CA2054956A1 - Financing management system - Google Patents
Financing management systemInfo
- Publication number
- CA2054956A1 CA2054956A1 CA002054956A CA2054956A CA2054956A1 CA 2054956 A1 CA2054956 A1 CA 2054956A1 CA 002054956 A CA002054956 A CA 002054956A CA 2054956 A CA2054956 A CA 2054956A CA 2054956 A1 CA2054956 A1 CA 2054956A1
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- Prior art keywords
- percentage
- borrower
- month
- salary
- percentages
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- Abandoned
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- 238000012545 processing Methods 0.000 claims abstract description 8
- 238000000034 method Methods 0.000 claims description 14
- 230000007423 decrease Effects 0.000 description 4
- 230000004075 alteration Effects 0.000 description 2
- 238000009472 formulation Methods 0.000 description 2
- 239000000203 mixture Substances 0.000 description 2
- 238000012552 review Methods 0.000 description 2
- 238000012550 audit Methods 0.000 description 1
- 238000012937 correction Methods 0.000 description 1
- 230000001186 cumulative effect Effects 0.000 description 1
- 230000001419 dependent effect Effects 0.000 description 1
- 238000010586 diagram Methods 0.000 description 1
- 238000007726 management method Methods 0.000 description 1
- 238000012216 screening Methods 0.000 description 1
- 238000012546 transfer Methods 0.000 description 1
- 230000001960 triggered effect Effects 0.000 description 1
Classifications
-
- G—PHYSICS
- G06—COMPUTING; CALCULATING OR COUNTING
- G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
- G06Q40/00—Finance; Insurance; Tax strategies; Processing of corporate or income taxes
- G06Q40/02—Banking, e.g. interest calculation or account maintenance
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- Business, Economics & Management (AREA)
- Accounting & Taxation (AREA)
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- Engineering & Computer Science (AREA)
- Development Economics (AREA)
- Economics (AREA)
- Marketing (AREA)
- Strategic Management (AREA)
- Technology Law (AREA)
- Physics & Mathematics (AREA)
- General Business, Economics & Management (AREA)
- General Physics & Mathematics (AREA)
- Theoretical Computer Science (AREA)
- Financial Or Insurance-Related Operations Such As Payment And Settlement (AREA)
Abstract
ABSTRACT
Home financing is provided by means of a salary linked mortgage. A borrower repays a loan from a lender by paying a percentage of his salary, irrespective of the manner in which his salary varies, for a predetermined period. The percentage may be the same for the entire period or it may vary in a predetermined manner. The lender may also unilaterally vary the percentage if the borrower does not make payments on specified dates. Conveniently, a convenience percentage value is used for each financial year and, if necessary journal entries are made. The system is managed and supervised by data processing equipment which stores information characterizing each borrowers account, inputs details of repayments from the borrower and his employer, generates an updated schedule percentage for each account at the end of each month and communicates the updated schedule percentage for each account at the end of each month.
Home financing is provided by means of a salary linked mortgage. A borrower repays a loan from a lender by paying a percentage of his salary, irrespective of the manner in which his salary varies, for a predetermined period. The percentage may be the same for the entire period or it may vary in a predetermined manner. The lender may also unilaterally vary the percentage if the borrower does not make payments on specified dates. Conveniently, a convenience percentage value is used for each financial year and, if necessary journal entries are made. The system is managed and supervised by data processing equipment which stores information characterizing each borrowers account, inputs details of repayments from the borrower and his employer, generates an updated schedule percentage for each account at the end of each month and communicates the updated schedule percentage for each account at the end of each month.
Description
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THIS INVENTIO~ relates to the financing of homes, to a financial instrument and to a home financing management system.
- 5 According to a first aspect of the invention there is provided a financial instrument for financing the purchase of a home, which comprises a salary linked mortgage.
10. The financial instrument may include an obligation on the part of the borrower to repay to a lender percen~ages of the borrower's salary for a predetermined period of time. There may be a fixed percentage for the entire period or the percentage may vary in a predetermined manner.
The percentages may be fixed for the entire period of time.
The financial instrument will normally specify that repayments are to be made on specified dates~ The percentages may then be fixed for the entire period of time if repayments are made on the specified dates, and the percentages may vary in a predetermined manner if .
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Further, the percentages of salary that are repaid may also be varied in a predetermined manner if advance repayments are made.
The financial instrument may include an obligation on the part of an employer of the borrower to repay the said percentages of the borrowed salary on behalf of the borrower to the lender.
The financial instrument may also include a cession on the part of the borrower of an asset of his to the lender as collateral. This asset will be the home and may also be a portion of the borrower's funds in a retirement fund.
The financial instrument may further include an instrument of deposit for a funding body which invests funds with the lender to be lent to the borrower. The instrument of deposit may be a promissory note or a certificate of deposit.
