid value with the finalized price P, P is the ask value with the same finalized price, H is the present value of the house, i is the risk-free interest rate (assuming a flat deadline structure with no change in the cross term), R is the present value of the net rent during the option repayment period, and τ is the expiration time. A call equates to having a house (not accumulating net rent), holding, borrowing a bond through zero coupons to yield i, which increases to equal the strike price P when the option expires. Debt terms paying off interest on the sale day have the present value:
the total bay of the investor is equal to:
c-(1-e-iT)P＝H-P+p-R
In ANZIE-DOOR, ipThe homeowner must be compensated for the time value of providing the staffing and currency. This situation is similar to the situation when a mortgage loan is issued, where interest rates reflect not only the time value of the currency, but also compensate the mortgage owner for the advance repayment and default options enjoyed by the mortgage (homeowner).
During each year, the investor effectively "rents" the trade options from the homeowner. The market rental terms are:
rp＝ip+δpp
wherein deltapEqual to the expected "depreciation" of the call within the year, expressed in the proportion of the initial value of the call"rate". The expected depreciation rate at time t is equal toIf the expected value of the fall in the year is higher than the present value, the expected depreciation is negative. This can easily occur if the expected rate of return for the house is not actually greater than the risk-free rate.
Considering both the time value of the currency and providing confirmation, neutrality requirements:
ipP＝iP+ip+δpp
and we have:
on the surface of ipEqual to the risk free interest rate plus the standing rental fee represented by the fractional part of P. The rental fee items represent a premium for risk-free rates that compensates the homeowner by providing leverage on a non-recourse basis.
It is clear that equation (8) is a result of a large simplification even assuming that the roll-off value p is easy to calculate. The investor does not know when the homeowner sells. Although the homeowner has more information in this regard, the homeowner is still uncertain. This situation is similar to the mortgage market, where the same uncertainty and asymmetry in information exists. The mortgage owner must provide the mortgage terms based on evaluating the time of a possible mortgage payment. Unlike mortgage situations where default and advance repayment options complicate evaluation, ANZIE-DOOR strips out the option elements. The uncertainty associated with when the homeowner terminated the DOOR tool still remains.
This uncertainty is significant. Consider now a simplified model, where the assumptions behind the most basic Black-Scholes model for pricing European options apply: a flat time frame structure with time invariant risk free interest rates, a target asset (house) that respects geometric brownian motion and has time invariant drift and volatility rates, and no net cash flow return (here: net rent ═ 0). Thus, the rate dynamics are described by a simplified random difference formula:
dH＝αHdt+σHdZ
where H is room price, α is constant drift rate, σ is constant fluctuation rate, and dZ is basic Brownian motion.
A simple problem is added to the model: the timing of the execution of the european option (the timing of the termination of the DOOR tool) is random and specified by the poisson process with the strength λ unchanged every year. This procedure implies a constant termination rate with the result that the expected payment time of the DOOR tool remains constant regardless of the number of years that have passed since the initial calculation. One skilled in the art would expect that the time to repayment would begin to decrease at some point. Although this is not a reality, it is assumed that a poisson process is advantageous, as this renders it easier to understand and imagine a certain example.
The innovation point in the poisson process is assumed to be independent of the innovation point in the geometric brownian motion process that characterizes the building price dynamics. (this assumption makes the example simple and clear, but not realistic.A plot of house price trends is possible to influence the life of ownership.)
The assumptions in the hypothesis reference model apply: the immediate risk-free interest rate corresponds to 5% per year; the real-time expected annual rate of rise of the house is equal to 7% of geometric mean return per year; and immediate fluctuation in house prices (standard deviation) equal to 9% per year. Finally assume that the current house value is 100 and P is 120.
To show how quickly insurance assets have accumulated in this situation, an example is needed where the priority block is greater than the rate of the house. Assuming that the net rent is zero, the ratio factor is calculated in the last column of Table 5 below. The ratio factor is high, exceeding 1, except when the expected tool payment time 1/λ is long. (1/λ is the expected length up to the termination tool. the intermediate time up to termination is only about 0.7. these relationships apply only to Poisson processes with constant intensity λ, which is assumed for the sake of example.)
The case of the priority block "shrink" results in a very high fall value and a very high ipThe range can reach almost twice the risk-free interest rate when the expected repayment time of the tool is short. Repayment time pair ipAnd the ratio factor have a large influence. Both drop sharply as the expected payment time increases, but remain high. The reason for the sharp drop is clear: as the expected repayment time increases, the anterior chamber is more likely to increase in value at the termination of the tool by the house value enough to offset the priority block. If this occurs, the fall option is due without value.
TABLE 5 influence of expected repayment time
Practical applications require more real-world elements. The term structure is not flat. Interest rates are random. The rate does not follow geometric brownian motion, etc. Although i is calculated in a real-world situation with sufficient accuracypIt is not a trivial matter, but the task is still clearly described.
The house owner has the possibility of storing toolsThis fact remains in the time-dependent quality information. The homeowner can arbitrage from this information by financing the priority block gracefully. For example, suppose a homeowner knows that holding a house for a shorter time. The homeowner can finance the priority block with a mortgage whose interest rate is adjustable and which incurs very low interest charges in the first few years of the loan. At the same time, the homeowner can enjoy a high level of i reflecting a longer expected payment timep。
This possibility is not a problem for two reasons. First, in the case where all investors are not symmetric about the same information, it does not generate a financing incentive to re-finance the DOOR tool itself. The duration of any re-financing tool will not differ from the duration of the current tool. Second, the existing important option elements are completely traded between the mortgage lender, i.e., the house owner and the mortgage owner. The option elements associated with the DOOR tool are not important, provided that dynamic adjustments are made sufficiently frequently to approach neutrality. The value of the tool is very close to its true value.
The possibility of a mortgage breach does not create a secondary problem for the DOOR tool. The DOOR tool contract must deal with the situation where default and credit are hooked up, i.e., a mortgage person cannot repay a mortgage due to a loss of business or other lost income event, regardless of whether the house value is higher than the principal due for the mortgage loan. For example, the contract gives the investor the right to repay some or all mortgage loans to avoid loss due to loss of redemption rights and to terminate the DOOR tool. This possibility is implicit in the variant ANZIE' S NU DOOR discussed below. It is also important to consider that a breach, which is not triggered by a credit issue, is triggered by a house "shrink", i.e., a principal due that is of lower value than a mortgage loan. If the mortgage loan is non-pursuit, the homeowner has an incentive to make a policy breach. ANZIE' S NUDOOR completely eliminates this possibility, but for ANZIE-DOOR it makes neutral calculations more complex. The calculation process must take into account the possibility that the DOOR tool will terminate because the bank receives the house and auctions. Of course, this situation can be dealt with using the terms of the contract. ANZIE' S NU DOOR provides a complete contractual solution.
Adjusting frequency
Even if such as ipSuch determines a ratio factor pihIs accurate, but periodically adjusts, rather than continuously, leaves a port for embedded options that are important later. If the ratio factor on an existing tool is less favorable than the ratio factor for a new tool, the homeowner has an incentive to re-fund the tool in the middle of two adjustments. The house value and economic changes when this happens change in such a way that: the current rate factor underestimates the net investment of the homeowner. If the current rate factor underestimates the net funding, then there is an embedded option in the reverse direction. The value of the DOOR tool is lower than the real value it really has in the hands of investors, and homeowners have the artificial incentive to leave funds in the market to obtain a DOOR benefit far more advantageous than the market.
This does not happen with continuous and accurate adjustments, but the adjustments are not free. The adjustments include other tasks that generally do not benefit the recent sale of the business, such as evaluating a house.
However, given the prior art and its cost, the rate factor can be evaluated and adjusted very frequently in most cases, and re-financing is less likely to profit from fluctuations over time. For many houses, it is feasible to make the evaluation and ratio factor adjustment quarterly, monthly or even daily. The most difficult factor is the valuation of the premises without recent sales. The AVM (automated valuation model) method is used to estimate the value of a house, which is accurate for many houses, and involves a computer computing method rather than an evaluative or other labor intensive method. Many economic changes are readily available in the form of government, research or private sector analysis of company-issued daily market prices or monthly data.
Thus, instead of ANZIE-DOOR, we may have QUANZIE-DOOR, MONZIE-DOOR, or DANZIE-DOOR, which are the same tools with quarterly, monthly, and daily adjustments, respectively.
Since tuning is costly, the optimal solution may not be to achieve the shortest tuning period technically feasible, i.e. some approximation of the tool "CANZIE-DOOR" with continuous tuning. (CA stands for "continuous adjustment") such approximations are possible and may even have some degree of accuracy in some cases. Some data is periodic and only available monthly or quarterly. Even aggressive trading-type instruments that form the basis for adjusting interest rates in calculations, such as bonds and swap trades, do not trade every moment or within the time that the market is closed. Various deductions and data loss techniques are needed to make the CANZIE-DOOR approximation as accurate as possible.
Attempts to develop such approximations are not significant. Even if the transaction cost or true value deviation is economically significant, it is sufficient to ensure that fluctuations within those periods do not generate potential re-financing revenue if the reconciliation period is short enough. A monthly adjusted regime is considered, i.e. the variant considered, MONZIE-DOOR. MONZIE-DOOR establishes monthly automated re-financing that is practically non-expensive.
Refinancing in a month only achieves a short return with a slightly more favorable ratio factor over a few days or weeks. This benefit disappears at the next monthly adjustment. As long as one moves forward from this point in time, the transaction is the same whether or not the homeowner is rewarding. The true value deviation due to intra-period fluctuations is similarly transient without re-financing.
The magnitude of the short-term deviation from the economic value varies depending on which party-either the homeowner or the investor-is focused on. Only the homeowner has the option to terminate the DOOR tool early. The cost of early termination by the homeowner depends on the circumstances. If the objective is to "re-fund" by leaving funds in the same house or a new equivalent house, the relevant event is the actual re-financing service or "resale". The sales are expensive. Both selling a house and buying an equivalent house involve a cost that is several percent of the value of the house. Refinancing services like current mortgage refinancing are also costly. The spending of the house in these mortgage refinancing usually accounts for a small percentage of the house value. However, one of the attractions of the DOOR scheme is the possibility of financing cheaply. There is a potential for changing terms in the tool online at the expense of only a few hundred dollars. If the online re-financing possibility includes a new tool that is identical in form to the old tool, it may be worthwhile to take advantage of the short-term changes in economic conditions even though there is very little revenue.
The ability to re-fund substantially the same instrument with an additional fee or limit may control this possibility but may have undesirable effects. When the terms in the tool match the economic conditions in any event, the constraint may defer the adjustment until the next periodic adjustment time. Other options for homeowners are more expensive re-financing schemes or resale. Some homeowners may have a re-financing incentive that is not related to fluctuations during the utilization period, thereby moving to a similar but not identical DOOR tool. This scheme adds "re-financing taxes" to these homeowners, thereby hindering the welfare of the expanded transaction.
On the other hand, the complete inability to supervise this situation makes the adjustment calculations more complex. The embedded option weights work and the adjustment calculation must take this into account. Very frequent adjustments may be the best solution as it avoids all these problems.
In an embedded option scenario, the transaction fee becomes significant. If the re-financing costs are very high, the risk of the homeowner performing the option by strategic re-financing or selling is suddenly eliminated. On the investor side of the equation, the situation is quite different in terms of homeowner behavior that does not involve "re-financing". For example, if the problem is a minor impact on the homeowner's behavior or investor side, such as moving to another city, and an accurate assessment for purposes such as running an open financing pool, the cost of deviating from true value is a continuous function of the magnitude of the deviation, rather than a function that ramps up rapidly from zero at a threshold level, triggering the option to be executed in the face of a re-financing cost. In these cases, the potential gains from frequent adjustments are more vague, since the effects that would otherwise be observed or estimated are more difficult.
Given that reasonably accurate, computer-based estimates of premises are feasible, daily adjustments are necessarily simple and quite reasonable. Daily adjustments should eliminate any problems associated with a deviation from true value due to the short time gap between two adjustments. Of course, the accuracy of the adjustment process itself remains a concern regardless of frequency.
A analysis machine for realizing ANZIE-DOOR
FIG. 5 is a flow chart depicting an analyzer implementing ANZIE-DOOR. The other ten figures (fig. 6, 8, 10, 11, 12, 15, 16, 18, 20 and 21) are similar flow charts describing the analysis engine for the other DOOR variants. This section will discuss fig. 5 in detail, but will also be used to focus on the discussion of many of the elements of fig. 5 that are common to subsequent figures.
All of these figures follow the same convention in terms of the physics and arrows in the flow diagrams. The cylindrical object represents a device for dynamically storing data and existing data stored in the device. These devices may include servers with dedicated hard drives, optical media to archive permanent value data, and other components that can be used to maintain a large expanded data set associated with the adjustment process of the DOOR tool. Hexagonal objects (regular and irregular hexagons) represent the main computational process. These processes need not occur in a single computing device. Some processes are mechanical in nature and can be implemented by fixed software or hardware encoded logic. Other processes include learning, whereby software or logic elements are dynamically evolved with or without human intervention. The bold rectangle or square box represents the blending computation process and the related information. Arrows indicate data flow. If the arrows are solid lines, the corresponding data flow is an essential part of the processing each time the DOOR tool is dynamically adjusted. The dashed arrows indicate that the data flow may or may not be involved in a particular adjustment. The non-bold rectangles or square boxes represent the information output from the cylinders or hexagons. Such boxes typically "define" the information flowing along the arrows. The explanation makes clear the content flow indicated by the arrows.
FIG. 5 shows the calculation of a single adjustment or the calculation of an initial calculation value ("initial adjustment") for the ANZIE-DOOR. The illustration of the figure is best accomplished by the data combination step from the final calculation on the right hand side of the figure back to the left hand side. The remaining value account of ANZIE-DOOR is an insurance asset. At each point in time that the tool is initialized and adjusted, it is necessary to determine the current insurance asset percentage and how much the insurance asset percentage will change during the next time period. The final calculation in figure 5 is therefore represented by the "percentage insured assets" hexagon on the right side of the figure. The hexagon implements equation (5) above, i.e., a formula that represents the percentage of insurance assets at any given point in time and how the percentage of insurance assets will evolve between this time and the next dynamic adjustment. All arrows finally point to this box.
It is clear from equation (5) that the necessary input for the percentage calculation of an insurance asset is the long term deterministic equivalence i, respectivelyfSum ratio factor pihPast and current values of. Past values are sequentially provided for each interval between adjustments until a present value is provided. The current value is used in the earlier occurring time from the start of the current adjustment and continuing to the next adjustment or termination of the tool. Accordingly, the three arrows point to the insurance asset percentage hexagon on the right side of the figure. First, an arrow comes out of the calculated hexagon labeled "long-term deterministic equivalence ratio". The output of this calculation is the long-term deterministic equivalence ratio used in the next time period. Second, from the marked "ratio The calculation of the rate factor "comes out of an arrow in the hexagon. The output of this calculation is the ratio factor used in the next time period. Third, an arrow comes out of the data cylinder labeled "DOOR tool feature". The cylinder contains two types of data: (i) contract specification for the DOOR tool itself; and (ii) a plurality of different components encoding tool history. The contract specification for the ANZIE-DOOR tool includes insurance assets as the remaining value account and equation (5) as the method of calculating the percentage of insurance assets. The past history of the tool stored in the cylinder includes, among many other things, the date on which the tool was initialized and adjusted and the long-term deterministic equivalence and rate factors available for each time period described in chronological order.
The DOOR tool feature cylinder is the instruction library that controls the analysis engine and the key history that relates the current results to the events that occurred before. There could theoretically be two types of arrows, one being a large arrow pointing from the DOOR tool feature cylinder to the entire machine diagram, and one being a series of arrows pointing from the hexagon that calculates the percentage of insurance assets and some other hexagon that calculates the opposite to the cylinder. The former arrow indicates that the attributes of the analyzer itself and many of its detailed aspects are specified by the DOOR tool contract. The second set of arrows represents a plurality of calculated values during the current adjustment as part of the tool history saved in the DOOR tool feature cylinder. All of these arrows have been omitted to simplify and clarify the drawing. The only arrows to or from the DOOR tool feature cylinder are arrows representing critical directional data or command inputs associated with the particular adjustment to be made. The fact that the output obtained by the adjustment will be part of the critical history of the tool, or that the contract specification of the tool indicates certain specific units and attributes of the analysis machine, is clearly taken into account so that no arrows or other indications are required in the flow chart.
The "ratio factor" hexagon represents the ratio factor calculation. In the simplified illustrative evolution of ANZIE-DOOR herein, the ratio factor calculation implements equation (4). Input as priority block estimate interest rate (i)p) Preference block "loan to value" ratio (L)P) (equal to the priority block amount divided by the house value), the expected house promotion (α) and net rental accumulation rate (v). The net lease amount itself follows several elements: rent, expected depreciation, property tax, and other expenses are calculated. For purposes of illustration and not of comprehensiveness, FIG. 5 shows only the main elements, ignoring aspects such as the exact nature of "other costs". In fig. 5, there are two arrows pointing to the hexagons that calculate the scale factors. One is a large arrow of gray shading emanating from a block of gray shading of six computing hexagons: house value, expected upgradings, expected depreciation of the building, property tax + costs, estimated rent, and priority block estimated interest rate. These are all input to the ratio factor calculation just mentioned. There is also a second arrow emanating from the DOOR tool feature cylinder. The arrow represents the transfer of data and description. The contract specification for the DOOR tool specifies how the ratio factor is calculated, i.e., similar to equation (4) or its equivalent. The DOOR tool feature cylinder also contains data critical to the calculation. In particular, the size of the priority block is necessary information. The columns include history records such as the homeowner's cash contributions, mortgages, and other elements that determine the size of the priority block.
Long term deterministic equivalence ratio hexagonal representation calculates the long term deterministic equivalence ratio (i) available in the next time periodf). As described above, ifIs the deterministic equivalence rate of long-term investment. Calculating the ratio typically involves the term structure of the interest rate model and data including current and past interest rate values, current and past values for a plurality of macro economic changes, and current and past values for other indicators or variables. These data are generated from general economic data, housing economic data, and housing specific data cylinders. Assuming continuous repair of a building's depreciation, ifHouse specific data is also critical, incorporating the estimated life of the house (or the estimated time distribution of potential life) as production data. For many houses, the lifetime can be very long — perhaps hundreds of years. However, such a situation is conceivableIn the case where the life is fixed, known and very short, for example a certain number of years of leased production, after a few years all buildings will be dismantled and this land will become part of the natural protected area. As is the case with many calculations of hexagons, there is also methodological uncertainty as to how the desired components are calculated. The calculation step may incorporate model uncertainty, or the DOOR contract may specify appropriate methodology.