A specified borrower may be linked to the instrument of deposit.
The instrument of deposit may include a pledge or obligation on the funding body to provide funds on demand by the lender.
Correspondingly, the financial instrument may include an entitlement on the part of the funding body to redeem the instrument of deposit if funds are available.
The invention extends to a method of acquiring a home by a person which includes borrowing a sum of money from a lender thereof;
paying for the home or at least a part thereof with the said money; and repaying the said money by paying at specified times for a predetermined period of time an amount equal to specified percentages of the person's salary.
The home may be acquired by building it, or by purchasing it.
The invention extends further to a method of financing the purchase by a person of a home, which includes lending a sum of money to the person; and collecting an amount equal to specified percentages of the person's salary from the person at specified times for a predetermined period of time.
Still further, the invention provides, in combination in a system for processing and supervising a plurality of home financing accounts for a plurality of borrowers who have borrowed money from a lender to finance the acquisition of a home, each o~ the accounts being repaid by each borrower repaying percentages of his salary, said system including 5borrower account data file means for storing information characterizing each borrower's account;
manual entry means for entering details of repayments made by at least one borrower to the lender;
data receiving and verifying means for receiving 10and verifying details of repayments made in favour of the lender by employers of at least some of the borrowers on behalf of these borrowers and repayment details from said manual entry means;
means responsive to said borrower account data file 15means and said data receiving and verifying means for generating an updated schedule percentage for each account at the end of each month; and communicating means for communicating said updated schedule percentage for each account to each borrower.
The updated schedule percentage generating means for each account may include means for determining an average monthly gross remuneration, a cancellation value, a valuable consideration, a remaining term ~nd an 25average schedule percentage.
The schedule percentage may be determined at the beginning of a financial year and may be kept constant fo.r that year at a convenience value. The system may then include a means for determining an actual schedule percentage and a means for determining a percentage journal transaction amount if the actual schedule percentage is different from the convenience value, which percentage jo~rnal transaction amount results in the actual schedule percentage equalling the convenience value, and which percentage journal transaction amount is stored in said data file.
The updated schedule percentage generating means may comprise means for determining if the cancellation value complies with legislative constraints and if not for generating a legislative journal transaction amount which will provide an acceptable cancellation Yalue, said legislative journal transaction amount being stored in said data fi~e means.
The updated schedule ~enerating means may comprisa means for generating an imputed monthly gross remuneration value for self employed borrowers.
The system may include a means for allocating funds to borrowers and to investors who have invested money with the lender.
This fund allocating means may include a means for determining if there is a shortage of funds, and if .
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~' "'~ 1 so for allocating funds to borrowers and investors in a predetermined preferential manner. The fund allocating means may also include a means for determining if there is an e~cess of funds and if there is an excess of funds but insufficient cash to provide loans to all applicants for determining which investors who have pledged funds are required to deposit money with the lender. In addition, the fund allocating means may include a means for determining if there is an excess of funds and if there is an excess of funds and sufficient cash to provide loans to all applicants for determining the amounts to be returned to investors by way of compulsory redemptions.
The invention is now described in more detail in the specific illustrative embodiment presented hereinbelow in conjunction with the accompanying drawings Figs. lA and lB, which is a schematic flow chart depicting the data processing methodology and structure in accordance with the principles of the present invention.
Referring now to the drawings, there is shown in overall scope a data processing and system operational flow chart for implementing a system for processing and supervising a plurality of home financing accounts for a plurality of borrowers who have borrowed money from a lender to finance the acquisition of a home, each of the loans being repaid by each borrower repaying percentages of his salary.
Investors make redeemable investments for an unspecified term in a salary linked housing investment fund, which operates like a unit trust. At its own risk, the investment fund makes advances which are secured by first mortgages on the property concerned to borrowers (which are referred to hereinafter as "customers"), usually, but not necessarily, members of an investing retirement fund (the "investor").
The investor's return is approximately equal to the rates of salary increase of the customers. Salary linked investments are thus well suited to pension funds: the investment grows in line with their liability for pension payments.
The investment fund, which is the lender of the money, is managed on behalf of the investors by managers who are skilled loan and mortgage administrators. Their fees are paid by the investment fund.
After signing a salary linked investment agreement, the investor makes a pledge to invest cash in salary linked housing advances. One or more certificate numbers are assigned to the investor, against which to make pledges.
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A pledge is exclusive if it is to be used to finance specific customers, nominated or introduced by the investor. Otherwise it is a general pledge. The investors may also choose to introduce a customer without making a matching pledge. Such an introduction is called a free nomination.
Demand for funds arises from applications for advances and from requests from investors for redemption of units~ Supply of funds comes from the commitment of pledges, and from the cash flow of the investment fund.
An allocation program establishes whether there is a surplus or a shortage oE funds. This program employs a novel form of rational inducement to encourage the balancing of supply and demand. A priority ratio is used to reward investors with better opportunities to invest if they nominate customers in times of abundance of cash, and to reward their nominated customers with advances if they (the investors) make investments in times of cash scarcity.
As demands are funded in the allocation program, investors are committed to their pledges, and payments are made or requested as the funds are actually required.
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When required, the necessary funds are drawn down from the committed amounts; interest is paid on the amounts until the month end, when a unit price can be established from the month's growth in salaries. The investment and interest is then used to purchase units at this price.
Apart from their freedom to redeem investments when funds allow, liquidity for investors is promoted by allowing the purchase and sale (transfer) of units in a secondary market by traders who may not themselves have made investments.
Investors are informed monthly of the quantity and value of the units in each of their certificates. A register of investors is maintained.
The customer contracts to pay agreed percentages of his salary or monthly gross remuneration, ("MGR") during the payment term, up to 20 years, in exchange for an advance to acquire a home.
The cancellation value or outstanding balance, ("CV") at any stage is not linked to interest rates or to the amount initially advanced, but is solely dependent on the percentages due in each remaining month of the term, and the customer's average monthly remuneration at that time.
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The actual formula is:-Cancellation value = Sum of percentages duethroughout remaining payment term x current 12 month moving average of MGR.
The set of percentages due throughout the remaining payment term is called the schedule of percentages.
The percentages are pre-determined in such a way as to result in the exact repayment of the advance in the remainder of the term if customer's salary and 12 month moving average were to remain constant throughout. The percentages change if and only if the customer does not adhere absolutely to the agreement or if the contract is renegotiated. They do not change if the customer's salary increases.
The growth in the customer's salary provides the return for the investor.
In the first year, the rate of increase of customer's salary (say 16~) is greater than the decline in the sum of the percentages in the remainder of the term (say 10~). Accordingly, the cancellation value increases in the early years; eventually the decline in percentages becomes greater than the increase in income, causing the cancellation value to reduce, and finally disappear.
At the time Qf application for the advance, the customer .
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must be employed full-time by an approved employer, who is bound contractually to remit monthly instalments electronically to the investment fund, together with audit data relating to the customer's salary.
If the customer's employment with an approved employer is terminated or interrupted in any way, or if the income data mentioned above is not forthcoming, provision is made to impute a notional salary or monthly gross remuneration to the customer and to calculate payment percentages on the basis of that imputed figure.
Increases in imputed salary are linked to an appropriate national average.
Other provisions in the agreement with the customer are similar to those applic~`~le to conventional advances.
Securitv for the advance ; The security offered by the customer for a salary linked advance is:-SalarY. Before the advance is approved, the applicant's gross salary over the past year is examined. Attention is paid to quality and stability of earnings and salary growth potential.
Propertv. The property is a residential dwelling, ; .
existing or to be built. Title can be freehold, leasehold or sectional title.
Collateral. Security over and above the property itself takes the same forms as in conventional advances, with the possibility that the customer's retirement fund withdrawal benefit may be ceded to the investment fund, or to the approved employer or pension fund with an onward guarantee to the investment fund.
Provision is made for the guarantee to cover the full cancellation value (in which case a mortgage might be unnecessary), all unrecovered losses, or ~ust the value of the withdrawal benefit.
20 Tvees of aPPlicant There are five types of applicant:-- ordinary applicants, whose applications enjoy no special preference; they are not nominated;
- free nominees, who are nominated by investors who have no obligation to match the nomination with an investment. Free nominees are preferred, when - . . ~ . .
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funds are short, over ordinary applicants. The degree of preference depends on the priority ratio of the nominating certificate;
- special preference applicants, who may also be free nominees, ordinary applicants and urther applicants and who may be preferred over other free nominees;
O _ further applicants, who are applying for re-advances or further advances; preference for them is determined by the rules of the investment fund;
- exclusive nominees, who are assured of advances, because they are financed by a matching pledge from the investors;
Regardless of their type, all applicants are subject to the same interview and screening procedures, funded in an allocation run, and mortgage bonds are registered in the normal way. A customer is allowed only one salary linked advance at a time.
Return to the investor An investment fund which is fully invested in salary linked advances earns a gross return which is slightly greater than the weighted (by amount of cancellation value) salary growth rate of its customers.
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The extra return arises from the fact that the cancellation value is calculated from the average monthly gross remuneration ("AMGR"~, whereas instalments are calculated from actual monthly gross remuneration ("MGR"), which can be expected to be higher than the average.
The return is reflected in the unit price.
Salarv linked ad~ances - the ke~_monthlv s,ubroutine Introduction The nature of a salary linked advance has been described above.