The data input for the house value hexagons includes general economic data, housing specific data and possibly transactional data — represented by the four separate columns in FIG. 5. The transaction data includes a purchase or sale price for the premises that also has a purchase or sale transaction, wherein the analyzer generates an initial value, an updated value, or a final value. In this case, the house value is usually easy to calculate: some direct adjustments are made to the sale or purchase price. In many cases, however, the task is to calculate an insurance asset percentage schedule without profit from concurrent sales or purchase transactions. Thus, the arrow pointing from the transaction data cylinder to the house value hexagon is dashed, which means that it is not always in use.
The calculation of the house value can be very complex when there is no concurrent transaction. The relevant housing economy data includes, among other data items, historical selling prices and attribute characteristics in past domestic transactions, as well as a number of local, regional, and domestic indicators relating to house value. The relevant housing specific data includes, among other data items, the selling price of a particular property in past transactions, and a detailed description of past and current attribute characteristics. General economic data is also valuable, such as, for example, general popularity, local loss, local population indicators (including net change in local population), and local income level. There are a variety of methodologies that can be used to calculate the house value directly from these data, including the current situation of the automated valuation model, and this data, as well as related methodologies with other subjective data, which is typically only collected at the time of a sale or purchase transaction, can be supplemented into the attributes of the valuation data.
The expected growth hexagons enable the calculation of the expected growth rate of the house from the available general economic data, housing economic data and housing specific data. Relevant housing economics data includes future prices corresponding to regional or domestic housing indicators. This futures market has long existed in the united states and is in the process of further development and keen management. But in most cases it is not possible to extract the appropriate expected uprate directly from the future price. A satisfactory way of calculating the rate requires additional modeling and statistical evaluation, both of which are often complex.
The building expected depreciation hexagon includes simpler calculations than the house value or expected upgradeability. The depreciation and maintenance of residential buildings is well known, and the prediction and estimation of depreciation is an element of national income accounting, corporate accounting, and multi-part tax laws and regulations. However, it is expected that the depreciation calculation does not require substantial modeling and statistical evaluation. Modeling and evaluation is necessary not only in generating a generally suitable depreciation rate for the relevant building, but also in reviewing elements for the location and attributes of a particular property. Seaside buildings exposed to environments with high temperature changes have different depreciation and maintenance characteristics than buildings in desert areas, which are characterized by small temperature change ranges and mild climatic conditions.
The hexagon, which calculates property tax + costs, makes more use of directly related data components and generally produces deterministic or nearly deterministic values. In many cases, the appropriate property tax or property tax rate for the next time period is a matter of state law or administrative regulation. The "fee" includes various items that are defined as the homeowner's responsibility under the DOOR contract. For example, a contract may require coverage of a particular accidental injury insurance for a property. In this case, the property tax + cost hexagon includes calculating the appropriate coverage for the next time period. Assuming that the coverage is standard, a quote may be made. The calculation simply involves ascertaining the market rate from the quote. For market interest rates, there may be residual value uncertainty, but it is usually more or less deterministic. Of course, other fees in a DOOR contract that are responsible for the homeowner may not be so determined. Nevertheless, the property tax + cost hexagon generally includes components that directly follow available housing economics data and housing specific data.
The deduction lease hexagons represent calculations that are generally similar in complexity to the house value calculations. Rent data for a single household is sparse and interest is not rented itself in nature. There is a lot of data relating to apartment rentals. This data is relevant, but not directly relevant, to determining rental variables for individual households. Therefore, it is necessary to estimate the estimated rent from the statistical data. The house value estimation value itself is input data, and the same type of data input into the house value estimation value calculation module is related to the estimated rent value. There are alternative models and methodologies that create uncertainty in similar aspects in the case of estimating the value of a house.
The priority block prediction interest rate hexagon performs the interest rate (i) as exemplified and summarized in equation (8) abovep) And (4) a calculation method. Part of the calculation method includes estimating an interest rate i representing the risk-free monetary time value in equation (8). Discussion of this equation simplifies the problem by assuming a flat term structure for interest rates. This simplification eliminates the problem of having to consider the repayment time of the reference "loan", i.e., the time equal to the remaining repayment time of the instrument. Practical calculation methods generally cannot rely on such simplifications because the term structure usually appears to bend significantly. The specification of the applicable value of i requires a risk-free deadline structure obtained from the model and data on the payoff time estimate or time section of the tool. After grasping i, calculate ipThe other three elements required are also evident by equation (8): the value of the call option representing the non-resource attribute of the block-priority loan, the expected depreciation of the call option over the next time period, and the size of the block priorityIs small. The size of the priority block is input from the DOOR tool feature cylinder to the priority block derived interest rate hexagon, as indicated by the arrow emanating from the cylinder. The other two components are input from the nonrefractive fall option estimate hexagon. Finally, a dashed arrow is also entered from the homeowner data cylinder into the priority block estimate interest rate hexagon. The dotted arrow is generated by the fact that the remaining payment time length of the DOOR tool starts with the calculation of the priority block estimate interest rate. Homeowner characteristics such as age and income generally affect the estimate of the length and its time distribution and can be used in the priority block estimate interest rate calculation method.
The homeowner feature may also affect some of the calculations in the gray colored blocks, but not the calculation of the estimated interest rate of the priority block. For example, homeowners with certain characteristics tend to maintain houses more efficiently or make minor changes to increase house value without incurring billing in the DOOR scheme. These characteristics can affect house value, expected upgradings, expected depreciation, and indirectly affect property tax + expenses. In these possibilities, the dashed arrows emanating from the homeowner data cylinder are ignored to keep the icons concise. More generally, some of the 8 computation outputs stacked in the middle of FIG. 5 are or may be input to other computations. For example, the house value is entered into the unit that calculates the estimated interest rate of the priority block and may affect some other calculation such as property tax. For the same reason: for simplicity, the dashed or solid arrows of these effects are ignored. Most relevant actual or potential data flows are in any case obvious.
The non-chasable fall option estimate hexagon is outside the gray shaded block of six calculated components, which are directly input into the ratio factor calculation unit. The value and expected depreciation of non-chasable fall options are not used directly in this calculation. Instead, they are entered into the priority block derived interest rate calculation as indicated by the arrow pointing from the non-chasable fall option estimate hexagon to the priority block derived interest rate hexagon. As described above, the value of the non-retroactive call option depends on the time distribution of the remaining repayment time length of the instrument. Thus, the homeowner characteristics such as age are potentially relevant, and accordingly, there is a dashed arrow pointing from the homeowner data cylinder to the non-chasable fall option estimate hexagon. The size of the priority block is critical to the fall evaluation, so the solid arrows point from the DOOR tool feature cylinder to the non-chasable fall option evaluation hexagon. The calculation of the non-chasable fall option estimate requires modeling and statistical analysis. For example, a stochastic process on house prices can affect the fall option value, and with past data, the process must be modeled and refined. Such calculations are valuable and involve analyzing a variety of methodologies and modeling uncertainty.
The 5 data cylinders stacked on the left side of fig. 5 represent dynamic data acquisition. The general economic data includes, among other data items, a plurality of interest rates and a macro-economic time series. These time series are updated periodically. Some data items include daily data. Although the data collection is very labor intensive, most of it is well defined and ordered. Many data items are readily available from public or commercial data sources.
Housing economy data is a completely different thing. While the data collection includes certain standard, publicly available data, such as publicly available regional and domestic housing price indices, it also includes personal house transaction characteristic data across the country. Such transaction characteristic data is irregular. For some premises a very extensive evaluation of its characteristics (for example the interior decoration such as a kitchen counter) can be made at some points in time, while for other premises a preliminary evaluation can be made only at some points in time. Transactions may be reported with varying degrees of completeness and detail. Data relating to the depreciation of a building includes some very detailed information, but is primarily affected by temporal and geographic differences. Data imbalance faces two challenges. First, organizing data acquisition under irregular conditions is critical — this is a task "inside" the data cylinder. The multiple computing units in the analysis engine must be able to evaluate and use different data units simultaneously. The second challenge exists outside the data cylinder: the calculation step must be performed under irregular conditions. Completing this challenge requires data dead-reckoning procedures and other methodologies to deal with the missing data and unbalanced data.
The housing specific data cylinder includes property transaction history and various past and current attribute features. This data exceeds the data available in the housing economy data cylinder. The cylinder includes data obtained from public and commercial data sources, but does not include data generated in the process of creating and maintaining a DOOR tool. These processes generate other data from data sources such as property assessments and house change reports.
The transaction data cylinder represents data generated in the transaction that is subject to the initialization adjustment process. The cylinder is only meaningful if the house is purchased or sold and the analyzer sets an initial value that specifies the evolution of the percentage of the insured asset or determines the final value of the percentage. After the sale or purchase is complete, the data generated in the stacked data cylinder is transferred to the housing economics data and housing specific data cylinder.
The homeowner data cylinder includes information relating to the time of payment by the DOOR tool. The range of this information may be wide. Personal characteristics such as age, health status and income are relevant. In addition, the time of repayment by the DOOR tool may be affected by the status of the mortgage loan. Thus, the credit characteristics and history of the homeowner are relevant.
The data in all cylinders is dynamic. Existing data in the cylinder, such as financing time series, is continuously updated. In addition, entirely new data is also available. For example, the information generated by a new depreciation survey includes a new data set and there is no existing copy in the housing economics data cylinder. New housing futures markets may emerge. The analyzer includes a data update processing component represented by the bold rectangle on the left side of fig. 5. The process includes a full range of data updates, i.e., ranging from a periodic increment of an existing publicly available time series to an increment of a completely new data unit. This update requires some computation because the new data must be converted into a format consistent with the data structure in the cylinder.
Many features of the ANZIE-DOOR analyzer are represented by fig. 5, which again appear in subsequent figures of the analyzer embodying variants other than ANZIE-DOOR. These subsequent figures are considered based on the extensive discussion of fig. 5 herein. The novel features of subsequent figures are briefly described herein by explicitly referring to fig. 5, thereby avoiding a repeated explanation of features already presented.
Numerical examples
To illustrate the increase in insurance assets in ANZIE-DOOR, consider an example. Assuming that the net rent is zero over the applicable time period, the expected increase is 7% per year, and ip＝if05. (interest rate i)f05 by year. In contrast, equation (5) requires ifInstant form ln (1+ i)f). ) The ratio factor is reduced to:
the net rent is set to zero, which ensures that the ratio factor is positive. The only variable being LPI.e., the "loan-to-value" ratio ("LTV") for an implicit priority block loan. Since the size of the priority block remains the same, L rises as the house rises in valuePAnd the rate factor decreases, which slows the increase in insurance assets. This example is not entirely imaginable. It can be considered asHighly stylized versions of "normal" conditions in some property markets, such as the gulf region of san francisco, california: maintaining a strong increase over a long period of time with negligible or even negative net rent.
Assume that a homeowner purchases a house at $200,000, where the ANZIE-DOOR tool provides $40,000 of the funds. The priority block is $160,000, which represents 80% of the initial "LTV". Consider an exemplary price path: the house is accurately upgraded by 7% at the expected annual rate of upgrade each year. Table 6 shows the pattern of the insurance asset as the house owner and investor eventually produce more and more over the years. The penultimate column represents the true value of the investor's overall position, while the last column shows the incremental percentage in that position over the applicable year.
TABLE 6 ANZIE-DOOR-an example of a price path
A homeowner accumulates a large number of insurance asset equity rights several years later. Even if the homeowner borrows the money of the whole priority block on the basis of non-periodic repayment, the homeowner can steadily 'benefit' from the money. This result demonstrates the potential role of ANZIE-DOOR on the average homeowner. It is not necessary to invest most or all of one's wealth into one's premises to benefit from it. How will other price paths? If the house is going up sharply, the percentage of insurance assets will increase slowly. Will the homeowner continue to "benefit from" in most cases? To solve this problem, consider a random version using the example of the reference model described above: the house price complies with geometric brownian motion with a 7% constant expected annual geometric return rate and an annual standard deviation of 9 percentage points, the expected duration of the tool is ten years, and all relevant risk-free interest rates remain.05 over the term and event span. It continues to be assumed that the net rent remains zero.
Table 7 shows the percentage coverage of insurance assets per year consisting of 12,000 individual samples. The table shows the mean, standard deviation, minimum, maximum and 1%, 10%, 90%, 99% of the cases. To generate additional views, assuming a starting value of 1, the last two columns represent the minimum and maximum house values per year in 12,000 simulations. (the table is labeled "non-following example" because the priority block "loan" in ANZIE-DOOR is non-following
TABLE 7 EXAMPLES-benchmark model, non-retrospective example (ANZIE-DOOR)
The high robustness is evident from the numbers in the table. The minimum outcome per year (of 12,000 price paths) tends to be about two-thirds of the average, which itself is close to the value of the 7% fixed ascending price path. The results at 1% are close to three quarters of the average results. The scores "two-thirds" and "three-quarters" are relatively accurate for a decade. These scores were somewhat larger in the first few years and smaller in the latter years.
Thus, even in the worst case (including very high levels of added value), the homeowner can actually still "benefit" from it.
Such simulations are heuristic and not definitional. The rate does not follow geometric brownian motion. The change in house prices from time period to time period tends to manifest as positive sequence correlation and random volatility. These significant features tend to exacerbate the fluctuations of the simulation, i.e., make the simulation results time-consuming and drastic. It is worth noting, however, that the high-lift results in the simulation, corresponding to the percentage values of low-risk assets, are as extreme or more extreme than the vast majority of extremes in comparable real-world scenarios. For example, the average appreciation rate and the change in room price in the simulation are clearly lower than the historical values in the gulf of san francisco during 1976-2008. But the largest price-escalation segment for that region and that time falls within the simulation interval. Considering all of the cases of san jose, san francisco, oclan MSA for one, seven, ten and twenty years, the cumulative add-on value never approaches the maximum value in the simulation. For the four time segments to increase length, the vast majority of extremum increasing segments fall in the simulation at about 99% of the positions, below 99% but above 95%, about 95% of the positions, and above 75% of the positions. This pattern is reasonable from the point of view that price increases appear as positive sequence correlations and random fluctuations. One skilled in the art would expect that there would be more drastic short and medium term price changes than geometric brownian motion, but the long term price changes would be less distinct.
A further problem in simulation is that we have fixed the net rent to zero and let ip、ifAnd alpha remains unchanged. These assumptions are strict. The total rent varies considerably and one benefit of having a house is the risk of fighting the rent. The homeowner pays for the purchase of the premises and is then no longer subject to rent level variations during the period of ownership. Sinai&Soulels (see, e.g., brown-shaped Housing as a Hedge agennst rint Risk, Quartely Journal of Economics, vol.120, pp.763-89 (5 months 2005)) proposed this idea and provided a great deal of empirical evidence of Rent fluctuations.
Further, assuming that the net rental is zero (or negative), this ensures that the rate factor is positive and the homeowner's insurance capital is increased, unlike other approaches. The net rent tends to be positive at all times in certain geometric areas and positive even for certain periods of time in certain areas where the average is often zero or negative. If the net rental changes and appears positive, there is no guarantee that the interest rate factor will always be positive. Interest rates and expected house rise values also vary. The sequence correlation of the rate changes means that there are periods of lower and higher expected price rises.
Economic principles mean that the relationship between net rental, expected rate rise and interest rate is also the case. While these principles do not appear to fully explain the real world's phenomena of stories, they provide useful guidance in designing DOOR tools. After being equipped with ANZIE-DOOR as a basic example, much of the discussion in the next section focuses on illustrating these principles and discussing certain insights related to DOOR tool design.
Finally, whatever the restrictive nature of the simulations in this discussion, they are relevant to certain DOOR variants considered below, particularly LAZIE-DOOR and COZIE-DOOR. Examples of these variations have features that are very consistent with certain limitations in simulations.
Economic viewpoint
The economic model of housing valuation provides insight relating to the design of DOOR tools. These models generally assume rational, prospective market participants. While it seems clear that the model captures many aspects of the real market, whether the model is approximately completely descriptive is a matter of debate. For example, it is a problem whether recent worldwide increases in house prices constitute "foam" or a rational reaction to economic conditions and expectations. One way to solve this problem, as exemplified by Himmelberg et al (see, Assassing High House Presses: Bubbes, Fundamentals and Mispercepts, Journal of Economic Perspectives, vol.19: 4, pp.67-92 (autumn 2005)), is to use an Economic model as a reference to see if the market price deviates from "base".
A set of "User Cost" models, which were first applied to homeowners ' homes, is particularly pertinent, and is proposed by Poterba (see J.Poterba's Tax Subsides to Owner-Occupied Housing: An Asset Market Approach, Quaterly Journal of Economics, vol.100, pp.1-27 (February 1985)), and Hendershott and Slemrod (see P.Hendershott, P.and J.Slemrod's Tax and the User Cost of Captal for Owner-Occided Housing, Journal of American read and Urban Association, vol.10: 4, pp-93 (1982) 375. These models use periodic fees and rewards such as explicit or implicit rent, property tax, depreciation and loan fees as raw data, similar to the method used to calculate the ratio factors that drive ANZIE-DOOR. Under certain plausible conditions, a single periodic user cost model translates into a traditional existing value or growth model. This section herein starts with some simple existing value models and then considers the views available from the user cost structure. Although the DOOR scheme does not assume that the user cost structure fully describes the fact, it is very useful to consider how the DOOR looks at the structure. The resulting view is then valuable for designing DOOR variants. At the same time, it is important to allow for the possibility of real market deviations from the user cost structure and other rational participant economic models as part of the design process.
The initial application of the user cost model to owner-owned housing was to study the effect of tax on the rate of housing and housing market balance. The role of taxes in calculating the ratio factor for ANZIE-DOOR and related variants is discussed in this section of this document.
Simple user cost model and meaning thereof
Consider now a simple continuous-time residential model. All variables are functions of time t, but the discussion omits the argument t unless it is necessary for clarity, e.g., when it is assumed that some components do not change over time while others do not. The house value is H ═ L + S, where L is land value and S is building value. The following instantaneous annual growth rates were defined as set forth above:
r: total rent
d: depreciation
p: property tax.
These ratios are assumed to cover all calculated or actual cash flows. For the owner's own building, r is the calculated cash flow, which is equal to the calculated rent. When the owner rents the house, r is the actual cash flow. The instantaneous annual rate of "net rent" is n ═ r-d-p. That is, assuming that the owner pays d per year to maintain the building under the same conditions, the owner renting the house trades n dollars evenly spread out into each year.