What follows is a step-by-step account of the essential processing that takes place in the monthly update program for each customer. This is supported by the accompanying diagram, Figure 1.
During the month, new or changed data relating to customers is entered manually, and is also received on electro-magnetic media from other sources. These changes and alterations are manually and electronically verified. Electro-magnetic files relating to the customers are read and updated.
Salaries are recorded in an unbroken se~uence in the QUANTITIES dataset, commencing 12 months prior to the application and terminating in the month in which the customer's agreement is cancelled. Months in this sequence are number consecutively from 1 upwards.
QUANTITIES contains one record for each customer for each month. Its contents are described in detail later.
It contains, in some instances in summarised form, all the financial information for each customer, and includes all the innovative procedures hereof with the exception of the handling of corrections, which will be treated separately.
The first accounting transaction, usually a debit for (a portion of) the advance, always takes place in month 13 or later. The first instalment al.ways occurs (ie. the payment term begins) at least a month after the first transaction. Payments received in the same month as the first transaction are treated as additional transactions.
Notation In the formulae which follow:
AMGRm = Average monthly gross remuneration in month m.
ASPm = The average of the percentages that are due over the remainder of the term, as shown in the schedule of percentages calculated at the end of month m-l.
~,1,. ' ' ,' ATdm = Total of all accounting transactions in month m, up to day d.
ATSPom = Result of multiplying each accounting transaction in month m by the number of days from the date of the transaction to the end of the month and adding.
ATSPdm = Result of multiplying each accounting transaction up to day d in month m by the number of days from the date of the transaction to day d of the month and adding.
CVdm = Cancellation value on day d of month m.
(d not equal to 1) CV.m = Cancellation value on last day of month, after all transactions or cancellation date, whichever is the sooner.
CV,m = Cancellation value on last day of month m after all transactions.
25 d = d~h day of the month.
ICm = Daily rate of cancellation interest applicable in month m.
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~ 3 IIm = Daily rate of intra-month interest applicable in month m.
ILm = Daily rate of legal constraint interest applicable in month m.
e = The day on which cancellation occurs, if it occurs in the month in question;
otherwise the number of days in the month.
l = last day of the month.
LCm - Maximum allowable balance in terms of legislative constraints, in month m.
m = Month number.
MGRm = Monthly gross remuneration in month m.
MTGm = Remaining term, or months-to-go, or number of instalments still due, from and including month m. Calculated in month m-1.
SPm = Schedule percentage for month m, calculated in month m-1.
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-VCm = Valuable consideration in month m.
SteP 1 - Calculate averaae monthlY aross remuneration If the customer has been classified as self-employed (not employed by an approved employer), an imputed monthly gross remuneration is calculated, as in Step 9.
The relevant data files are accessed and updat~d.
The average monthly gross remuneration is calculated: it is the cumulative moving average of the customer's latest 12 months' monthly gross remuneration:-~2 AMGRl2 = ~ MGRm/12 -m~l AMGRm = AMGRml ~ (MGRm - MGRm.l2) / 12 , Eor m ~ 13 The latter formulation requires reference to only 3 QUANTITIES records.
Customers whose agreements have been cancelled are excluded, but all others are included, even if they have as yet had no transactions. The relevant data files are updated.
If it is the end of the fiscal year, the appropriate year end processing is done. New convenience percentage "`, ' ` ~
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are calculated for customers, and these are communicated to them. The relevant data files are accessed and updated.
If notification of cancellation of the agreement has been given during the month by the customer, the average monthly gross remuneration is (optionally) not used as the basis for the investor's return, nor for the cancellation value; the chances are that the monthly gross remuneration might not be available at the time of a cancellation. A market-related interest rate for cancellations is applied for that month and thereafter and capitalized monthly. The formula is.-CVo,m = CV~,ml * (1 + ICm) + ATom + ATSPCm * ICm The relevant files are accessed and updated.
Ste~ 2 - Calculate the current cancellation value After all data has been received fr.om employers, or has been imputed as above, the cancellation value as at the end of the current month is calculated:-CV = AMGRm * MTGm * ASPm + AT,,m + ATSP,,m * IIm ~ AMGRm * SPm ; There is no cancellation before the first accounting transaction, but a cancellation value can exist before the first instalment is paid. For example, an advance ; can be paid to commence (and complete) a residential dwelling even before the first instalment is due. The cancellation value rises at the same rate as the average ~;
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monthly gross remuneration during this period.
The current average monthly gross remuneration is as calculated in Step 1 above.
MTGm is found in MTG-NEXT of the preceding month's QUANTITIES records. If the first instalment date has ; not been reached, the remaining term is equal to the total term.
The ASPm and SPm are found in the preceding month's QUANTITIES record.
The cancellation value on any day d (other than the last day) in the month following month m, is CVd,m+l = CVI,m* (1 + IIm,1) ~ ATdm,,, ~ ATSPdm~, * IIm~, The relevant files are read and updated.
Step 3 - Calculate the leqislative constraint (LC) balance Certain countries employ legislative constraints to limit the cancellation value: a ceiling (IL) is placed on interest rates. As stated, the monthly return or "interest rate" in a salary linked advance is the rate of growth of the customer's average monthly gross remuneration over the last month, plus the component due to the "lead" of monthly gross remuneration over the , - ,: ~
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average monthly gross remuneration.
If no legislative constraint applies, go to Step 4.
If such a constraint applies, the program calculates a legislative constraint balance tLCm), for the month, which reflects the maximum allowable cancellation value in terms of the applicable legislation.
If in any month the legislative constraint balance is exceeded by the cancellation value in Step 2 above, a legislative journal transaction is generated, crediting the customer with the difference. When incorporated into the calculations, this additional transaction reduces the previously calculated cancellation value to the maximum permissible in terms of the constraint. The relevant data files are accessed and updated.
Additional transactions which have been used to limit the cancellation value will not again be used in deriving the current maximum. These are called excluded transactions.
LCm = LC~l ~ ILm * LCm, + LCATm + ILm on each transaction of LCTAm from the transaction date to the month end, or date of cancellation, whichever is sooner.
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where LCATm is the sum of the non-excluded accounting transactions in month m.
SteP 4- Calculate valuable consideration (VCI
The valuable consideration (gross profit, "interest") is calculated by two methods, which, although mathematically identically equal, provide a good check on the correctness of the calculations and the variables used.
The first method uses the fact that the valuable consideration is the sum of the ~rowth in the customer's average monthly gross remuneration, and the "lead"
component as described previously. The formulae are:-VCm~ = VCgl~h~ VC,.~, where VCg~ h = ( AMGRm ~ AMGRm.l ) / AMGRm~l * C'VI m-VClolsd = ( MGRm ~ AMGRm ) * SPm20 The growth component is calculated only in the month after the customer's first transaction has occurred.
The lead component is calculated only after the first instalment (ie. after commencement of the payment term).
Both are zero otherwise.
In the second method, the valuable consideration is calculated along more conventional lines:-~ . .
VCm2 = CVm ~ CVm.l + SPm * MGRm ~ AT,m (In current usage: "Interest = closing balance - Opening balance ~ Instalment paid - Other credits") This calculation is done only in the month after the customer's first transaction: it is zero otherwise. The data files are updated with the VC.
If the two methods yield unequal results (ie. VCm' is not equal to VCmz) there is a programming error.
SteP 5 - Charqe the customer for the schedule payment on the last daY of the month A schedule of percentages is produred for each customer at the commencement of the contract. If the stated percentage of the customer's monthly gross remuneration at that time ls paid on due date tlhroughout the payment term, the advance will be exactly and finally liquidated in the last month of the payment term.
However, this is seldom the case. Payments are made early or late. Payments are missed. Extra payments are made. Charges are incurred. Credits are passed when legislative constraints must be observed. Intra-month interest is earned or paid on these transactions. All the preceding are examples of accounting transactions.
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The only transactions which are not accounting transactlons are those in which the charge is made for the scheduled payment on each due date. These charges are not additional transactions because they do not themselves alter the cancellation value or the schedule of percentages, ~which have already reflected the charge in the changing AMGR, the remaining term and other accounting transactions), but are 'memo' entries.
A 'memo' entry is generated only once the payment term has started. The transaction is dated the last day of the month. The calculation is:
Schedule amount = SPm * MGRm The data files are accessed and updated.
Comment When an additional transaction occurs the schedule of percentages changes, and a convenience percentage made ; 20 on behalf of the customer by the approved employer will not equal the schedule percentage. Thereafter, the convenience payment differs from the scheduled payment for a while (see below).
It is not feasible for the employer to alter the convenience payment every time there is an additional transaction and a resultiny alteration to the next month's schedule percentage.
The adopted technique is to allow convenience percentages to differ from schedule percentages for a period of up to a year, and then to bring the situation into line at the end of the financial year (or other period) by (contractually) adjusting the convenience percentage to equal the schedule percentage at that time. In fact the schedule percentages is recalculated automatically each month (see Step 8)~
In familiar jargon, the concept of "due and payable" is, in the case of salary linked advances, divisible. What is "due" is the sum of the outstanding percentages, multiplied by the current average monthly gross remuneration. What is "payable" is the percentage lS agreed upon annually or by renegotiation.
Step 6 - Calculate the new remaininq term (months-to-qo, MTG) each month The formula is:
MTGm~j = payment term - (max (0, m-s+1)) where the payment term is established in the agreement or by renegotiation m is the current month number s is the starting month number o~ the payment term (month of first instalment) .