It is assumed that there is no bloating, a risky neutral economy and a risk-free instantaneous interest rate i that does not change over time. Thus, the term structure of interest rate is flat and time invariant, and has an annual interest rate ei-1。
If the lack of land and the growing population cause net rent to increase from a value n at time zero at an annual constant instantaneous rate g, then the house value at time t is:
the house value increases continuously at an instantaneous rate g, along with the net rent. If physical depreciation occurs at a constant instantaneous rate delta, and the owner pays d ═ 1-e per year-δ) S to maintain the house in its original state, S and d remain unchanged. For H to increase continuously at a constant rate g, L must first increase at a rate greater than g and then decrease gradually to g. This situation is hypothetical, but the goal here is to create a simple, intuitive instance.
If ν is the instantaneous rate of net rent flow, α is the instantaneous rate of house upgrade, and η is the appropriate risk premium, then the instantaneous user cost relationship is as follows, ignoring taxes:
ν+α＝i+η。 (9)
equation (9) describes the economic balance of rational participants. If "foam" or other deviation from an economic benchmark exists, the model is not a complete description of market results, but instead provides a benchmark for assessing whether the rate has deviated from a base value. For example, Himmelberg et al (supra) calculated a projected price-to-rent ratio based on user fees, which was then compared to actual price-to-rent ratios in a plurality of U.S. cities to determine if the house price was predominantly driven by ground laws over a plurality of times. In the discussion that follows, we assume that the user cost model is applicable. This approach yields a good view in DOOR tool design, even if it is only close to reality.
For the ever-increasing permanent ownership scenario we have just considered, η is 0 because the economy is risk neutral and α is g. Therefore, v ═ i-g, and v > 0 are necessary, thereby avoiding the house value becoming infinite. (i-g > 0 is the necessary relevant cross-sectional condition to derive the current value formula, e.g. the formula stated at the beginning of this section of this document, from a piece-by-piece time cost formula such as equation (9))
The ratio factor takes a particularly simple form:
to make the ratio factor positive: (i) the rate of increase must be large; (ii) the priority block must be very large compared to the house value. Due to LPAs house value decreases at a rate g, g and i remain unchanged, so it is clear that the ratio factor eventually becomes negative. Therefore, ANZIE-DOOR is not applicable if the goal is to ensure that the homeowner's insurance assets continue to accumulate at a significant rate. Instead, the insurance asset percentage eventually stops increasing and begins to decrease. The insurance asset percentage may become negative. The insurance assets are then accumulated, which is beneficial to investors rather than roomsAnd (5) performing main operation. The various styles of ANZIE' SSIDE DOOR, LAZIE-DOOR, and FIXED-DOOR provided below address these issues while retaining some or all of the other essential features of ANZIE-DOOR.
Several examples in the foregoing discussion have one feature: the percentage of insured assets that benefit the homeowner continues to increase substantially over time and is independent of the rate path. Setting the net rent to zero is one of the drivers behind this result. The ratio factor becomes:
the ratio factor is always positive in an environment where α > 0.
The case of a zero net rent or even a negative net rent is uncommon. In some "expensive" housing markets, such situations can occur and persist for extended periods of time. Such markets are characterized by a high price-to-rent ratio. One potential reason is that rates and rates of rise are high because of the high chance that drives rates away from economic routes: investors renting premises and homeowners obtaining the calculated rent are willing to bear zero or negative net rent to catch up with the artificial up-rating waveform. However, the situation of a zero or negative net rent held during a relatively long time is also likely to be a substantial result of the market. If market participants desire a significant increase in rent, then the existing net rent may be negative or zero. Now consider that the net rent is at a level n at the current time T and is maintained until a later time T. At this point, the net rent increases to a new higher level n + Δ and is maintained at that level at all times. At this time, the room price at time t is:
If n is 0, any value of H is not logically excluded. In particular, if Δ is large, H is high. In the united states, this story is not very credible in regions that have or will experience a zero net rent, a very low net rent, or a negative net rent regime for some period of time. These regimes tend to occur in cities or regions where the potential for new houses in the future is limited due to geographical or regulatory reasons, and not in cities or regions where their business or lifestyle attracts people to live.
It is reasonable for market participants to anticipate future premium leases in these areas under conditions of population growth.
If one were willing to assume that the real market conditions met the user cost relationship in equation (9), then the user cost relationship represents an important empirical shortcut that is available. As long as any three of v, α, i and η are known, the fourth is redundant. If there is a reliable asset pricing model available, i and η can be estimated relatively directly. On the other hand, both total rent (and net rent) and expected house price increases may be less practical.
Tax payment
The user cost model for a homeowner's own house was initially applied to study the effect of taxes on the balance of house prices and housing markets. The user cost equation in this application contains other terms that express features such as deduction of Property Taxes and Mortgage loan interest (see Tax expedition for ower-Occupied Housing: reductions for Property Taxes and Mortgage intest and the Exclusion of Imputed renewable inclusion, American ecomatic Review, vol.98: 2, pp.84-89 (5 months 2008)).
The ANZIE-DOOR ratio factor calculations and related variables are very user cost specific, although the user cost relationship does not require the use of these calculations and variables. An important issue is whether the funding elements in the calculation of the rate factor should be adjusted to take into account the tax. For example, a homeowner can deduct property taxes but not depreciation. The other mode is as follows: should the net contributions of the parties be measured on a pre-tax or post-tax basis? The answers are not completely clear, but it is sufficient to use the pre-tax component if the way in which the taxes are paid to the parties is maintained similar to what is the case with the existing alternatives.
The situation is obviously very complex. The fundamental role of the ratio factor is to create a condition: the DOOR tool is simulating market trading at any time. The post-tax component is different between different taxpayers because taxpayers are faced with different tax rates and different ways of handling other characteristics, such as certain restrictions on deductions. If the tax is not perfectly added, the market price can only be adjusted to produce a zero net present value transaction for one type of taxpayer, i.e., no economic profit. This type is the "marginal investor" of the asset in question. Other types are ultra marginal and some of them are able to receive tax rewards in asset prices that are not capitalized.
An investor or type of investor may be marginal in all assets, particularly if the capital market is perfect or nearly perfect. However, if there are restrictions such as restrictions for certain types of borrowing, investors with different tax characteristics may be marginal in different asset classes. These restrictions prevent investors from trading freely in all asset types and thus allow the situation of marginal investors to be divided into multiple cases. This distinction is well addressed and discussed by Dybvig and Ross (Tax Clientees and Asset principles of P.H.Dybvig and S.A.Ross, Journal of Finance, vol.41: 3, pp.751-62 (7 months 1986)).
Regardless of the particular tax handling mode of the DOOR tool, some investors or homeowners may be out of bounds. It is important whether the DOOR tool itself allows new tax possibilities for the basic components of the housing transaction. If allowed, there is a tax incentive to use or not use these tools. If the tax processing approach creates a net joint revenue for investors and homeowners compared to alternatives, then there is a tax incentive to use tools. If the joint gain is compromised, then there is an incentive to not use tools.
Another problem is the tax incentives present in many marginal profits. Many financial solutions allow an individual or family to live in a house. Two conventional arrangements are renting houses from investor-type owners or buying houses using mixed debts and financing. These two schemes produce different tax payment scenarios. The investor type industry mainly deals taxes for rent, deals taxes for sale, can deduct losses when selling houses, and can deduct property tax, mortgage loan interest and depreciation. The owner who owns the house can not deduct depreciation without paying tax for calculating rent, can deduct mortgage loan interest and property tax under specific limiting conditions, can avoid selling income to exceed specific limit, but can not deduct loss when selling the house. The non-financial ownership and control aspects in the DOOR scheme are almost the same as in the proprietary-proprietary case. For example, the house owner decides when to sell and purchase houses and is responsible for maintenance. It is therefore reasonable to consider the home of the owner's own house as a reference case.
Given the reference, it is easy to specify a tax handling approach that selects a DOOR scheme from the alternatives with little or no tax incentives to the parties. The simplest way to achieve the above goal is to start with the divergence presented above for ANZIE-DOOR first. The tool consists of a conventional "real" part plus an independent "abstract" private trade. A concern with private transactions is the increase in insurance assets. The conventional section relates to capital structure, property tax, depreciation, and mortgage loan interest (if the priority block is of the debt financing type). The homeowner pays at least property taxes and mortgage interest in the ANZIE-DOOR. It is reasonable to allow homeowners to deduct these fees without DOOR tools under conditions applicable to tax regulations of the homeowners of the house. Similarly, some tax regulations prohibit discounting, so the homeowner cannot deduct this part. In ANZIE-DOOR, the homeowner's capital gain cannot be in the conventional part, but the capital loss is in the conventional part. Committed assets cannot exceed the homeowner's funding (equal to the funding), but if the house value falls below the priority block amount, the committed assets can be reduced or completely cancelled. Also, in parallel with not having a DOOR tool, proper processing may prevent any loss, but it needs to be informed that a private transaction is involved.
The private transaction closely resembles a long-term contract for advance payment, which occurs over time. The net funding of the homeowner is accumulated as an increase in insurance assets, and the contract is settled by the investor paying the homeowner an amount equal to a percentage increase in house value when the house is sold. If the amount of money obtained exceeds the total funding, the homeowner is profitable. In this case, the investor has a corresponding loss. It is reasonable to consider these as capital gains and losses.
It is now additionally noted that in the case of conventional ownership, i.r.c. § 121 specifies that the homeowner's capital gain cannot exceed a certain limit, but that the homeowner cannot deduct capital losses. One way to translate this specification into a Z capital structure scenario is to combine the homeowner's profit or loss on the insured asset with the profit or loss on the committed asset, and then limit the aggregate profit or loss with conventional processing: preventing losses and prohibiting profitability beyond appropriate limits. This approach is reasonable based on the replacement of the homeowner's assets in the conventional scenario by insured and committed assets in the ANZIE-DOOR case.
Some DOOR variants involve conventional capital structure. The COZIE-DOOR discussed below is an example. The value-added insurance asset accounts are beneficial to investors. Thus, the alternative discussion herein does not apply, the obvious tax management approach used by homeowners applies conventional regulations to the conventional part of the transaction, but treats the private transaction as though it were an abstract non-residential financing service that produced capital gains or losses. The results generated by the conventional section closely match those generated under conventional premises ownership conditions, including § 121 the amount deducted.
If the tax authority treats the ANZIE-DOOR tool in the manner just described, the homeowner is in a situation very similar to regular ownership: mortgage loan interest and property taxes are deductible under certain constraints, depreciation is not deductible, capital losses are not deductible, and the deduction stipulated by § 121 applies to capital gains.
How are investors? Investors hold financing positions in a physical concept house and an empty head on an abstract concept in a private trade. Mortgage interest, property taxes and depreciation fees are deducible if the investor pays. Instead, in ANZIE-DOOR, the homeowner makes payment. Thus, there is no suitable deduction or basic adjustment for the investor. In private trading, investors get ever increasing head of vacancy in the house at the level of abstraction. The open entry is the periodic net investment by the homeowner on the investor. Typically, acquiring the head-off will not result in immediate revenue equal to the intake amount, but instead results in a sale of the house, i.e., a capital gain in the sense that the amount paid to end the head-off at the sale of the house is less than the total intake amount.
There are other possible tax handling ways that parties may have for the ANZIE-DOOR tool. A thorough discussion of potential tax treatment modalities would be verbose and professional and beyond the scope of this document. The key point is that there is a way of tax handling that places the parties in similar tax liabilities in the alternative, and that there is little or no damage to the pre-tax component in the calculation of the rate factor.
The real tax processing mode applied to various DOOR tools possibly influences the market cycle of the tools. If so, it is necessary to properly adjust the operation of the analyzer: for all DOOR tools that do not involve subsidies, the period must be such that the solution is initially a market trade, whereas for a neutral DOOR tool, each adjustment must re-establish the solution as a market trade that is in line with true value.
Variations to be discussed later herein include features not present in the ANZIE-DOOR, and possible tax handling approaches corresponding to some of these features are discussed herein. From these discussions and the contents in this section, it will be apparent to those skilled in the art that the impact of multiple tax processing approaches on the adjustment mechanism of different DOOR variants.
Flexibility of DOOR
The adjustment process of the DOOR makes it highly flexible. The ANZIE-DOOR has a specific set of contract terms, such as the property tax paid by the homeowner, and the tool adjusts the insurance asset amount to achieve neutrality. The DOOR mechanism allows for almost any pattern of fixed contract terms, and neutral adjustments may involve other features besides an insured asset account. It is also possible to relax neutrality when having a specific purpose, thereby making contractual terms flexible, even to be able to switch between neutral DOOR tools while in operation.
Contract clause
The fixed contract terms may differ from ANZIE-DOOR in many ways. For example, one variation requires the investor to pay property taxes while specifying a homeowner's fixed quarterly repayment plan for the investor. The purpose is to keep the property tax rate of the homeowner unchanged, thereby transferring the risk to the investor.
The contract itself allows flexibility in certain features. For example, contracts allow homeowners to make additional voluntary payments to investors at any time. In the ANZIE-DOOR type of scheme, these payments result in a compensatory increase in the rate of increase of the insured asset during the next period of time or some small time increment after the payment. There is no need to delay the credit repayment until the next scheduled adjustment. The payment itself makes an adjustment and a new cycle is started.
The variants are infinite. The homeowner's repayment of the investor may be periodic, occasional, a function of variables or parameters such as interest rate, or may be triggered by market conditions including house value. The payment may be partially or completely voluntary. Repayment may be in other directions, such as from the investor to the homeowner. In the ANZIE-DOOR type of scheme, this represents a slow appreciation of the insured assets, but the homeowner will profit from the cash flow. Such a scheme may be useful in the case of the redemption of a house or house value "cash-out".
The adjustment mechanism can easily accommodate more radical transitions, i.e., equivalent to re-financing with a new and different tool. For example, one may choose to switch between the conventional style of ANZIE-DOOR and the aforementioned style of property tax payment by the investor at any time.
The neutrality mechanism of DOOR can easily accommodate changes in contracts themselves, whether the parties change transactions in operation within contractual conditions. All that is involved is the adjustment to the accumulation algorithm, i.e. the adjustment that is easily added as an option in the available software programs. It can be easily imagined that the changes are performed instantaneously with little expense by simple on-line processing steps.
The flexibility of the neutral DOOR tool allows many tasks that are currently inflexible to be easily accomplished and at a low cost. For example, home equity credit ("HELOC") currently requires a separate formal loan. If the house is up-rated, the upward adjustment of the credit amount is not automatic. This requires re-financing by the homeowner. In contrast, the feature of allowing homeowners to generate HELOC-type loans as options that are virtually free is consistent with many DOOR variants. In addition, the amount of credit available may vary in real time with house value and market conditions. Consider now the structure of ANZIE-DOOR. The homeowner can credit up to the full amount of the priority block if necessary. Without cash contributions, homeowners expand priority blocks in two ways: (i) by undertaking more mortgages: (ii) by converting an insurance asset to a committed asset. Both of these pathways are simple in DOOR. The contract may allow the insured asset to be converted to a committed asset, perhaps subject to a minimum level of insured asset, such as 10 percentage points, to ensure that the homeowner's power to maintain the premises remains unchanged. This transformation increases the lending capacity of the homeowner because it increases the size of the priority block by increasing the committed assets. While insurance assets fall, the premium rate of insurance assets increases, reflecting the now larger priority block. As part of the adjustment process, a "quote" may be made at any time that the amount of the insurance asset designated as available for changing the priority block. Of course, the DOOR contract also includes loan limits that are adverse to the priority block. These limits may be pre-specified or may fluctuate in real time with house value and other market parameters. In conjunction with this lending capability, this effectively requires that data on the credit status of the homeowner be considered part of the analysis process for updating the corresponding DOOR tool. These data are generally only available when the homeowner agrees.
Whether the first approach is easy depends on the extent to which the third party is involved. If the investor is also the lender of the mortgage loan, then the extended loan is an "internal" adjustment. This may involve some closing costs, but the transaction fees may be quite low compared to conventional re-financing alternatives by third party lenders. The ANZIE-DOOR investor has other potential advantages over a third party who becomes a lender for mortgage loans. If the investor is also a mortgage owner, then the ANZIE-DOOR contract yields the actual benefit of the outside for the inside mortgage owner. Without internalization, the parties may forego joint revenue or face higher negotiation costs. However, the DOOR investor may not be a very efficient mortgage lender. Other DOOR variants discussed elsewhere herein include features that avoid extrinsic problems altogether.
Neutral mechanism
ANZIE-DOOR achieves neutrality through an insurance asset account-i.e., a collateral scheme that is independent of capital structure gains for the premises. The account accumulates net contributions over time, converting the net contributions into the abstract hedge empty and multi-headed of the house. Over time, as house values change, economic parameters such as interest rates fluctuate, and the net investment balance also changes. The insured asset account absorbs this fluctuation as a residual value in balancing the transaction between the house owner and the investor.
There are a number of alternatives to balance the transaction. One solution that has been mentioned is to accumulate the cash value of the net funding amount together with the interest in a "reconciliation account" and then pay the account when selling the house. The scheme has the characteristic of forced saving. The homeowner is only committed to accumulate funds in the accessible secondary accounts when the premises is sold-creating the "SAVING DOOR" variant. The account suffers loss when the premises are not maintained. A simpler solution is to settle the net payout in each time period by cash payment.
FIG. 6 is a flow chart illustrating an analyzer implementing SAVING-DOOR. FIG. 6 is a 3 point difference compared to the corresponding flow chart for ANZIE-DOOR, FIG. 5. First, the purpose of the calculation is to adjust the increment rate of the tie-out (savings) account rather than the percentage of the insured asset. Thus, the last target hexagon on the right hand side is the reconciliation (savings) account rather than the insurance asset percentage. The account earns interest in long term deterministic equivalence and the ratio can be reset or initialized so the arrows emanating from the hexagons that calculate the ratio indicate that a new ratio is entered into the account calculation. Second, the added amount of SAVING-DOOR in the reconciliation (SAVINGs) account is the net funding amount of the homeowner, as opposed to calculating a rate factor for use in the appreciation of the insured asset. The factors discussed in calculating net contributions are the same as those in calculating the ratio factor (except for expected depreciation). Thus, the homeowner net-funding hexagon in FIG. 6 replaces the rate factor hexagon in FIG. 5. Third, the expected depreciation is not directly considered into the homeowner net pay calculation, but rather is indirectly considered through its effect on the estimated interest rate of the priority block. Thus, the expected depreciated hexagons in FIG. 6 are not included in the gray shaded stack of various factors that directly impact the homeowner's net investment calculations. Instead, it is separate from the stack and has an arrow pointing to the priority block pay out rate hexagon.
There are many other potential variations. For example, rather than adding insurance assets, the scheme may credit the committed assets with a net loan. In this case, the priority block is expanded at the expense of the investor's assets, and the homeowner's expected net contributions are increased, accelerating the accumulation of more committed assets.
Which scheme is selected depends on the target of the DOOR variant. The ANZIE-DOOR scheme apportions all net contributions into the insured asset account with the aim of maximizing the "safe" assets and creating a strong maintenance impetus. This solution is ideal for homeowners with little occupational and wealth, and may be considered ideal for "typical" U.S. owners as well.
Even if these objectives are to be retained, it is envisioned that a variety of variations are suitable. Insurance asset solutions do not have the features of insurance and can be somewhat painful when the premises are sold at or below the level of the priority block. In this case, the homeowner is ready to pay a percentage of the value of the house, regardless of whether the investor has lost all investment and has not had any cash back in selling the house. The increase in the percentage of insured assets in ANZIE-DOOR is not subject to contractual constraints and the percentage can reach 100%. Such open unrestrained may make the investment unattractive. One potential remedy is to increase the percentage of insured assets to a limit, say 20%, and then make further net funding adjustments in other ways: cash repayment, addition of committed assets, reconciliation accounts, etc. This scheme allows homeowners to achieve the goal of earning large amounts of assets and thus "benefit from the housing market" regardless of the housing price level, while limiting the insurance liability of the investor.
Another disadvantage of using an insurance asset account as the remaining value reserve for net funding is that the volatility of funding makes the rate of accumulation of insurance assets uncertain. For many homeowners, a great attraction for insurance asset solutions is the prospect of selling a house with a steady percentage of the house's value share and the consequent "benefit from" guarantee regardless of price. The randomly accumulated percentage of insured assets is at least to some extent inconsistent with these objectives. An alternative is to specify a fixed cumulative schedule of insured assets and then have the random remaining value element of the net payout indicate itself to be a committed asset by other means such as a cash payment, and so on. The result is that neutrality of the DOOR tool is maintained while the expected schedule of insurance asset percentages is made certain.
As mentioned above, the neutral mechanism implies a more general type of flexibility. There is no need to pre-commit a specific neutral DOOR tool. Switching between neutral tools in operation IS easily generic and IS central to the IS-A-DOOR variant discussed below.
Relaxed neutrality
Neutral DOOR tools have tremendous energy and range, but in some cases the neutrality needs to be relaxed. There are several ways in which strict neutrality can be deviated. First, the tool may be neutral, but include infrequent adjustments. In this scenario, the tool operation may deviate significantly from neutral as economic conditions change, since no adjustments have recently been made. The extreme form is a static DOOR tool defined by a predetermined schedule that specifies all of the expected characteristics of the tool, such as the path of an insurance asset growing in a pre-neutral manner. ("before" neutral means that the actual value of the tool is equal to its original true value.) this form is very useful. A balance is struck between the cost of deterministic and embedded options. Static DOOR tools create uncertainty in terms such as increased amount of insurance assets, but embedded option values tend to increase. If the terms in the DOOR tool become less favorable than the market, the homeowner is motivated to re-fund, and if the terms in the DOOR tool become more favorable than the market, the homeowner is motivated to continue to leave funds in the premises.
Another way to deviate from neutrality is to preserve the adjustment mechanism but not require a strict profit-and-loss balance. For example, the tool incorporates the subsidy in the form of a dollar amount or percentage of house value into the calculation of the rate factor. This solution is valuable in the case of employee homes where subsidies can provide financial payment capabilities for individuals living at their workplace.
DOOR variants that include infrequent adjustments or subsidies are examples of "semi-neutral" DOOR tools. Some characteristics of neutrality still exist, but are not complete and purely neutral. Useful "non-neutral" DOOR tools are also envisioned. One example is a static DOOR tool with a non-pre-neutral schedule. The following discussion provides some examples of semi-neutral and non-neutral DOOR tools.
Multiple variants
Even if limited to consideration of neutral DOOR tools, it is clear that there is still a hard to imagine set of available DOOR variants. In most cases, it is reasonable to first classify investors and homeowners and assign targets for each type. These goals imply a number of features. Combining the necessary features results in a useful DOOR variant. This document does not intend to list all possibilities or to explore a particular application area deeply. It is intended herein to provide sufficient variation to generally illustrate the scope and flexibility of the DOOR tool of the present invention.
In the following, a number of variants are focused on. ANZIE' S SIDE DOOR is an extension of ANZIE-DOOR, which can be used in many environments, including low value-added environments and situations for the purpose of accumulating specific premises assets. ANZIE' S NU DOOR addresses the problems associated with "shrinked" houses and strategic violations that occur when the house price falls below the principal balance of the mortgage loan. The ANZ triedioor and various partial resource-based DOOR tools shift the priority block risk from homeowners to investors. The COZIE-DOOR variant achieves the goal of homeowners to bring on premise assets. IS-A-DOOR allows homeowners to switch continuously between DOOR variants. LAZIE-DOOR and FIXED-DOOR are examples of semi-neutral or non-neutral variants.
ANZIE’S SIDE DOOR
ANZIE' S SIDE DOOR extends ANZIE-DOOR by increasing payoff terms between homeowners and investors ("SIDE payments"). These payments alter the net payoff balance and thus cause the insurance asset to increase at a faster or slower rate. The description and indication of the side payment depends on the goal of motivating the particular application. Two applications are contemplated herein: (i) the ANZIE-DOOR target is realized in the time or the area with low-speed increase of the room price; and (ii) a target for an insurance asset.
It is important to note that side payments generally do not have the traditional type of unintelligible and quick explanation like "rent" or "interest". Instead, the payout represents a deliberate attempt to alter the "private trade" involved in the appreciation of the insurance asset. A related way to understand "side payment" is that side payment is only one aspect of a "private transaction".
This payment is made entirely in a private transaction, a fact which has a tax impact. The above discussion has presented a long-term loan, which is to be treated as a pre-repayment for private trade, or more simply as hedging bull and miss held by the homeowner and investor, respectively. Under this regime, the side payment totals are the purchase of more homeowners and are counted into the basic influence. In another aspect of the transaction, the payment is a revenue for other sales outlets that are repeated, with a fundamental impact. There is no existing deduction or revenue item.
Meeting the region and time period of low increment
The housing market varies over different geographical areas and time periods. In some areas, additional, convenient-to-place land is readily available for residential buildings. In these areas the rate growth is often limited. Implicit or explicit leases look much like the increase in value as a factor in the overall return. In other areas, the rates have been rising and have risen considerably, e.g., for long periods of time continuing to exceed the general price of the commodity. The house value reaches the level where the net rental money is always zero or negative. These areas often lack some natural or governmental guidance, such as by regulatory restrictions. Examples may include many european cities, as well as us coast cities such as san francisco, los angeles, or new york. Even though there is sometimes a flat or declining rate in these areas.
Unlike many asset prices, house price changes tend to be continuously related, that is, a drop is often followed by a further drop.
Both rental-intensive areas and price maintenance declining over time present challenges to asset-based housing tools. In a rental-intensive situation, the net funding by the homeowner may be small, or may even be the net funding made by the investor. The result of ANZIE-DOOR is a very slow or even negative appreciation of insurance assets. Our goal is to provide a tool that allows a typical homeowner to accumulate a large number of "safe" assets, but this result defeats this purpose.
Maintaining a price drop over a period of time is even worse. Conventional asset-based tools rely only on the appreciation of the investor's return and may not be feasible. Homeowners can take advantage of this sustained price drop by financing with an up-rating based tool during this disappointing price period, and then re-financing as the market begins to recover. The best result is to enjoy a free loan for the duration of the tool. If the homeowner makes strategic sales, i.e., collects asset credentials at a point in time when the price falls sufficiently to exclude some or all of the investor's assets in the house, the investor loses "principal".
ANZIE-DOOR avoids many of these problems, but the goal of providing a continuous upgrade of insurance assets to homeowners is not achievable in some cases. In ANZIE-DOOR, the potential problem caused by rented intensive areas and maintaining price drops over time is that investors can only make profits if prices rise. It is very easy to increase the temporary or continuous periodic side payments made by the homeowner to the investor. The result is the ANZIE' S SIDE DOOR pattern. FIG. 7 is a schematic block diagram showing a fixed additional payout to investors in the ANZIE' S SIDE DOOR scheme in accordance with the present invention.
In rent-intensive markets, the side payment may be permanent, resulting in a large net funding for the homeowner and a strong growth in insurance assets. If the insurance asset is limited or targeted, the facility may prescribe a reduction of side payments upon reaching the target or limit.
This possibility of keeping the price down for months or years in succession requires a greater degree of flexibility and complexity. One solution to the DOOR contract requires the homeowner to make temporary side payments. The amount of this payment depends on the percentage of insurance assets currently available, which reflects the amount of insurance assets in the affiliated account, and also depends on the current house present value versus priority block. If the insurance asset is sufficiently large, the contract will allow the insurance asset percentage to be reduced to the bottom line, which delays or reduces the side payment. Avoiding or reducing side payments may be a desirable feature for homeowners, especially when the decline in house value is associated with regional or national dissatisfaction. If the house value is low enough relative to the priority block, the homeowner pays a large net payout, thus eliminating the need for a side payment.
A situation of this type is clearly indicated when the price drop completely obliterates the investor's assets, i.e. the house value is lower than the priority block. In this case, the real and actual value of the investor's position is zero. Because the investor's interest in the house amounts to having positive extra-price options, the homeowner must pay net contributions and accumulate insured assets. As described above, funding fundes the call option. The addition of insurance assets offsets the value of the call, which produces a zero net value for the investor. A typical result in this situation is that insurance assets are accumulated by homeowners at a fast rate, so that no side payments are required. Whether or not the likelihood of further reductions is predicted by continued reductions is high, the need for side payments becomes strong when investors have large investors with large investments.
Numerical values are exemplified by: "Sunbi for taxi"
An example is described above in connection with ANZIE-DOOR, ending with table 7, and based on a high-lift, low-rent "baseline" scenario, where the rate of the house is increasing at the expected rate of 7% per year and the net rent is always maintained at zero. For high-rate regions of the united states, this example is a very rough stylized version of some cases.
Considering now the baseline model is changed, the total expected annual return (expected net rent + expected rise) is always maintained at 7%, but the mix proportion is pushed to rent by a large margin: net rent is kept at 3% per year and expected increases are 4% per year. This change keeps the denominator of the ratio factor unchanged but reduces the numerator by 3 percentage points. Insurance assets are growing more slowly. All other assumptions and parameters in the model were kept constant and the results in ANZIE-DOOR are shown in Table 8 below.
TABLE 8 examples-high rent style, no-call-back case (ANZIE-DOOR)
Obviously, this result does not achieve the goal of "benefiting from" most homeowners after several years by adding a large number of insurance assets. The average percentage of insured assets across all price paths never exceeded 3.15%, became negative in year 19, and then declined sharply in year 30 to reach-11.24%. Only very extreme cases (about the 99 th percentile or up again representing an increase in insurance assets, corresponding to very low or negative upprices) that result in an increase in insurance assets are satisfactory. In this new example, the volatility of the room price is not adjusted down, but remains the same as the high expected rise in table 7. The extreme results in table 8 are even more impractical than the case represented by the table if lower volatility is accompanied by lower expected rise.
The ANZIE' S SIDE DOOR model can be easily made where the homeowner pays the investor annually to solve the problem. Suppose that the tool requires the homeowner to pay the investor a net rent of all 3% per year. At which time the rate factor returns to the same value as in the case of a 7% increment of 0% net rent. The 3% payoff to the investor is added to the numerator of the ratio factor in equation (4) to exactly offset the negative 3% term produced in the net rent. The denominator, i.e., the total expected return for the house, does not change due to the addition of the homeowner's annual transfer payments to the investor. Thus, the results are the same as in Table 7, and the homeowner receives a large appreciation of the insured asset on all price paths.
This situation is similar to the "rental-versus-self" scenario, except that the occupant is initially the owner. The occupants pay "full rent" (depreciation + property tax + net rent) and are also charged with repayment of the mortgage loan. These mortgage repayment are net funding and result in rapid appreciation of the insured property.
FIG. 8 is a flow chart illustrating an analyzer implementing the ANZIE' S SIDE DOOR scheme involving a planned repayment of a homeowner to an investor. The flow chart is the same as that of figure 5 except for the addition of an arrow pointing from the DOOR tool feature cylinder to the scale factor hexagon. The added flow includes a non-bold rectangle labeled "repayment schedule," which means that the contract terms impose a certain repayment schedule on the homeowner for the investor. These repayment are included in the calculation of the rate factor. Other straight line arrows pointing from the DOOR tool feature cylinder to the scale factor hexagon include data and descriptions that have long been present in ANZIE-DOOR: the size of the priority block and the formula used to calculate the ratio factor. The flow of creating these two arrows emphasizes the aspect of the repayment schedule that converts the ANZIE-DOOR to the ANZIE' SSIDE DOOR scheme.
Insurance asset objectives
Another application of ANZIE' S SIDE DOOR deals with the situation where homeowners prefer the predictability of an insurance asset value-add schedule. One version of ANZIE' S SIDE DOOR accomplishes this result, which requires a random repayment between the homeowner and investor in a direction and amount that will achieve the desired mode of value-added. FIG. 9 is a schematic block diagram showing an established insurance asset scheme that uses random repayment for the ANZIE' S SIDE DOOR scheme in accordance with the present invention.
FIG. 10 is a flow chart illustrating an analysis engine implementing the ANZIE' S SIDE DOOR model including a pre-determined insurance asset scheme by using random repayment as a balance balancing mechanism. It differs from the ANZIE-DOOR analyzer shown in fig. 5 in three points. First, the end result of the machine operation is to define a flow of repayment funds between the homeowner and the investor in the next session that balances the net contributions of the parties, allowing the homeowner's accrual assets to accrue. Thus, the last hexagon at the far right of FIG. 10 represents the change in the percentage of insurance assets in calculating the necessary payment flow rather than the ANZIE-DOOR of FIG. 5. One key input for this calculation is the value of the ratio factor that causes the change in insurance assets to be consistent with the fixed schedule specified in the available pre-determined insurance asset model of ANZIE' S SIDE DOOR. After grasping this input, the calculation process proceeds using a ratio factor relationship, such as equation (4), which is converted to determine the required payment fund flow.
Second, the calculation of the rate factor requires a long-term deterministic equivalence rate, insurance asset value-add schedules, past interest rate values, and a relational expression such as equation (5). The arrow pointing to the scale factor hexagon indicates the required input.
Third, there are two independent arrow flows pointing from the DOOR tool feature cylinder to the scale factor hexagon. One is the same straight arrow as in FIG. 5, representing a similar information flow as in ANZIE-DOOR: past data and contract specifications in the mathematical relationships required to calculate the ratio factor. Another arrow flow includes a non-bold box labeled "insurance asset value-added schedule" and begins with the DOOR tool features cylinder, indicating that the schedule is contractually specified. This arrow flow emphasizes that the calculation of the ratio factor requires the insurance asset appreciation schedule in the DOOR contract.
To make the AnZIE 'S SIDE DOOR' S model of an established insurance asset more specific, we consider an example. Suppose that the homeowner wishes to add value to the insured asset by 20 percentage points after 10 years and keep the percentage at that level. Applying this type of schedule results in a random payment that always flows from the homeowner to the investor in the first 10 years but then in the opposite direction. Thus, upon reaching a given percentage of insured assets, the homeowner enjoys a revenue stream of funds.
In situations where the expected upgradings are high, the homeowner may wish to make a heavy payment over the first few years to avoid having to pay for an extremely high payment until the 10 th year. Recalling equation (4) with zero net rent and fixed interest rate, the numerator of the rate factor always decreases as the house increases in value due to the decrease in the "loan-to-value" ratio represented by the priority block. Thus, if not tight before and loose after, the amount of the homeowner's repayment to the investor is likely to increase dramatically over the course of ten years.
But the homeowner does not have to tighten the front and loosen the back. Any desired pattern is possible and dynamic elements may be inserted. For example, the homeowner may continually adjust future payments or the length of time required to reach a goal to set up lines and lines for payments. The flexibility of the DOOR tool allows even wider possibilities. For example, after the insurance asset reaches a certain minimum level, the DOOR contract may allow the homeowner to select a repayment amount only at the beginning of each session. Different repayment amount patterns ultimately result in different insurance asset amounts. The "difficult target" style is not the only possibility.
Numerical values are exemplified by: insurance asset objectives
For comparison, it is convenient to use a high-rise low-rent benchmark model that yields the ANZIE-DOOR results in Table 7 above: the rate of housing increases at the expected rate of 7% per year and complies with geometric brownian motion, and the net rent remains non-zero. Consider now an example of a "difficult target": the insurance asset percentage increases to 20 percentage points after 10 years and remains at that level thereafter. This requires an average scaling factor of about 0.4463 over the first decade, with the scaling factor thereafter being zero. Approaching the centerline along the price path representing the rise in house value, homeowners make additional payments to investors over the first decade, and thereafter obtain payments from investors.
Suppose that homeowners require fairly constant expenditures during the first decade. Because the trend in the rate of housing increases is clear, homeowners want to have a higher established rate factor at first and a lower established rate factor at last (the tenth year) than the necessary average of about 0.4463 per year. Good results were obtained keeping the average of the ratio factors constant and creating an exponential descent pattern with an annual factor of 1/(1.075). The following table 9 shows the distribution of payments required as a percentage of the initial house value:
TABLE 9 EXAMPLES ANZIE' S SIDE DOOR with difficult insurance asset targeting
The calculation of the average is very satisfactory. For the first decade, the average annual repayment sequence is approximately 2/10 percent of the original house value. Over a decade later, the average is calculated such that the homeowner receives continuous annual payments on the price path that yields very low revenue, the annual payments being equal to 4% or slightly more of the original house value. The reason for this mode is simple. Interest rate i for calculating the rate factor in addition to price paths with very low profitPKeep 5% unchanged. As a result, the homeowner's funding amount is flat since the priority block has a constant amount size (80% of the original house value). Since the net rent is always zero, the net amount funded by the homeowner remains 4% of the original house value. At the beginning of year 11, the investor only needs to pay this amount of cash to the homeowner each year.
Ten years later, the homeowner holds 20% of the positions in the house using the insurance asset account. The entire pattern has a well-defined "life cycle" pattern. The individual increases his wealth through savings over the previous years (through additional expenses) and then gains annuity in the following years.
The maximum payoff amount required appears to be very high. The total of 10 years is about 40% of the original house value. Of course, no one price path can cover the maximum payoff per year. When the upgradeable income is the maximum, the payoff amount is also the maximum. The value of the insurance asset account is high, although the payoff amount is high. For example, the maximum house value result after ten years is about 4.77 times the initial value. The insurance asset percentage is 20 at this time. Thus, the value of the account is approximately equal to 95% of the original house value. It is also simple to count them as "uncounted" if a higher payment is not acceptable. There are many possibilities. The homeowner may choose to reduce certain payments, or all payments may be voluntary, resulting in a "homemade" accumulation scheme. Over time, it is easy to provide the homeowner with information regarding the outcome of any payment and the various modes of payment.