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This formulation ensures that the remaining payment term does not start decrementing by 1 until the first instalment is raised. The months-to-go startinq next month is stored in the record for the current month m in the QUANTITIES data file.
steP 7 - Calculate averaqe schedule Percentaae for next month As shown in the first formula in Step 2, the cancellation value changes each month as a result of late, early, failed, extra payments etc., and interim interest paid and earned on them. Also, with each passing month (once the payment term has commenced) the remaining term decreases. Bringing these to account:-CVm = AMGRm * ASPm,,l * MTGm,~.~
where CVm i s known from Step 2, AMGRm is known from Step 1, MTGm+l is known from Step 6, SO ASPm+l can be found:
ASPm 1 l = CVm / ( AMGRm * MTGm ~ l ) SteP 8 - Recalculate schedule_of Percentaqes ..
~s stated above, monthly payments of the average schedule percentage ~ASP) of monthly gross remuneration will completely liquidate the current cancellation value over the remaining term, provided that there are no deviations arising from late, early, extra, missing transactions.
The customer may contract to make repayments at percentages other than the average schedule percentage.
The option offered will ordinarily be a plan in which the schedule percentage decreases by a fixed amount at the end of each fiscal or financial year.
Given the average schedule percentage, the terminating schedule percentage (established at the time of the agreement), the current month number, the current calendar month, and the remaining term, the schedule of percentaqes and the new annual decrement is calculated for the remainder of the payment term.
As a check, when these schedule percentages are added and divided by the number of months remaining in the term, the result will be the average schedule percentage.
The results of Steps 6, 7, 8 are updated into data files.
SteP 9 - _ Calculation of imPuted monthl~ qross ' `' ' ~ 1 ~ ~ `
THIS INVENTIO~ relates to the financing of homes, to a financial instrument and to a home financing management system.
- 5 According to a first aspect of the invention there is provided a financial instrument for financing the purchase of a home, which comprises a salary linked mortgage.
10. The financial instrument may include an obligation on the part of the borrower to repay to a lender percen~ages of the borrower's salary for a predetermined period of time. There may be a fixed percentage for the entire period or the percentage may vary in a predetermined manner.
The percentages may be fixed for the entire period of time.
The financial instrument will normally specify that repayments are to be made on specified dates~ The percentages may then be fixed for the entire period of time if repayments are made on the specified dates, and the percentages may vary in a predetermined manner if .
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. , ~. . :: , ': :: :. ' ' repayments are not made on the specified dates.
Further, the percentages of salary that are repaid may also be varied in a predetermined manner if advance repayments are made.
The financial instrument may include an obligation on the part of an employer of the borrower to repay the said percentages of the borrowed salary on behalf of the borrower to the lender.
The financial instrument may also include a cession on the part of the borrower of an asset of his to the lender as collateral. This asset will be the home and may also be a portion of the borrower's funds in a retirement fund.
The financial instrument may further include an instrument of deposit for a funding body which invests funds with the lender to be lent to the borrower. The instrument of deposit may be a promissory note or a certificate of deposit.
A specified borrower may be linked to the instrument of deposit.
The instrument of deposit may include a pledge or obligation on the funding body to provide funds on demand by the lender.
Correspondingly, the financial instrument may include an entitlement on the part of the funding body to redeem the instrument of deposit if funds are available.
The invention extends to a method of acquiring a home by a person which includes borrowing a sum of money from a lender thereof;
paying for the home or at least a part thereof with the said money; and repaying the said money by paying at specified times for a predetermined period of time an amount equal to specified percentages of the person's salary.
The home may be acquired by building it, or by purchasing it.
The invention extends further to a method of financing the purchase by a person of a home, which includes lending a sum of money to the person; and collecting an amount equal to specified percentages of the person's salary from the person at specified times for a predetermined period of time.
Still further, the invention provides, in combination in a system for processing and supervising a plurality of home financing accounts for a plurality of borrowers who have borrowed money from a lender to finance the acquisition of a home, each o~ the accounts being repaid by each borrower repaying percentages of his salary, said system including 5borrower account data file means for storing information characterizing each borrower's account;
manual entry means for entering details of repayments made by at least one borrower to the lender;
data receiving and verifying means for receiving 10and verifying details of repayments made in favour of the lender by employers of at least some of the borrowers on behalf of these borrowers and repayment details from said manual entry means;
means responsive to said borrower account data file 15means and said data receiving and verifying means for generating an updated schedule percentage for each account at the end of each month; and communicating means for communicating said updated schedule percentage for each account to each borrower.
The updated schedule percentage generating means for each account may include means for determining an average monthly gross remuneration, a cancellation value, a valuable consideration, a remaining term ~nd an 25average schedule percentage.
The schedule percentage may be determined at the beginning of a financial year and may be kept constant fo.r that year at a convenience value. The system may then include a means for determining an actual schedule percentage and a means for determining a percentage journal transaction amount if the actual schedule percentage is different from the convenience value, which percentage jo~rnal transaction amount results in the actual schedule percentage equalling the convenience value, and which percentage journal transaction amount is stored in said data file.
The updated schedule percentage generating means may comprise means for determining if the cancellation value complies with legislative constraints and if not for generating a legislative journal transaction amount which will provide an acceptable cancellation Yalue, said legislative journal transaction amount being stored in said data fi~e means.
The updated schedule ~enerating means may comprisa means for generating an imputed monthly gross remuneration value for self employed borrowers.
The system may include a means for allocating funds to borrowers and to investors who have invested money with the lender.
This fund allocating means may include a means for determining if there is a shortage of funds, and if .
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~' "'~ 1 so for allocating funds to borrowers and investors in a predetermined preferential manner. The fund allocating means may also include a means for determining if there is an e~cess of funds and if there is an excess of funds but insufficient cash to provide loans to all applicants for determining which investors who have pledged funds are required to deposit money with the lender. In addition, the fund allocating means may include a means for determining if there is an excess of funds and if there is an excess of funds and sufficient cash to provide loans to all applicants for determining the amounts to be returned to investors by way of compulsory redemptions.
The invention is now described in more detail in the specific illustrative embodiment presented hereinbelow in conjunction with the accompanying drawings Figs. lA and lB, which is a schematic flow chart depicting the data processing methodology and structure in accordance with the principles of the present invention.
Referring now to the drawings, there is shown in overall scope a data processing and system operational flow chart for implementing a system for processing and supervising a plurality of home financing accounts for a plurality of borrowers who have borrowed money from a lender to finance the acquisition of a home, each of the loans being repaid by each borrower repaying percentages of his salary.
Investors make redeemable investments for an unspecified term in a salary linked housing investment fund, which operates like a unit trust. At its own risk, the investment fund makes advances which are secured by first mortgages on the property concerned to borrowers (which are referred to hereinafter as "customers"), usually, but not necessarily, members of an investing retirement fund (the "investor").
The investor's return is approximately equal to the rates of salary increase of the customers. Salary linked investments are thus well suited to pension funds: the investment grows in line with their liability for pension payments.
The investment fund, which is the lender of the money, is managed on behalf of the investors by managers who are skilled loan and mortgage administrators. Their fees are paid by the investment fund.
After signing a salary linked investment agreement, the investor makes a pledge to invest cash in salary linked housing advances. One or more certificate numbers are assigned to the investor, against which to make pledges.
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A pledge is exclusive if it is to be used to finance specific customers, nominated or introduced by the investor. Otherwise it is a general pledge. The investors may also choose to introduce a customer without making a matching pledge. Such an introduction is called a free nomination.
Demand for funds arises from applications for advances and from requests from investors for redemption of units~ Supply of funds comes from the commitment of pledges, and from the cash flow of the investment fund.
An allocation program establishes whether there is a surplus or a shortage oE funds. This program employs a novel form of rational inducement to encourage the balancing of supply and demand. A priority ratio is used to reward investors with better opportunities to invest if they nominate customers in times of abundance of cash, and to reward their nominated customers with advances if they (the investors) make investments in times of cash scarcity.
As demands are funded in the allocation program, investors are committed to their pledges, and payments are made or requested as the funds are actually required.
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When required, the necessary funds are drawn down from the committed amounts; interest is paid on the amounts until the month end, when a unit price can be established from the month's growth in salaries. The investment and interest is then used to purchase units at this price.
Apart from their freedom to redeem investments when funds allow, liquidity for investors is promoted by allowing the purchase and sale (transfer) of units in a secondary market by traders who may not themselves have made investments.
Investors are informed monthly of the quantity and value of the units in each of their certificates. A register of investors is maintained.
The customer contracts to pay agreed percentages of his salary or monthly gross remuneration, ("MGR") during the payment term, up to 20 years, in exchange for an advance to acquire a home.
The cancellation value or outstanding balance, ("CV") at any stage is not linked to interest rates or to the amount initially advanced, but is solely dependent on the percentages due in each remaining month of the term, and the customer's average monthly remuneration at that time.
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The actual formula is:-Cancellation value = Sum of percentages duethroughout remaining payment term x current 12 month moving average of MGR.
The set of percentages due throughout the remaining payment term is called the schedule of percentages.
The percentages are pre-determined in such a way as to result in the exact repayment of the advance in the remainder of the term if customer's salary and 12 month moving average were to remain constant throughout. The percentages change if and only if the customer does not adhere absolutely to the agreement or if the contract is renegotiated. They do not change if the customer's salary increases.