Non-neutral and semi-neutral DOOR tools
Why is neutral relaxed?
Achieving neutrality through the conditioning process has a number of attractive features. By making options substantially or virtually worthless, the role played by embedded options and the consequent moral risk and valuation difficulties can be eliminated. Surprising flexibility can be created by auto-compensation adjustments that allow the terms of the neutral DOOR tool to be changed continuously with very little expense.
Neutral and related adjustment processes also produce traits that are not always desirable. Most importantly, there must be some "redundant" element to withstand the impact of the adjustment. For ANZIE-DOOR, the element is an insurance asset. It increments at different rates depending on the impact of the adjustment process on the economic outcome. Homeowners may need a more predictable appreciation of insurance assets, but some "redundant" other elements are required to achieve this goal and remain neutral. For example, in one model of ANZIE' S SIDE DOOR, the insurance asset value-added model is fixed, but homeowners make random additional payments annually to maintain neutrality.
More generally, the adjustment process exposes the homeowner to a number of different risks. This process offsets the rent, depreciation, property tax, interest rates contained in the priority block, the magnitude of the priority block relative to the house value, and the expected rate of rise. Many of these elements are random. In particular, rent, interest rates, house values, and expected rise values may fluctuate widely. The homeowner is directly confronted with these fluctuations due to the changes subsequently made in the redundant elements. For example, assume that one-time permanent and unexpected increases in rent, property tax, interest rate, and expected upgradings are unchanged. Presumably, the rate of the house rises as it capitalizes on the future value of the net rent. Recall the ratio factor for ANZIE-DOOR in equation (4):
The increase of the house price will decrease LPAt the same time, the increase in rent prevents the reduction of net rent v by the house value unit. The final ratio factor decreases. If this change is large enough, the rate factor becomes negative and the insurance assets accumulate more slowly or even gradually decrease.
As pointed out by Sinai and Souleles (supra), purchasing a house reduces and in some cases almost eliminates the homeowner's rental risk. Instead of paying a rental fee that changes over time, the homeowner purchases the house at a single payment. Variable rentals only have an impact on homeowners when selling their house (because the house value capitalizes on the future value of the rent), but sales may be in the distant future, and so the impact is greatly discounted. Sinai and soulels use data relating to apartment rentals to show that the rental risk is significant.
ANZIE-DOOR negates the protection against rent fluctuations. These fluctuations affect the appreciation of the insured assets by the regulatory process and thus expose the homeowner to rental price risk. If the adjustment process is frequent enough, for example daily, the homeowner is exposed to more rental price risk than the lessee. The lessee can lock out the rent for at least the lease period.
Such problems are predispositions for the production of the semi-neutral and non-neutral variants discussed herein. But there are other causes. One of which has been discussed above, is the desire to provide subsidies to some homeowners. This desire may be made clear by not strictly meeting neutrality, thereby bringing the homeowner more profit or credit than expected based on the homeowner's net contributions.
There are many available DOOR variants that give up or deviate from neutrality. The following discussion focuses on two illustrative variations. LAZIE-DOOR is generally semi-neutral: the adjustment process is still ongoing, creating a tendency towards neutrality, but some elements (rent, depreciation, expected upgrade, etc.) are fixed and do not fluctuate to reflect their actual value. FIXED-DOOR is a DOOR tool with pre-set terms and no adjustments. The FIXED-DOOR pattern may be semi-neutral or non-neutral.
LAZIE-DOOR
If the goal is to help the homeowner fight rent fluctuations, then a simple solution is to change the ANZIE-DOOR by fixing the net rent in the rate factor equation. If the net rent is static, the neutral scheme will set it to its average value. If the rent is independent, identically distributed ("IID") and static, the adjustment process is substantially neutral in a priori sense in this scenario. (since the expected size of the insurance asset percentage in the future will vary due to the Jensen inequality, complete neutrality is generally not achieved
If the trend of the average net rent is to increase, for example, truly or symbolically at a fixed rate, the net rent may be set to the expected average over all time periods in the future, which results in a fixed schedule. Since the expected house growth reflects the expected growth of the rent, among other factors, the scheme of net rent in the specific interest rate factor equation can be supplemented by fixing the expected growth or allowing the expected growth to equal the general price volatility with an adjustment that reflects the expected real growth rate of the rent.
These schemes are examples of LAZIE-DOOR: "Limited neutral, annual adjustment, Z capital Structure, insurance assets DOOR tool. The "lazy" in "LAZIE-DOOR is derived from: the adjusting party has no particular observation of the actual values of certain elements in the calculation of the ratio factor, but rather fixed values are used for these elements.
LAZIE-DOOR allows certain subsidy schemes with good targeting. For example, if the net rental is set to zero in the positive range of the average net rental, the homeowner can be subsidized, i.e., "live free of net rental" in the house. This solution has some conceptual appeal in the case of employee homes, but may provide too few or too many subsidies. In this case, the adjuster may replace the zero net rent with another level of net rent or a time-varying but schedule-fixed net rent.
Table 7 above illustrates the operation of ANZIE-DOOR in the baseline model, which assumes a net rent of zero and an expected increase that remains constant at a 7% annual rate. This example corresponds exactly to LAZIE-DOOR in an environment where net rent and expected rise fluctuate but the adjuster fixes it to 0% of house value and 7% per year, respectively. If these numbers include subsidy elements and also represent good revenue for a typical homeowner when no subsidy elements are present, the results are very good in the case of employee housing. Homeowners can add significant insurance assets in all price path scenarios.
There are many LAZIE-DOOR models available. The adjusting party may leave any combination of parameters (rent, depreciation, property tax, interest rate, volatility, expected upgradings, actual rent, etc.) unchanged or apply a fixed predetermined schedule. This flexibility allows adaptation to different situations, whether or not they involve employee accommodations.
While the parameter remains constant, the homeowner is not affected by fluctuations in the parameter for the duration of the DOOR tool. The fluctuation in parameters may reappear when the room is sold or the DOOR tool is otherwise terminated. For example, assume that the LAZIE-DOOR tool includes a fixed net rent. The rate at which the house is sold reflects the actual net rent level, so the homeowner receives a lower or higher dollar return for a given percentage of insured assets based on the degree of change in net rent.
Leaving one or more parameters unchanged means that neutrality is lacking and the embedded option restores its importance. For example, if the net rental is fixed and the actual net rental fluctuates above a fixed value, the homeowner will obtain a spread and have an artificial incentive to continue to leave funds in the house because the DOOR tool is more favorable than the market. But it is still worth using the LAZIE-DOOR model. All parties agree to transfer the risk of fluctuation in one or more parameters to the investor, or LAZIE-DOOR is a good tool to implement subsidies. Combining certain models of subsidy and relief risks is ideal for many employee housing situations where the housing is primarily faced with house costs that seem large and at great risk compared to revenues.
LAZIE-DOOR is usually "semi-neutral". The adjustment process is still present but some aspects of it have been frozen. These aspects do not reflect the actual value of contributing neutrality. But other aspects will reflect. The result is some tendency to neutrality, but not complete, pure neutrality.
FIG. 11 is a flow chart illustrating an analyzer for the LAZIE-DOOR scheme in which expected upgradings, expected depreciation, property taxes, and estimated rentals are fixed. ("fixed" includes the case of a parameter change but according to a determined schedule, and setting the parameter to a value for the duration of the tool.) at each point in time of the adjustment, the unfixed rate factor input is only the house value and the priority block estimated interest rate. The next graph is the same as FIG. 5 for ANZIE-DOOR, except that four inputs are specified for the ratio factor rather than estimated or observed. The four inputs (as if four stacked gray shaded non-bold rectangles-were determined rather than calculated) are therefore generated from the DOOR tool feature cylinder rather than from the data cylinder and then fed into the ratio factor calculation.
In addition to fixed values or fixed schedules, there are other ways to avoid difficult estimations of parameters such as rent or house value. One possibility is to use regional or national rent or house rate indicators to adjust the initial rent or price level. These indicators show the overall proportional change in price or rent and can be used to increase or decrease the initially observed rent or price value. This solution is "lazy" because lenders can marginally accept easily calculated but less accurate rental estimates or house value levels. The change in rent or room rate of the property in question is usually at least to some extent different from the total change. On the other hand, the corresponding rent and house value estimates remain approximate no matter how mature the analysis engine in ANZIE-DOOR is. Tuning using an index-based scheme may be considered to use only a value that is approximately similar but still within the range of the ANZIE-DOOR itself. It is not important whether the person skilled in the art associates the names ANZIE-DOOR or LAZIE-DOOR with a particular scheme. Interestingly, ANZIE-DOOR is implemented using some approximate approach, which results in a DOOR tool that is similar to some LAZIE-DOOR models.
FIXED-DOOR
FIXED-DOOR is a static DOOR tool. None of the terms are conditioned on future values of parameters such as interest rates or house values. The evolution of insurance assets or other accounts is predetermined. These accounts may change over time, but only in accordance with a predetermined schedule.
The FIXED-DOOR tool is "initially neutral" in the sense that the market value of the tool at the time of sale is equal to the amount prepaid by the investor. At that time, the market value of the tool is equal to its true value. This equal sign is of course almost non-existent if market parameter adjustments are not considered, even if the tool terms evolve according to a fixed schedule. Since FIXED-DOOR is static, the tuning parameter deviates from the actual future value with a probability of 1. Therefore, the market value can almost certainly deviate from the true value.
Another step of moving towards neutral may be performed. An annual adjusted schedule or other characteristic that reflects the expected outcome of the rates, interest rates and other parameters at the initial time may be established. If the expected result is always presented as the same as the actual result, the tool will be always neutral for some future time. Of course, this nice result is only a difficult to believe coincidence. Nonetheless, setting the tool in this "projective neutral" manner tends to produce a state closer to actual neutral in the future.
The expected future outcome using the parameters is only one way to bring the future outcome closer to neutral. A more meticulous approach is to select a fixed insurance asset schedule that minimizes a total deviation criterion (e.g., mean square error or mean absolute deviation) based on some numerical measures that are neutral. In short, there is a large array of "recognized neutral" insurance asset value-addition schedules that appear in a number of different ways to achieve neutrality.
FIG. 12 is a flow chart illustrating an analysis engine for the FIXED-DOOR scheme that generates an insurance asset value-addition schedule that is deemed neutral. The analyzer only works at one point in time: initially. Thus, in contrast to the ANZIE-DOOR analyzer shown in FIG. 5, the bold frame on the left hand side of FIG. 10 reads "data at initial time". No update processing is performed on the data. Instead, the analyzer uses the initially available data to generate a publicly-neutral insurance asset value-addition schedule. This process is represented by the calculation parameters of the gray shaded stack being fed into the DOOR tool feature cylinder. The instructions contained in this column specify the method for determining the insurance asset value-addition schedule that is known to be neutral. The method and the related information derived from the calculation parameters are then fed into a calculation module represented by a hexagon labeled "insurance asset value-added schedule", wherein the schedule is determined once. Because some of the arrows associated with the DOOR tool feature cylinder form a ring, it is necessary to explain the order of the flow of information. The order is indicated by numbering the arrows in the figure. First, step "1" in the figure is the data on the priority block and the command stream from the DOOR tool feature cylinder to the non-chasable fall option value and priority block derived interest rate calculation module (hexagon in the figure). The output of these modules is (along with other parameters in the gray shaded stack) the current and projected priority block prediction interest rates input back to the DOOR tool feature cylinder, which is step "2" in the figure. Finally, step "3" in the figure is where these inputs are combined with instructions for calculating the required deemed neutral insurance asset value-addition schedule and passed to the module which calculates the schedule.
In some cases, it is desirable to sell a FIXED-DOOR tool that does not have a neutral element. These "non-neutral" tools are quite normal in a staff's house or other environment where subsidies are appropriate. For example, the FIXED-DOOR tool may relate to a predetermined insurance asset value-added schedule that is pre-emptively beneficial to the homeowner. Initially, this tool assumes that the market value of the investor is lower than the amount offered to the homeowner, which reflects subsidies. The tool may also add insurance assets at a rate greater or less than the expected rate over different periods of the tool duration, thereby adapting the insurance asset schedule to the individual's preferences or needs.
ANZIE’S NU DOOR
'shrinking' house
The problem of house "shrinkage" has been particularly apparent during the house crisis since 2007. Once the house value approaches or falls below the principal due for mortgage loan financing, problems arise and risk incurring real economic losses. First, for many homeowners with non-pursuit mortgages, it becomes advisable from a financial standpoint to violate the default, even if the homeowner has sufficient income to continue lending the mortgage. The default and subsequent emptying or loss of redemption can result in significant trade losses. Second, the homeowner has reduced or lost the power to maintain the house and even protect it from robbery, making the situation worse. Any such effort benefits the lender, not the homeowner. Finally, if there are houses being recovered by the bank, the value of the houses nearby can also be adversely affected, particularly if these houses are out of maintenance. This effect leads to further house price reductions and can lead to more loss-of-redemption situations and large-scale depreciation in the vicinity.
It is important to emphasize that this situation involves substantial economic loss, not just the transfer of property from one owner to another. Transaction fees, maintenance failures, and external effects in the vicinity all produce a net loss of value.
The following discussion provides a DOOR variant that prevents the occurrence of a "shrink" condition. This variant is derived from ANZIE-DOOR, but it is easier to add features to most DOOR variants that prevent the home value from falling below the mortgage balance. The discussion at the end of this document describes the DOOR scheme in relation to the related "security" problem to deal with situations where a house is already "shrunken" and is about to lose redemption.
Keep shrink-free no longer has real estate crisis
ANZIE 'S NU DOOR completely eliminates the problem of house "shrinkage" by requiring investors to pay down for home owners' mortgages when the ratio of house loan values exceeds a given percentage (e.g., 85%). Otherwise ANZIE' S NU DOOR is identical to ANZIE-DOOR. (the added letter "SNU" means "no shrinkage from then on")
When the investor pays the homeowner's mortgage, the analysis engine that forms the basis of the ANZIE-DOOR ensures that this is a "market deal". The investor will receive two benefits:
(1) The priority block shrinks and the investor's assets expand the first-payment amount.
(2) As the priority block becomes smaller, the speed up of insurance assets to the homeowner becomes slower.
These two benefits are equal to the cash required for the first payment in terms of the adjusted cash value for the risk.
FIG. 13 is a schematic block diagram illustrating profitability of the ANZIE' S NU DOOR scheme in accordance with the present invention; and FIG. 14 is a schematic block diagram showing the deficit condition of the ANZIE' S NU DOOR scheme in accordance with the present invention.
Among the environmental factors of the whole scheme, most of the consideration is the tax processing mode in the first payment event. Normally, the repayment of a debt by a party other than the taxpayer will result in the fulfillment of the debt revenue. However, there is a key difference here. The first payment will not bring benefits to the homeowner. Instead it creates additional assets for investors that equal the payers and also slows the rate of value-addition of insurance assets. This is only significant in that the payoff amount is added on an investor basis with respect to the regular trade portion and subtracted on a homeowner basis with respect to the priority block. There should be no other tax effects.
It is worth noting that even after removing the first payment, the priority block must be large compared to the total house value. Mortgage loans are part of a priority block. When the loan value ratio based on these loans is high, only a small portion of the property is left. Even if the assets are all investors 'assets, that is, the homeowner's committed assets are equal to zero, the homeowner provides considerable leverage to the investors and, therefore, the insurance assets are quickly added value. Indeed, the rate of increase is lower than without the first-payment feature, but the homeowner gains exact economic compensation by reducing the interest charges and lowering the loan balance. Cash flows are quite popular in adverse economic environments associated with reduced house prices leading to high loan value ratio situations, as compared to lower mortgage payoff amounts.
FIG. 15 is a cash flow diagram illustrating an analyzer implementing ANZIE' S NU DOOR. The analyzer is similar to the one shown in fig. 5 implementing ANZIE-DOOR, except that a set of steps relating to the first payment of a mortgage is added. Because the first payment reduces the size of the priority block and because the size of the priority block affects the calculation of other parameters, the analysis engine must calculate the first payment for the mortgage loan before making other calculations. Fig. 15 includes a new hexagon labeled "mortgage on priority block first payment", which represents the calculation of first payment. To resolve the ambiguity inherent in the arrow loop, some arrows are numbered, thereby indicating the order of the information flow. The calculation of mortgage payments requires the house present value (step "1"), which can be estimated using the information in the data column and the state of the pre-payment of the priority block stored in the DOOR tool feature column (step "2"). Information about the mortgage itself is also required (dashed lines emanating from the "mortgage information" hexagon). After obtaining this information through the first two steps, a calculation of payment is made (the "first-payment" hexagon for mortgage on priority block). The calculation result is transmitted back (step "3") to the DOOR tool feature cylinder, forming the basis for the priority block update information. The remaining steps are identical to those in ANZIE-DOOR. The priority block update information is input data for calculating the estimated interest rate of the priority block (step "4"). This interest rate, along with other parameters in the gray shaded box, is used as input data for calculating the ratio factor (step "5"). Step "5" also includes data calculated from the DOOR tool feature cylinder input ratio factor, and also data calculated from the cylinder input to the insurance asset percentage (step "6").
If ANZIE' S NU DOOR is widely used, the traditional property crisis involving loss of redemption tides will disappear. There is also a strong positive externality for the mortgage lender. Loans are always protected by the buffering of property capital. There are no strategic violations, only "credit violations," where a decrease in revenue or other adverse circumstances reduces the ability of the homeowner to support mortgage loans.
In the event of a credit breach, both ANZIE-DOOR and ANZIE' S NU DOOR actually create a different negotiation environment than today, which results in higher joint economic benefits to homeowners, mortgagers and investors. Currently, mortgages and mortgages can dispute after a mortgage owes a debt to an due and outstanding amount. At the point of loss of redemption, the homeowner gains free ownership, but at the same time loses the power to maintain the premises at once. A classic picture is that the homeowner changes to an unregistered telephone number and ignores the creditor, which is a typical example of the lack of cooperation power. Failure of cooperation and the unfavorable motivation for homeowners to maintain a home result in substantial economic loss.
The situation is quite different in ANZIE-DOOR and ANZIE' S NU DOOR. Homeowners typically own a large amount of insurance assets and profit from selling as much as possible. If homeowners' mobile assets are constrained due to difficult economic conditions, there is a strong incentive to earn these benefits as quickly as possible. The power of the homeowner and the mortgage owner is equal and the mortgage owner will answer the phone call even if the homeowner does not make the call.
There is a mortgage-related problem in ANZIE-DOOR, but not in ANZIE' SNU DOOR. In ANZIE-DOOR and ANZIE' S NU DOOR, maintenance contracts and insurance asset schemes can create positive externalities to mortgagers that relate to potential joint revenues. In many cases, homeowners own a large number of insurance assets when redemption rights are about to be lost. Thus, the homeowner has a strong incentive to maintain and protect the premises until the bank retrieves the premises and ends the auction. Otherwise, the return on insurance assets by the homeowner at the time of settlement will be reduced on the basis of changing from one minute to one minute. The net result is that the physical deterioration of the premises that are going to be processed without redemption is greatly reduced and thus a deposit is made for the mortgage owner. It is assumed that in a competitive mortgage market, some or all of these potential deposits are made available to the homeowner in the form of lower mortgage fees (interest rates, points, etc.) and possibly the ability to loan more. But this is not just a zero sum game. At least a portion of the deposit, and possibly even a substantial portion of the deposit, generally represents a joint gain. In many cases, the low capital cost of maintaining the house at the right time avoids the cost of more money to repair in the future, which is typical of "roof leaks". (early prevention of water leaks with inexpensive patches often prevents the occurrence of water attacks that require expensive remediation.)
The problem is that the ANZIE-DOOR contract is between the homeowner and investor, rather than between the homeowner and mortgage owner. In the face of loss of redemption, the investor has no incentive to include the terms of raising the rate by enforcing maintenance incentives. The opposite is true. Investors are more profitable if the house conditions are severely degraded before the bank withdraws the house and auctions. The investor has no remaining assets in terms of capital structure that can be lost, and a lower selling price reduces the investor's insurance for the homeowner. In short, the ANZIE-DOOR clause which reduces redemption costs creates positive externalities for mortgage owners that may be partially or fully acquired by the homeowner, but are often harmful to the investor. If the DOOR tool investor is simply a mortgage owner, then this externality is internalized. If not, there is an incentive to address the externality from a contractual perspective. The third party mortgage person is very interested in the terms of the DOOR tool and may make certain requirements as conditions for the appropriate mortgage terms or as conditions for approving a loan. Creating and executing these contract terms obviously involves a fee that is not present if externality is internalized. On the other hand, third party lenders may have much more expertise in mortgage financing than investors, and therefore, the result is a mortgage that is more economical for the homeowner, regardless of the surcharges inherent in dealing with externality.
In ANZIE' S NU DOOR, there are no extrinsic problems. The investor is responsible for paying a mortgage loan to maintain the maximum LTV, and therefore wishes to avoid the following nightmare-like scenario: the power to maintain the house is lost, followed by a deterioration in physical conditions that results in a sudden drop in the value of the house. On the down-path of the house price, the investor eventually provides 100% coverage of the mortgage guarantee, which fully and in advance compensates for any potential loss by the mortgage owner. For example, assume an initial house value of $200,000, a mortgage principal balance of $90,000 and a contractual maximum LTV of 90%. If the house value drops to $50,000, the investor has to pay $45,000 to the mortgage owner to raise the LTV back to 90%. But a $45,000 payout also produced $5,000 assets to the investor. The net transfer is $40,000, exactly equal to the loss of the mortgage, i.e., $90,000 from the initial principal balance minus the house value ($50,000). In short, investors and mortgage owners share the same position in terms of losses due to non-ideal maintenance. No externality exists.
Is ANZIE' S NU DOOR "calling for"?
ANZIE' S NU DOOR is involved in the "hunting" aspect. The investor may be responsible for all losses in the sense that the homeowner funds the priority block via a mortgage loan. However, this tool is different from the traditional recourse in which the responsibility for compensating for loan losses occurs only when there is a default event or the loan terminates. Investors must pay mortgage before the breach becomes a real possibility, and for that matter, ANZIE' S NU DOOR is a pre-emptier. This feature means that in some cases, first payment is present even though a breach has not yet occurred.
Another difference may exist between the provisions so far of ANZIE' S NU DOOR and the traditional responsibility for pursuit. Advance payments in ANZIE' S NU DOOR are tied to any collateral guarantees undertaken by the homeowner. However, the homeowner selects the amount of the mortgage financing and may hold a portion of the priority block as committed assets. If the ANZIE' S NU DOOR tool does not limit the amount of mortgage credits, the homeowner has an incentive to act strategically when there is a risk of the house value falling below the "principal" amount of the priority block. In this case, the homeowner wishes to "withdraw" committed assets, converting them into mortgage guarantees. This act transfers the risk of loss in terms of committed assets to investors. The entire priority block is financially financing, which the investor must pay if the house value drops to a certain extent.
If all homeowners are strategic in their performance and the cost of mortgage financing is low, then the priority block in ANZIE' S NU DOOR is fully retrospective, with another advance payment feature. There is no possibility of loss for any mortgage owner or homeowner. Thus, investors are reluctant to pay the calculated interest of the priority block at an interest rate that is higher than the risk-free rate of the loan during the same repayment period. The situation is more troublesome if the behavior of only a portion of the homeowners is strategic. The terms of the tool must price the probability of strategic action and some homeowners withdraw commitment funds at the best opportunity to do so, and these homeowners have acquired satisfactory terms but sacrifice those who fail to protect their commitment assets by withdrawal. There is an embedded option that the diligent homeowner wishes to perform when granted. One way to solve this problem is that the tool has significant recourse in addition to the mortgage loan offer feature. As such, withdrawal of committed assets would not benefit. Ensuring that the homeowner recovers committed assets at any event and at the same time earns an appropriate "market" level of return.
If all homeowners are strategically present, then investment inefficiency results if the withdrawal involves a large amount of transaction cost. Unlike the consequences of the responsibility of the priority block which entails the cost of "moral risks" and which is ultimately virtually identical to recourse, it is reasonable to first make the entire priority block apparently recourse, which is the scheme described below as ANZ' S NU TRIE DOOR.
It is important to note that the feature of repayment of loans in advance in the ANZ' S NU TRIE DOOR increases the value of the house even though the facility also considers the entire priority block as a recourse. Repayment may reduce the homeowner's maintenance costs to achieve this result when the homeowner has no moving funds to pay for the loan. It is important to remember that the declining trend in house value is related to the homeowner's adverse financing environment. The decline of local economy often affects both revenue, employment security and housing price. The feature of loan clearing also provides security for the mortgage owner. When a house sale or other event triggers this feature, it removes any doubt as to whether the DOOR tool investor will perform the hunting feature by compensating for the mortgage loan spread of the mortgage owner at some point in the future. This increased security may be translated into a lower mortgage interest rate or the ability to fund a larger share of the homeowner's priority block.
This may be a very interesting feature even if there is no obligation to repay the loan in advance, making priority block liability retrospective. The discussion below, along with the partially retrospective DOOR variants, scrutinizes this possibility. The ethical risk problem associated with ANZIE' S NU DOOR is also discussed in detail.
DOOR tool with following and partial following performance
All variants considered so far, except ANZIE' S NU DOOR, are non-retrospective in terms of priority blocks. Thus, the interest rate i is estimatedPIncluding a premium that compensates the homeowner's principal' for the investment on a non-recourse basis. As described above, this premium is a sharp increase when the house value drops below the priority block cost amount. The result is a faster appreciation of the insurance assets in favor of the homeowner. At the same time, the homeowner is directly charged on the committed equity portion or on the portion covered by the retrospective mortgageAnd additional fees are paid for mortgage default options on any part of the third party's financing with non-retrospective mortgage loan. Not all homeowners enjoy this particular balance between risk and return. Thus, there is room for a partially or fully retrospective DOOR variant.
ANZ TRIE DOOR-variants that are completely retrospective
The ANZ TRIE DOOR is the same as ANZIE-DOOR, except that the priority block loan is fully retrospective. (the "full recourse" nature of the priority block led to the addition of the letter "TR" to the name of ANZIE-DOOR. the recommended pronunciation was: "Ann's Tree DOOR.) this variant is suitable for use by anorexic risk homeowners who fear the loss of some or all of the priority block due to adverse housing market conditions. The investor provides a guarantee in return for any committed property and in effect provides a 100% collateral guarantee for loans by the homeowner that are guaranteed by the priority block. This guarantee means a calculated interest rate i on the priority block "principalPNot including any fees to compensate the homeowner's borrowing on a non-recourse basis. As a result, insurance assets add value more slowly when the house price is low. Table 10 below shows the results of the reference model corresponding thereto.
TABLE 10 EXAMPLES-reference model, pursuit situation (ANZ TRIE DOOR)
Comparing these results to table 7 above, it is clear that non-retrospective financing results in a higher percentage of insured assets and a lower revenue price path. The percentage of the largest insured asset on the 12,000 price path in the nonrequest case is approximately 5 points higher in 10 years, and the gap is approximately 3 points in 30 years. The outcome of the insurance asset return is slightly higher at 99%, but there is little or no difference at the lower percentile or average return. The type of outcome depends mainly on the assumed value of the house price volatility. A higher degree of fluctuation has a greater effect on all percentiles. For example, a simulation not reported herein using a volatility equal to 11% instead of 9% resulted in an increase of about 1 percentage point in the percentage of insurance assets in the 99% calculation.
FIG. 16 is a flow chart illustrating an analyzer that implements ANZ TRIE DOOR. This analyzer is the same as the ANZIE-DOOR analyzer shown in fig. 5, except that the priority block estimated interest rate is calculated differently. In the ANZ TRIE DOOR, there is no step of calculating the components associated with non-chasable fall options, and the associated hexagons that are evident in fig. 5 are not present in fig. 16. The priority block loan in the ANZ TRIE DOOR is retrospective. As a result, the priority block estimated interest rate does not include a premium based on the non-recourse of the loan, and no estimate of the associated call option is necessary.
The ANZ TRIE DOOR is a very powerful choice for homeowners who are not at risk. Assuming the investor has paid capacity, the homeowner is unlikely to lose funds. Committed property in the form of an installment or mortgage loan is fully protected. Any mortgage loan is fully guaranteed by the investor. This feature can produce a considerable "credit increase" because the credit status of the investor supports the loan. The result should be that the mortgage interest rate is very satisfactory.
The recourse scheme must specify whether the return of the investor is to the homeowner or the mortgage when the final value of the house is below the priority block amount. For example, assume that a $200,000 priority block principal consists of $20,000 committed assets and $180,000 mortgage loan balances. If the house is sold at $160,000, the investor will proceed to: (i) pay homeowner $40,000; or (ii) pay the mortgage owner $20,000 and pay the homeowner $20,000? In the latter case, there is a significant collateral guarantee. In the former case, the homeowner may take $20,000 away and leave the mortgage owner with a $20,000 loss. The mortgage style that appears to be obvious is the more useful of the two schemes. In an insurance asset scheme, homeowners have long enjoyed effective protection in low selling price situations. Typically, no more money need be offered to pay back a loan. Thus, it is assumed in this discussion that the contractual scheme is a mortgage style.
The reason why the homeowner can obtain a strong credit increase is that the investor's committed assets support 100% of the blocks of priority. Contractual commitments to produce large amounts of value are less extreme, and are more attractive to investors because of their restrictive and reliable nature. Some examples of "partial pursuit" schemes are described below.
Before doing so, it is worth emphasizing that the fully retrospective variant is complementary to the first-come-up feature introduced in the ANZIE' S NUDOOR discussion. That is, one interesting variant is "ANZ' S NU TRIE DOOR". The investor provides guarantees for any committed property and advance mortgage initiatives to keep the priority block LTV from exceeding some maximum. This variant completely eliminates the ethical risk problem in ANZIE' S NU DOOR. The homeowner has no reason to convert the committed property to a mortgage loan to avoid losing the committed property. The investor has provided a guarantee of committed assets.
Partially following variable
There are many possibilities for creating useful "partially chasable" variants. One solution is to make the priority block loan retrospective, but only valid for a certain amount of loan. Consider, for example, the case where the priority block is $200,000. The investor is only guaranteed to be in a recourse state when the first $20,000 is lost. If the house is ultimately sold at $180,000 or less, the investor pays a $20,000 loss to the homeowner or mortgage owner. In this scenario, the homeowner may accumulate up to $20,000 committed assets without loss risk. At the same time, the investor's liability is limited, and the homeowner and investor together benefit from the homeowner's default options on mortgage loans in amounts less than $180,000. This scheme is sensible if the price of the default option is reasonable for the parties.
In deciding on the form of the scheme, it is helpful to treat the homeowner and investor as joint speculators as opposed to mortgage owners. If the investor is willing to offer the default option at a lower price than the mortgage owner, then the parties can agree to a fully retrospective DOOR tool. Homeowners and investors can share the "benefits" of doing so. In some cases, the investor has more information about the homeowner or house than the mortgage owner, which enables the investor to offer default options at a lower price.
Another possibility is that the investor provides an explicit collateral guarantee, but does not provide any guarantee on the committed assets. This solution can be of many types. In a comprehensive mortgage scheme, the investor supports 100% of any and all mortgages. Pricing can be dynamic, depending on the dynamic analyzer that forms the basis of the neutral DOOR tool. Each time a formal adjustment is initiated, the market value of the mortgage guarantee provided in the next time period is a credit to the investor in the net funding calculation that can slow the appreciation of the insured asset or other balanced residual value that is beneficial to the homeowner. Transitional adjustments are made whenever a mortgage loan becomes different from the installment payment schedule, e.g., the homeowner is crediting more at the beginning of the period or has previously returned some or all of the existing mortgages. A comprehensive mortgage guarantee scheme appears to investors as having a very good balance. If the house value drops or falls below the priority block amount, the insurance asset or other remaining account is sharply increased in value, which is beneficial to the homeowner. The mortgage "credit" that is beneficial to the investor mitigates this trend, slowing the rate of value increase. It is common for a neutral DOOR tool that investors receive market-based compensation due to the collateral warranty obligations they undertake.
This style with the full mortgage feature is equivalent to ANZIE' S NU DOOR without the advance loan repayment feature. The security covers the default of the homeowner when selling the house, but there is no obligation to pay for the mortgage loan prior to sale. The adjustment mechanism for "pricing" for the secured benefits adjusts as the mortgage balance changes and rationalizes the ANZIE' S NU DOOR. Adding loans may result in additional "collateral" compensation for the investor. However, the adjustment process does not eliminate the potential moral risk problem. There is also an information asymmetry problem. If the homeowner knows that there is a possibility of moving one in the near future and that the house is only slightly above the principal amount of the priority block, the homeowner has an incentive to cash out the committed property by adding mortgage loans. As shown by the calculations in table 5, a shorter expected hold time for the property of the house translates into a larger collateral guarantee "surcharge" for the investor. However, there is no reason for the investor to suspect that the holding time may be short, other than the cash-out event itself. These situations require a well-agreed response, such as limiting or delaying the provision of warranty to the cash-out portion. As described above, ANZ' S nut DOOR combines a full recourse tool with an advance payment, thereby providing a complete solution, eliminating ethical risks and avoiding any associated contractual or negotiation costs.
Another way to avoid this moral risk problem is to eliminate the recourse responsibility and the link between mortgage loans and the mix of committed properties in the priority block. For example, assume there is a $200,000 priority block principal. Investors provide "guarantees" for losses of $60,000 only in the range where house value drops below $160,000. A sale price below $160,000 triggers a repayment to the homeowner or mortgage player depending on which party funded the portion below $160,000. This liability for the investor is dependent only on the selling price and not a mix of mortgage loans and committed properties. Since the homeowner has the ability to change the mix of mortgage loans and committed property, there is no moral risk issue.
There are many other possibilities. For example, whenever a homeowner starts a new loan, the contract may require the investor to provide a mortgage guarantee with a premium due to the investor's net contribution calculation. Because the investor can select the selling offer, the investor can deal with the potential moral risk situation by setting the selling offer high when the environment shows it sensible to do so. This is particularly attractive if the investor is itself a sophisticated mortgage lender or guarantor.
COZIE-DOOR-cash-out or retire calmly
Shrinkage of property and source of income
Homeowners sometimes wish to cash out funds from their house. The sleeve is a rational action in the lifetime. A typical example is where retirees who need income live in very loving loans-free and valuable houses. The homeowner wishes to continue living in the house but wants to withdraw money to purchase pension or generate a cash reward. Various marketing tools such as reverse staged mortgages and after-market leases may handle this situation. A problem with many of these schemes is that they involve interest or rent expenditures, i.e. cash flows in the wrong direction. In addition, there is a strong uncertainty factor with tools such as reverse mortgages. If the homeowner lives long enough for the rate to be fixed or to decline, the mortgage loan may swallow all of the property value. Typically, a reverse mortgage contract requires the homeowner to pay a fee in advance to compensate for the potential difference of the mortgage owner. Reverse mortgages also place the property of the homeowner at the most risk.
For retired homeowners, the cash-out strategy works best if no interest or other expenditure is involved, future situations can be anticipated as much as possible, and minimal attention or management is required. The flexibility of DOOR creates many possibilities to meet this basic scheme. The focus in this section herein is on a group of variants under the abbreviation "COZIE-DOOR", where "CO" stands for "cash-out". These variations include the insurance or commitment asset part, the Z capital structure, and neutrality. They differ from ANZIE-DOOR in that the situation of the homeowner and investor are reversed. Before explaining COZIE-DOOR, it is worth discussing the ANZIE-DOOR type of scheme and related problems that may contribute to this reversal.
A very simple method of using ANZIE-DOOR is to initially bring up the maximum possible chance of neutrality and then freeze the transaction, i.e. without periodic adjustment. For example, assume that a retirement person has a house worth $600,000 and no loan debt. In ANZIE-DOOR the investor is pre-paid an amount, say $250,000, so that initially the insurance asset does not flow in any direction. Priority block leveraging exactly offsets the net rent. Without periodic adjustments, homeowners procure $25 million funds and live a lease-free for a long period of time. No mortgage loan interest needs to be paid and the homeowner's remaining $350,000 takes precedence over the investor's $250,000 assets, much like the first mortgage right. The homeowner does not have to take any measures to manage any aspect of the house financing transaction, but rather lives free of rentals for the rest of the life, while still receiving revenue from $250,000 pension or other investment.
This result is very attractive but also hides the problem. Neutrality exists only initially. Suppose that the house value falls thereafter. The homeowner has the incentive to pay off the tool and re-fund it with the new tool. The new tool even allows homeowners to acquire more assets than before. Assume that the house value drops from $600,000 to $350,000 in the previous example. This violent fall completely deprives the investor of assets. The homeowner will perform strategic re-financing. If the terms in the tool prohibit doing so, the homeowner can achieve the same result by selling it strategically. The sale is accompanied by the purchase of equivalent premises, which means that the remaining value of living in the loving premises is destroyed or lost. For some homeowners. Such consumers remain so high that they do not sell strategically, even with high financing revenue. Other homeowners may then become strategic in this situation. At least some options, such as moving to retirement communities through a guaranteed life, become more attractive if there are a large number of increasing financial incentives by earning from strategic sales.
The situation at this point is the same as that present in conventional asset tools. The investor's position has an inherent value of zero, but the investor potentially has a very valuable option to take a call: rights relating to all future increases of the house. Regardless of the investor, the homeowner may obtain more assets related to similar terms of the first transaction, perhaps $150,000 out of the remaining $350,000.
If such strategic actions occur frequently in nature, the investor will require a "moral risk" surcharge in advance. To achieve the full financing benefit of this transaction, the homeowner must behave strategically and make best efforts to do so. In the case of contracts prohibiting strategic re-financing, taking strategic actions requires moving out of their favorite home.
If the house is up, there is a high probability that the opposite situation will occur. In the new trade of house upgradings, the homeowner cannot obtain an amount of assets equal to the investor's current share. Thus, if a homeowner sells and moves to an equivalent house, the investment business is even worse. For example, assume that a house worth $600,000 is up to $1200,000. If the homeowner sells and proposes $350,000 to commit to the property and then attempts to purchase the equivalent house ($1200,000), the homeowner must invest more property or credit more. If we double the original transaction, the DOOR tool finances only $500,000 in the house worth $1200,000, which would result in $350,000 of the $700,000 required for the homeowner to move.
This simple solution is therefore problematic. In ANZIE-DOOR type tools, adjustments need to be made frequently enough so that the value of the embedded options associated with the tool is marginal. However, after frequent adjustments, the insurance assets begin to add value or lose value, which causes similar problems as reverse staged mortgages. If the house is up, the investor accumulates insurance assets. If the value continues to increase, the investor's insurance property equity can eventually be more valued than the homeowner's committed property!
One possible answer is to continue to implement ANZIE-DOOR but change its terms to achieve a result consistent with the homeowner's goal:
(1) increasing cash payoff;
(2) ensuring stability.
For example, the amount of withdrawal may be less than the amount required to zero the incremental amount of the initial insurance asset. This scheme creates "buffer credits," which tend to prevent situations where under-insured assets are created. If the house value decreases and the insurance assets increase quickly, the tool may cash out more than a certain percentage of the insurance assets. On the other hand, if the house is up, the tool may add committed assets instead of insured assets. The result is greater "priority block" leverage and a trend to maintain insurance assets flowing to homeowners.
There are several problems in this solution. First, the homeowner's return is uncertain and this is not a goal for stability. Second, a portion of the economic value of the house is used to generate a buffer limit consisting of insurance assets. Maintaining the buffer quota is a fee rather than a revenue, assuming the goal is cash-out. Buffering credits is necessary because ANZIE-DOOR is not very stable in cash flows that are important to homeowners.
COZIE-DOOR scheme
In many cases, a good alternative is to reverse the capital structure present in ANZIE-DOOR and the capital added positions between the homeowner and investor. Various styles of COZIE-DOORs are produced as a result. It is beneficial to consider at least two aspects in classifying these styles. First, there are different "cash-out" schemes. Two of these schemes are considered as follows: the allocation modes of periodic repayment and one-time repayment are an annuity mode and a one-time repayment mode respectively.
Another aspect relates to selecting remaining accounts that balance the net contributions of the parties. In ANZIE-DOOR, the insurance asset is the remaining account. The corresponding "insurance assets" model of COZIE-DOOR just reverses ANZIE-DOOR by adding insurance assets that are beneficial to investors rather than homeowners. However, in some COZIE-DOOR applications, it is preferable to balance with another remaining account. The COZIE-DOOR "committed assets" model is contemplated herein, wherein committed assets, but not insured assets, are remaining accounts.
One aspect of COZIE-DOOR is not concerned with reversing the positions of homeowners and investors in ANZIE-DOOR. In ANZIE-DOOR and COZIE-DOOR, the homeowner takes possession of the house and fully earns money from the estimated rent. Certain versions of COZIE-DOOR considered below share another similarity with ANZIE-DOOR: the homeowner is charged with depreciation and property taxes. In these COZIE-DOOR models, the homeowner obtains a net rent and a calculated rent, as in ANZIE-DOOR.
New year money scheme
One cash-out scheme in COZIE-DOOR requires investors to pay homeowners a fixed or planned repayment, namely an "annuity", for a long period of time. In exchange, the value-added benefits of insured or committed assets to investors are provided under a periodic adjustment mechanism underlying ANZIE-DOOR. The calculation of the ratio factor is somewhat different. The numerator on the right hand side of equation (4) does not include a net rent term. The net rent flows to the homeowner, not the investor, and is not subtracted when calculating the investor's net contribution. The net payout is equal to a cash payment, and the numerator consists of the cash payment interest rate over the period of time proportional to the house value.
FIG. 17 is a schematic block diagram illustrating an insurance asset annuity model according to the COZIE-DOOR scheme of the present invention.
While there is no reason to exclude the COZIE-DOOR's committed-asset annuity model, for the sake of brevity only the insurance asset model is considered when introducing COZIE-DOOR. Of course, some investors and homeowners may prefer the committed asset pattern in an annuity cash-out scenario. Committed asset models are particularly useful in certain security situations and are discussed below as part of the subject.
As in the case of ANZIE-DOOR, the premium rate of insurance in COZIE-DOOR is random and subject to variation based on many different market conditions that may arise in the future. This risk affects the return of the investor. The values in Table 7 illustrate that the investor return under the COZIE-DOOR insurance asset model is similar to the benchmark model scenario. This example corresponds exactly to COZIE-DOOR if the house owner and investor's position is reversed. The benchmark model assumes that the net rent in calculating the insurance asset is zero. This assumption is "correct" for COZIE-DOOR because the net rent is not subtracted when calculating the ratio factor. In the benchmark model scenario, this prospect is bright to the investor, since the investor still holds a major percentage of insurance assets even if this percentage slowly increases at an abnormal rate on the final price path.
Although the homeowner is the other party in the scenario, in exchange for abandoning the insurance asset, the homeowner receives the expected return for low risk for a long period of time in the future. The return may be large relative to the initial house value. For example, the annual return may amount to several percent of the initial house value, and there may be adjustments to the inflation of the currency if necessary.
Unlike reverse staged mortgages, the value of the premium of an insurance asset cannot become so high that the tool must be terminated. The percentage of insured assets cannot exceed 100. See equation (5) above.
In addition, the homeowner still has residual claim rights. If the rate of the house is soaring, the homeowner receives most of the revenue, which makes it easier to move around in the future, if necessary.
This style of COZIE-DOOR is particularly suitable for persons who own a house but do not have debt and wish to continue living in the house but need cash flow. In this case, the return of the investor can be protected by prohibiting a mortgage loan of the house guarantee. In this scenario, the investor can determine that the homeowner has a way to convert the percentage of the associated insurance assets into corresponding house value increments when selling the house.
This style of COZIE-DOOR requires the tool to be terminated when the homeowner dies and sells. Otherwise, the family can pass the house to the next generation by giving away or inheriting, continuing to obtain payment from the investor for a long period of time, and the insurance assets are never cleared. Termination at death has a wider application. The effect is generated whenever the contract terms activate a homeowner feature such as credit value. In these cases, after the house is handed over to a new owner in some way other than selling the house, the investor wishes to have at least the option of terminating the tool rather than continuing the armhole side view.
Maintenance issues may also exist. If the percentage of insurance assets increases to a high level, the consequences of not maintaining the premises are much less than the impact of changing from one minute to one minute on the homeowner. One way to deal with this situation is to make a similar maintenance liability as in ANZIE-DOOR, in addition to the contractual obligation to require the homeowner to make up the homeowner's sales revenue differential rather than the insured asset account differential at the time of sale of the home. The account belongs to an investor.
Unlike maintenance responsibilities that may exist, this style of COZIE-DOOR requires no or little proactive management on the part of the homeowner. The homeowner does not have to make any financing decisions but simply "pick cheap". This is really "ease".
FIG. 18 is a flow diagram illustrating an analyzer implementing COZIE-DOOR for an annuity model of insurance assets. This style of COZIE-DOOR involves the computation of insurance assets. For the analyzer that forms the basis of the ANZIE-DOOR, the calculation is similar in some respects to that shown in FIG. 5, but there are important differences. The net investor investment determines the ratio factor in COZIE-DOOR as opposed to the net investment of the homeowner in ANZIE-DOOR. Since the investor is no longer funding the priority block that affects the homeowner's equity in the house, the calculated rate factor does not take into account the calculated interest rate of the priority block. The four key elements are: net rent, expected upgradings, house value, and annual payouts of investors to homeowners. The numerator of the rate factor is the annual repayment over the next period divided by the house value, and the denominator is the net rent increment rate plus the expected increment rate. Returning to FIG. 18, the five calculation parameters include the gray shaded box input into the ratio factor calculation. Three of these parameters (dead rent, expected depreciation, and property tax) are elements in the net rent. To emphasize the contribution of annual repayment to the COZIE-DOOR, there are two sets of arrows emanating from the DOOR tool feature cylinder a directional rate factor hexagon. A set of DOOR contract terms present in the DOOR tool feature cylinder specify the annual payment schedule entered into the rate factor calculation (non-bold box labeled "annual payment schedule" in arrow flow). The other arrow flow represents the remaining inputs from the DOOR tool feature cylinder, including the algorithmic description of calculating the ratio factor. The remainder of the graph is identical to FIG. 5 of ANZIE-DOOR. For example, updated long term deterministic equivalence ratio is a necessary input to calculate the percentage of insured assets.
Disposable repayment scheme
The homeowner may wish to retrieve the property at one time rather than a periodic cash payment. In COZIE-DOOR, it is easy to meet this requirement. The investor provides a charge of money and then obtains a preferred block position in the house equal to the amount of money he provides. The homeowner has the remaining cable right. In exchange for providing this money, the investor accumulates insurance assets or commitment assets. (same as for the annuity scheme, but with a different way of calculating the ratio factor, because the homeowner gains a net rent, there is no net rent term in the numerator on the right hand side of equation (4))
One of these two one-time repayment styles involves adding insurance assets and other commitment assets, similar in many respects to the annuity style discussed above. The homeowner has previously acquired a risk-free repayment, but the appreciation of the insurance or commitment assets is random and may be very uncertain. As a remnant claimant, the homeowner is at least partially protected from an unexpectedly high rate of rise.
There is a distinction between these two patterns, one of which is particularly important: if the investor accumulates insurance assets, there are potential problems similar to the danger of excessive "reverse amortization". Although the percentage of insurance assets can never exceed 100, the value of an investor's insurance asset position may exceed the owner's assets in the house after some time following certain price paths, including under-or actually under-valued conditions. This possibility requires adaptation to one or more of the following: (i) if the insurance asset account exceeds the property of the homeowner when selling the house, the applicability of the one-time repayment style of the insurance asset to the homeowner with possible repayment capability is limited; (ii) require the homeowner to make sufficient additional guarantees to ensure success; or (iii) to add contractual terms to ensure that the insurance asset can be valued, for example, if the property of the homeowner falls below the level of the insurance asset, the homeowner is required to provide a cash buffer or termination tool and to clear the insurance asset as well. These adaptations are either "not relaxed" because the homeowner is faced with major financial surprise losses in the future, such as the necessary cash buffer, or contradict the goal of "cash-out" by posting additional guarantees, or both.
Fortunately, there is no need to face the problems associated with insurance asset schemes. Accumulating committed assets avoids all the problems and consequences of the related scenario, which is attractive to many homeowners and investors. The investor's position is up and well within the capital structure. If there is no mortgage loan, the investor has all of the "safe currency" portion of the house value. At the same time, the homeowner has the remaining rights to ask for and is therefore protected in the event of a rapid increase in the market. In this case, if necessary, it can still be moved to an equivalent house by using a huge appreciation of the assets to purchase a new house. If the house price drops or rises very little, the property of the homeowner may disappear altogether and the value of the house is lower than the priority block, which includes the investor's ever-increasing funds in the form of committed properties.
But this is not a problem. As shown in table 5, the results show that committed property is a percentage of the value of the house and accumulates quickly, compensating for the investor's risk of providing a non-recollecting loan to the homeowner when there is little or no property. Investors face the risk of loss, but the analyzer will accurately provide the appropriate compensation. Another fact is that the investor has possession of all "safe" funds relating to the house. The homeowner's financing equity on the house represents the responsibility for obtaining a live loan and paying "interest" on the priority block. Of course, the homeowner continues to enjoy the money deduction benefits of living in the house.
The main objective of homeowners is cash-out, which has been achieved: most of the original house assets of the homeowner are no longer placed in the house. Finally, the committed assets are accumulated instead of the insured assets to resume "easement". The homeowner only needs to enjoy the return on one-time investment and live in the house.
FIG. 19 is a schematic block diagram of the COZIE-DOOR scheme showing a one-time repayment of committed assets style in accordance with the present invention.
FIG. 20 is a flow chart illustrating an analyzer implementing the one-time payment for committed property style COZIE-DOOR. The output of the analysis engine is an updated committed equity balance in favor of the investor, the result being represented by the "committed equity balance" hexagon on the right hand side of the figure. Calculating a new balance requires an old balance, an increment to compensate investor funding priority blocks, and a description of how to calculate the new balance. The arrow pointing from the DOOR tool feature cylinder to the hexagon that calculates the committed asset balance represents the feature cylinder from which the old balance and associated description was generated. The compensation increments are calculated in "pay" hexagons. The inputs to this calculation are the priority block estimated interest rate, which is generated from the hexagons that calculate the priority block estimated interest rate, and the information about the size of the priority block, which is from the DOOR tool feature cylinder. The calculation of the priority block estimated interest rate requires information about nonrepetitive options for settlement, house value, and the expected rate of rise of the house. In the case of non-chasable options, these three items of information are calculated from the priority block size information from the DOOR tool feature cylinder.
Disposable repayment and annuity scheme and other suitable features
It is simple to combine multiple styles, which results in a solution that includes a one-time payment and an annuity-type payment. Investors accumulate insured assets, committed assets, or a combination of both between periods of time based on spending on the homeowner during that period plus credits calculated interest by the priority block during that period. The numerator in the ratio factor calculation for this combinatorial style includes these two elements, but does not subtract the net rent, as the homeowner gains the net rent, as compared to equation (4).
It is also easy to add other features. For example, the tool requires the investor to pay property taxes for payment. These expenditures are factored into the rate factor calculation and result in faster accumulation of insurance or commitment assets in favor of investors. This solution makes the situation of the homeowner even more "peaceful". There is no need to worry about semi-or annual property tax obligations.
COZIE-DOOR has the same flexibility as a general DOOR tool. For example, it may accommodate a repayment scheme experienced in an annuity style. There may be maximum and minimum monthly payments. The homeowner automatically obtains the minimum amount, but may request an amount up to the maximum amount. A related scheme accumulates a "free" funding capacity equal to a funding deficit compared to a maximum amount of interest in a "savings account". In this scenario, the homeowner can retrieve funds from the account at any time. These schemes and many others are readily adaptable. It is also possible to allow the homeowner to modify the particular protocol used to select a new protocol from a menu at any time. The dynamic mechanism in the DOOR automatically generates relevant compensation adjustments for the changes made by the parties.
Position of investor
The positions of investors in COZIE-DOOR are quite different from those in ANZIE-DOOR and this difference is not just a simple reversal of the homeowner's position. Elements with a simple reversion style ("symmetry") include:
(1) the homeowner, not the investor, has the remaining claim, and is faced with the loss and profit of marginal profits corresponding to the fluctuation in the rate of the house.
(2) In a one-time repayment style, investors, not homeowners, have committed asset positions that take precedence over the remaining claimants in terms of sales revenue.
After reversal, some elements are asymmetric. There is no reversal in maintenance responsibility. In all models of COZIE-DOOR and ANZIE-DOOR, the homeowner maintains the premises. This motivational structure is different from ANZIE-DOOR, and the different nature depends on whether ANZIE-DOOR is compared to COZIE-DOOR for insurance or committed property models. At the beginning of COZIE-DOOR, the normal incentive to change from one minute to another is present because no committed or insured assets have been accumulated and the homeowner has the remaining claims to take. In the insurance asset model COZIE-DOOR, this incentive gradually falls below the level of change from one minute to one minute as insurance assets increase. If no contract is maintained, the opposite result occurs in the ANZIE-DOOR. In the COZIE-DOOR committed property model, the incentive to change from one distribution to another always exists as long as the homeowner has the property in his house.
Another asymmetric element relates to the sign of the ratio factor. In ANZIE-DOOR, the ratio factor may be negative because the numerator in the ratio factor is equal to the calculated interest on the priority block minus the net rent. In all the COZIE-DOOR styles, the net rent is not considered in the calculation. The homeowner continues to enjoy the benefit of a rental fee. Thus, all elements in the ratio factor molecule are positive. The investor pays for a repayment (in the annuity style), an estimated interest on a priority block loan (in the one-time repayment style), or both, and may be funded in other ways, for example, by paying property taxes. As a result, the ratio bank is always positive and insurance assets are always accumulated on top of the investor. In ANZIE-DOOR, the homeowner has no such guarantee.
In the insurance asset style COZIE-DOOR, this positive incremental guarantee is a crust over the cake for the investor, and a non-leveraging percentage of ownership in the house accumulates over time, which attracts the investor. In contrast, in ANZIE-DOOR, investors face a high risk of loss as a remaining claimant in a lever-type scheme. Because of this positive incremental guarantee, although the benefits obtained by homeowners in ANZIE-DOOR are already very robust, the insurance asset style COZIE-DOOR provides investors with more robust property benefits. Clearly, these two types of tools are of interest to different types of investors. ANZIE-DOOR investors gain a portion of financing property ownership or gain a bay that is ideal for diversity on a larger system account and for speculating in a common owner-owned house or a house with specific geographic, demographic, or other characteristics. In contrast, the COZIE-DOOR model of insurance assets is a much more robust way to increase asset profitability. There is no high expected return and higher risk of financing.
If the investor funds a portion of the priority block with mortgage debts, the COZIE-DOOR promised asset style is at risk of financing, but the investor's assets are in a better state than if the investor were the remaining claimant in the ANZIE-DOOR. In the COZIE-DOOR with the committed-assets style of mortgage borrowing, the investor's risk of total loss is higher than in the insured assets style, because in the latter case total loss occurs only when the house value ends to zero. On the other hand, if there are enough homeowner (remaining claimant) asset buffers in the COZIE-DOOR that promises the asset pattern, the investor is not affected by the house value slowly falling. In the insurance asset model, investors suffer losses due to a decrease in house value because the value of the insurance asset bay decreases if the house value decreases. These different risk profiles are consistent with the morphology of each protocol: the asset positions of the investor in the committed assets style are "horizontal" slices in the middle of the capital structure. In the insurance asset model, there is a "vertical" slice consisting of the percentage of total house value.
It is easy to visualize the "standard" tax handling of parties in COZIE-DOOR, similar to that suggested herein for other variations. Whatever party pays the property tax or mortgage interest (if any) is deducted from these elements. In the insurance asset style, the insurance asset account produces capital earnings/capital losses that are not subject to special owner-owned property regulations, such as § 121 exclusionary regulations. The profit and loss of the homeowner on the house itself is governed by these regulations in all styles. Periodic repayment to the homeowner does not result in income or loss for each party, but has fundamental implications for the private trading of insurance assets under the insurance asset model, for the remaining claimant positions of the homeowner, and for the committed asset positions of investors under the committed asset model. Similarly, a one-time repayment to the homeowner and a compensatory priority block position for the investor will result in a fund adjustment, with the homeowner's fund on the house declining but not going below zero. (capital profitability results in a one-time payoff amount that exceeds the margin of the underlying fund). The original fund of the investor in the preferred block position is equal to the amount of the one-time repayment. Accumulation of committed assets in a committed assets model can increase the investor's capital cost in committed asset positions and decrease the homeowner's capital cost without incurring revenue or loss for the term.
IS-A-DOOR
Goal of transferring homeowner
The homeowner's goals change over time and with changing environments. Many young homeowners wish to increase house assets with very little commitment funds and their portfolios are well-averaged. ANZIE-DOOR and variants derived therefrom such as ANZIE' S SIDE DOOR are ideal for this purpose. In the latter half of life, their goal may be to stay in that house but to obtain revenue corresponding to the house's production value. Various styles of COZIE-DOORs may effectively meet this goal.
In addition to the consideration of life cycle, the temporary environment that the homeowner is facing makes the existing solutions less than ideal. For example, homeowners are faced with unexpected medical expenses, which necessitates that homeowners withdraw funds from the property of the premises. On the other hand, the homeowner may suddenly become aware, which makes different DOOR variants more attractive.
Low cost're-financing' using IS-A-DOOR "
A large demand for flexibility can be included in each DOOR variant. Provision may be made for withdrawal or addition of funds at once or by periodic or intermittent repayment. But this inherent flexibility from the analytical tuning tool allows more basic possibilities such as IS-A-DOOR. In IS-A-DOOR, the homeowner can switch between various neutral DOOR tools at any time. Therefore, we can only say that the homeowner has "a DOOR".
The IS-A-DOOR incurs very low costs and A wide and growing financing option. No evaluation is required, there is no very high bargain price, no extensive paperwork, no time is consumed, and it takes only a few minutes to make a call or tap a keyboard for refinancing. Since both the old and new tools are neutral, the analysis tool is appropriately adjusted for the changes required by the homeowner.
There may be certain limitations to the modification. For example, eliminating changes that favor the appreciation of the homeowner's insurance assets would compromise the effectiveness of the associated maintenance contract. However, the modifications may have an incredible breadth and flexibility.
FIG. 21 IS A flow chart illustrating an analyzer implementing IS-A-DOOR. The analysis engine allows the homeowner to switch between neutral DOOR tools as he desires. As shown at the top of the figure, the process begins with the homeowner requesting a change. The server or other device containing a menu of available neutral DOOR tools handles the request. The device finds an existing tool and the requested new tool. The analyzer of the existing DOOR tool includes a DOOR tool signature cylinder containing a description of the tool and values and historical values for all critical accounts, such as insurance assets, which can be updated (step "1") to date when requested by the homeowner using the existing analyzer. A reasonable biological ratio: the DOOR tool feature cylinder is like a nucleus; the analyzer itself is a cell. The nucleus contains all the key information that directs the activity of the cell. Altering the DOOR tool includes removing the nucleus, altering the nucleus, and then implanting it into a new cell, i.e., the analyzer of the new DOOR tool. The modification (step "2") includes: (i) replacing the operation instruction of the existing DOOR tool with the operation instruction of a new tool; and (ii) adjusting parameters and accounts to be compatible with the new tool and its analyzer. For example, if the existing tool is an ANZIE-DOOR model and the new tool is a COZIE-DOOR model of the annuity of insurance assets, then the owner's insurance asset balance under the existing tool needs to be converted to the real asset of the owner "remnant claimant" under the new tool. From the existing DOOR tool feature cylinder, the current insurance asset balance is available because both the house value and the insurance asset percentage are now updated in step "1" by the existing tool's analyzer and then stored in the cylinder. The insurance asset account under the new DOOR tool will belong to the investor and not the homeowner. After the change is completed, the new DOOR tool feature cylinder is incorporated (step "3") into the appropriate analyzer for the new tool. The analyzer is run (step "4") to generate initial parameters for the operation of the new DOOR tool.
DOOR for security
During the current property crisis, "security", i.e., the process of re-financing by homeowners in a "contracted" setting where capital disbonds are not available, has proven to be a challenge. The situation is particularly difficult when the homeowner is a mortgage of multiple mortgages that are part of a pool of bonds. Settlement requires the consent of all mortgagers, but the affiliated trust company may refuse to participate, or make a marginal concession because the affiliated investor may initiate a legal challenge. Even in the case where there is only one mortgage and the mortgage is not part of the bond pool, some mortgages are less willing to release the principal or take other steps to rationalize the situation, hopefully the homeowner will continue to repay his house even when they should default. In which case many homeowners are at least short-lived in terms of the balance sheet. The house may already be their leading asset, and most of its properties are not already available.
Several DOOR variants are particularly suitable for this case. It is very likely that the homeowner will be "secured" but not holding the balance, while the house is still "collapsed". One approach is an ANZIE-DOOR type variant. A first mortgage or third party like government may provide the homeowner with an ANZIE-DOOR tool. The homeowner gives up the risky increase in this financing, but increases the equity in the form of an insurance asset. The existing loan includes priority blocks and the homeowner continues to pay interest. As the house shrinks, insurance assets accumulate quickly. Table 5 shows how high the rate factor is for a house that shrinks about 17%. It is indeed high, most likely greater than 1. In the first year, the insurance asset percentage increases from zero to about 5%.
This rapid accumulation fully compensates the homeowner for continued lending and no longer has an incentive to default. Certain versions of ANZIE' S SIDE DOOR are very effective if the homeowner needs some help in completing the lending obligation. For example, a transaction may include periodic side payments to the homeowner at the cost of a somewhat slow accumulation of insurance assets.
The second approach is to use COZIE-DOOR, which promises the annuity model of the property. In this fashion, the homeowner continues to offer and obtain a substantially periodic payment that enables the offer to proceed. If the house price rises back and settles the loan and committed assets, the investor increases the committed assets, while the homeowner retains the "powerful" assets. Such a scheme is ideal for local governments or non-profit organizations that are unwilling to assume risks. Their capital gain is better than the property of the homeowner, but still increases over time.
Although the use of the committed equity annuity model is generally a better solution, the COZIE-DOOR of the insured equity annuity model may also be used in security situations. The insurance asset model only works if the homeowner is trusted to pay for the promise of the insurance asset when selling the house. In the security case, this confidence is particularly problematic: at the beginning of this scenario, the homeowner had no commonly found assets in the house and had to have a high value of appreciation before the homeowner's assets could counteract the insurance asset liability. The applications discussed elsewhere herein relate to very different initial cases: the house is not completely mortgaged. As discussed, the insurance property annuity style COZIE-DOOR generally guarantees that this initial situation will continue by prohibiting mortgage loans to that house. Ensuring that sufficient funds are available to offset the positions at which the rooms are sold protects the investor's insurance asset positions.
ANZIE-DOOR and COZIE-DOOR of committed asset models are not the only two attractive solutions. The selection under DOOR is broad, and the possibilities are broad. One interesting aspect is the introduction of liability compensation elements similar to ANZIE 'S NU DOOR or ANZIE' S NU TRIE DOOR. The investor can pay back a portion of the homeowner's debts based on a schedule or even conditioned on a particular market situation (e.g., a further reduction in the price of the house). Unlike traditional debt exemption, investors obtain market-based compensation in some way depending on the basic attributes of the instrument: facilitating slower insurance asset accumulation (ANZIE-DOOR) by homeowners, facilitating faster accumulation (COZIE-DOOR) by investors, providing less ancillary payments (ANZIE' S SIDE DOOR) to homeowners, etc.
These debt repayment variants provide a general view. One reason why mortgage obliges to avoid debts is that they are trapped in such a system along with the homeowner: (i) fraudulently motivated by the embedded option; and (ii) a very inflexible feature because it is very expensive to re-fund a more appropriate transaction. In the DOOR world, there is no reason to maintain liability levels and keep homeowners' properties shrunken. The exemption of the debt results in a market trade that appropriately compensates the precreditor. The case of shrinkage is not attractive to the DOOR investors. In ANZIE-DOOR, for example, in a shrink situation, an investor may wish to return to a higher room price to restore the investor's assets in the house, i.e., a strong option to take a call. But at the same time, the investor allows insurance assets to accumulate at a very high rate in favor of the homeowner, thereby paying the price for the option.
Overall, the DOOR tool provides an incredible set of powerful tools for preserving situations. The exact protocol is able to tailor the experience and goals of the homeowner and keeper.
Computer implementation mode
FIG. 22 is a schematic block diagram of an analysis engine, typically in the form of a computer system 1600, in which a set of instructions may be executed that cause the analysis engine to perform any of the DOOR methods above. In alternative embodiments, the analysis machine comprises or has a network router, network switch, network bridge, Personal Digital Assistant (PDA), cellular telephone, network appliance, or other machine capable of executing or transmitting a sequence of instructions that specify actions to be taken.
Computer system 1600 includes a processor 1602, a main memory 1604 and a static memory 1606, which communicate with each other using a bus 1608. The computer system 1600 further includes a display unit 1610, such as a Liquid Crystal Display (LCD) or a Cathode Ray Tube (CRT). Computer system 1600 also includes an alphanumeric input device 1612, such as a keyboard; a cursor control device 1614, such as a mouse; a disk drive unit 1616, a signal generation unit 1618, such as a speaker, and a network interface device 1628.
The disk drive unit 1616 includes a machine-readable medium 1624 on which is stored a set of executable instructions 1626, i.e., software, 1626 embodying any one, or all, of the methodologies described herein. The software 1626 is also shown to reside, completely or at least partially, within the main memory 1604 and/or within the processor 1602. The software 1626 may further be transmitted or received over a network 1630 using the network interface device 1628.
In contrast to the system 1600 described above, the different embodiments use logic circuitry rather than computer-executable instructions to implement the processing entities. Depending on the particular needs of the application in terms of speed, expense, repair costs, etc., the logic may be implemented by constructing an Application Specific Integrated Circuit (ASIC) having thousands of tiny integrated transistors. Such an ASIC may be implemented with Complementary Metal Oxide Semiconductor (CMOS), transistor-transistor logic (TTL), Very Large Scale Integration (VLSI), or other suitable configuration. Other optional components include digital signal processing chips (DSPs), discrete circuits (e.g., resistors, capacitors, diodes, inductors, and transistors), Field Programmable Gate Arrays (FPGAs), Programmable Logic Arrays (PLAs), Programmable Logic Devices (PLDs), and the like.
It will be appreciated that embodiments may be used as or to support software programs or software modules, which may be executed upon some type of processing core (such as the CPU of a computer), or otherwise executed or implemented in some machine or computer readable medium. A machine-readable medium includes any mechanism for storing or transmitting information in a form readable by a machine (e.g., a computer). For example, a machine-readable medium includes Read Only Memory (ROM); random Access Memory (RAM); a magnetic disk storage medium; an optical storage medium; a flash memory device; electrical, optical, acoustical or other form of propagated signals, such as carrier waves, infrared signals, digital signals, etc.; or other type of medium suitable for storing or transmitting information.
Conclusion
The current housing market is unusual, in large part because current financing methods are deficient. Even when parties wish to change some aspects of the transaction, which are relatively small, common approaches result in inappropriate financing positions for many homeowners, moral risks and valuation difficulties due to embedded options, difficulty in generating sufficient maintenance power, and inflexibility due to the expense of re-financing. It is easy to design DOOR variants that eliminate all this problem. The DOOR tool is a very superior solution for various objectives of homeowners: increase house assets without sacrificing portfolio balance, move from low asset positions to substantially horizontal house owners, retire income, security, etc. At the same time, the DOOR tool provides a new, very valuable tool for investors in large but relatively inaccessible asset types-proprietary property.
Although the invention is described herein with reference to the preferred embodiments, those skilled in the art will readily appreciate that other applications may be substituted for those set forth herein without departing from the spirit and scope of the invention. Accordingly, the invention is limited only by the claims included below.
The claims (modification according to treaty clause 19)
1. A method for separating assets, expenses, returns and risks of investors and property owners under contractual commitment conditions, comprising the computer-implemented steps of:
(a) providing a computing system configured to compute each of a committed equity part and an insured equity part, the committed equity part comprising a capital structure layer having priority over remaining valued claims equity, the insured equity part comprising the liability of one of said owner and said investor to pay the other of said investor and said owner a percentage of said property value upon sale of said property or any other event terminating said contractual commitment;
(b) the computing system is configured to identify a set of responsibilities of the owner for maintaining the property, and adjust a portion of the owner's committed equity, insured equity, or other shares according to the level of compliance with the set of responsibilities;
(c) said computing system configured to accumulate said committed equity portion in at least one priority block and to debt one of said owner and said investor having committed equity to the other of said owner and said investor or one or more third party debtor persons;
(d) The computing system is configured to treat one or more priority blocks as solicited, partially solicited, or non-solicited loans by one party (the owner or the investor) to the other party;
(e) the computing system is configured to dynamically allocate committed equity, insured equity, a reconciliation account balance, a necessary repayment of one of the owner and the investor to the other of the owner and the investor, or one or more other remaining accounts between the investor and the owner, according to a non-linear algorithm, and to change the one or more remaining accounts over time according to economic conditions, characteristics of the owner, characteristics of the investor, and/or real estate value, wherein the change is based on one or more interest rates defined at specific time intervals based on one or more parameters relating to a real estate market, the owner, the investor, economic conditions, or the real estate value;
(f) the computing system is configured to take into account as part of the allocation method: a voluntary or necessary repayment between the owner and the investor, a voluntary or necessary repayment by the other of the owner and the investor as dictated by the responsibility of one of the owner and the investor, or any other economic transaction between the owner and the investor as dictated or allowed by the contractual commitment; and
(g) The computing system is configured to allocate any of the committed equity portion, the insured equity portion, any outstanding remaining account balances, and any other obligations or repayment prescribed by the contractual commitment between the owner and the investor, in accordance with the allocation method, upon sale of the property or any other event terminating the contractual commitment.
2. The method of claim 1, wherein said computing system is configured to approach neutrality to a predetermined extent by occasionally, periodically or continuously computing contributions to the property by each of said owner and said investor, said contributions being considered joint venture investment; and the computing system is configured to adjust one or more remaining accounts to offset net contributions of the owner and the investor.
3. The method of claim 1, wherein said computing system is configured to occasionally, periodically or continuously calculate the contribution to the property by each of said owner and said investor; and the computing system is configured to generate a subsidy or offer to one of the owner and the investor, wherein a full compensation adjustment is not made to one or more remaining accounts, thereby generating a non-recourse tool.
4. A method according to one of claims 2 and 3, wherein said computing system is configured to take as a fixed value during said allocation a selected value of a funding factor, an economic change, a change in house price, an account or other factor, and to allow the other value to change.
5. The method of any one of claims 2, 3 and 4, wherein the computing system is configured to initially perform a calculation based on a contractual commitment, the contractual commitment selecting or arranging for an increase in all of the property rights or accounts over an effective period of the contractual commitment.
6. The method of any one of claims 2, 3, 4 and 5, wherein said computing system is configured to require or allow said investor to pay for the premiums of a mortgage loan owed by said owner, or to provide or give a partial or full mortgage of said mortgage loan, under predetermined conditions specified by said contractual commitment.
7. The method of any one of claims 2, 3, 4, 5, and 6, wherein the computing system is configured to allow the owner to perform any one of:
(a) converting an existing insurance asset to a new commitment asset;
(b) converting an existing committed asset to a new insured asset; and
(c) transforming other elements of the contractual commitment to change its obligations or requirements.
8. The method of claim 2, wherein the computing system is configured to cause:
(a) committed equity is held only by the owner and consists of any first payment, principal repayment of mortgage, added value due to house repair, or other capital contributions from the owner's cash or other resources;
(b) the owner is a debtor of any mortgage loan and gets credit in the neutral calculation of the calculated interest on a priority block, consisting of the loan plus committed assets, and considering the priority block as a non-recourse for the investor;
(c) the owner has the responsibility to maintain the property, pay property taxes and pay other periodic fees to gain credit for those responsibility in the neutral calculation;
(d) insurance assets are remaining accounts added to the owner or the investor, thereby offsetting the net contributions of the owner and the investor; and
(e) adjusting the rate of increase of the insurance asset at fixed time intervals, continuously or occasionally, as specified by said contractual commitment.
9. The method of claim 2, wherein the computing system is configured to cause:
(a) the investor funding a one-time payment to the owner and/or making periodic or required payments; and
(b) The funding and/or payment results in an increase in committed and/or insured assets in favor of the investor as determined by neutral calculations.
10. The method of claims 6 and 8, wherein said computing system is configured to require said investor to pay first payment for said owner's mortgage loan obligation to maintain a maximum loan value ratio, wherein said maximum loan value ratio is calculated as the ratio of total mortgage loan to house property value.
11. The method of claim 8 wherein said priority block comprises a recourse by said investor.
12. The method according to claims 6 and 11, wherein said priority block comprises a recourse liability of said investor; and the computing system is configured to require the investor to pay first for the owner's mortgage loan obligation to maintain a maximum loan value ratio, calculated as the ratio of total mortgage loan to house property value, according to predetermined conditions specified in the contractual commitment.
13. The method of claim 8, wherein the computing system is configured to add funds in an account (savings) account accessible to the owner at the time of sale of the property, at the time of termination of the contractual commitment other than sale of the property, or at other times under conditions specified by the contractual commitment, and wherein the account (savings) account includes a remaining account in addition to or in place of the insurance asset.
14. The method of claim 8, wherein said computing system is configured to include a programmatic or conditional supplemental payment between said owner and said investor; wherein the additional payment is added to the neutral calculation and changes the appreciation rate of the insured asset.
15. The method of claim 8, wherein the computing system is configured to add insurance assets according to a fixed schedule, wherein the insurance assets no longer include remaining accounts, and wherein the random payments between the owner and the investor balance the net contributions of the owner and the investor.
16. The method of claim 2, wherein the computing system is configured to allow the business owner to exchange one type of neutral contractual commitment for any one of a specified combination of other neutral contractual commitments whenever needed under predetermined conditions specified by the contractual commitments; and wherein the computing system is configured to update the initial contractual commitment, convert accounts on demand, and initialize a new contractual commitment selected by the owner.