The growth in the customer's salary provides the return for the investor.
In the first year, the rate of increase of customer's salary (say 16~) is greater than the decline in the sum of the percentages in the remainder of the term (say 10~). Accordingly, the cancellation value increases in the early years; eventually the decline in percentages becomes greater than the increase in income, causing the cancellation value to reduce, and finally disappear.
At the time Qf application for the advance, the customer .
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must be employed full-time by an approved employer, who is bound contractually to remit monthly instalments electronically to the investment fund, together with audit data relating to the customer's salary.
If the customer's employment with an approved employer is terminated or interrupted in any way, or if the income data mentioned above is not forthcoming, provision is made to impute a notional salary or monthly gross remuneration to the customer and to calculate payment percentages on the basis of that imputed figure.
Increases in imputed salary are linked to an appropriate national average.
Other provisions in the agreement with the customer are similar to those applic~`~le to conventional advances.
Securitv for the advance ; The security offered by the customer for a salary linked advance is:-SalarY. Before the advance is approved, the applicant's gross salary over the past year is examined. Attention is paid to quality and stability of earnings and salary growth potential.
Propertv. The property is a residential dwelling, ; .
existing or to be built. Title can be freehold, leasehold or sectional title.
Collateral. Security over and above the property itself takes the same forms as in conventional advances, with the possibility that the customer's retirement fund withdrawal benefit may be ceded to the investment fund, or to the approved employer or pension fund with an onward guarantee to the investment fund.
Provision is made for the guarantee to cover the full cancellation value (in which case a mortgage might be unnecessary), all unrecovered losses, or ~ust the value of the withdrawal benefit.
20 Tvees of aPPlicant There are five types of applicant:-- ordinary applicants, whose applications enjoy no special preference; they are not nominated;
- free nominees, who are nominated by investors who have no obligation to match the nomination with an investment. Free nominees are preferred, when - . . ~ . .
;
funds are short, over ordinary applicants. The degree of preference depends on the priority ratio of the nominating certificate;
- special preference applicants, who may also be free nominees, ordinary applicants and urther applicants and who may be preferred over other free nominees;
O _ further applicants, who are applying for re-advances or further advances; preference for them is determined by the rules of the investment fund;
- exclusive nominees, who are assured of advances, because they are financed by a matching pledge from the investors;
Regardless of their type, all applicants are subject to the same interview and screening procedures, funded in an allocation run, and mortgage bonds are registered in the normal way. A customer is allowed only one salary linked advance at a time.
Return to the investor An investment fund which is fully invested in salary linked advances earns a gross return which is slightly greater than the weighted (by amount of cancellation value) salary growth rate of its customers.
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The extra return arises from the fact that the cancellation value is calculated from the average monthly gross remuneration ("AMGR"~, whereas instalments are calculated from actual monthly gross remuneration ("MGR"), which can be expected to be higher than the average.
The return is reflected in the unit price.
Salarv linked ad~ances - the ke~_monthlv s,ubroutine Introduction The nature of a salary linked advance has been described above.
What follows is a step-by-step account of the essential processing that takes place in the monthly update program for each customer. This is supported by the accompanying diagram, Figure 1.
During the month, new or changed data relating to customers is entered manually, and is also received on electro-magnetic media from other sources. These changes and alterations are manually and electronically verified. Electro-magnetic files relating to the customers are read and updated.
Salaries are recorded in an unbroken se~uence in the QUANTITIES dataset, commencing 12 months prior to the application and terminating in the month in which the customer's agreement is cancelled. Months in this sequence are number consecutively from 1 upwards.
QUANTITIES contains one record for each customer for each month. Its contents are described in detail later.
It contains, in some instances in summarised form, all the financial information for each customer, and includes all the innovative procedures hereof with the exception of the handling of corrections, which will be treated separately.
The first accounting transaction, usually a debit for (a portion of) the advance, always takes place in month 13 or later. The first instalment al.ways occurs (ie. the payment term begins) at least a month after the first transaction. Payments received in the same month as the first transaction are treated as additional transactions.
Notation In the formulae which follow:
AMGRm = Average monthly gross remuneration in month m.
ASPm = The average of the percentages that are due over the remainder of the term, as shown in the schedule of percentages calculated at the end of month m-l.
~,1,. ' ' ,' ATdm = Total of all accounting transactions in month m, up to day d.
ATSPom = Result of multiplying each accounting transaction in month m by the number of days from the date of the transaction to the end of the month and adding.
ATSPdm = Result of multiplying each accounting transaction up to day d in month m by the number of days from the date of the transaction to day d of the month and adding.
CVdm = Cancellation value on day d of month m.
(d not equal to 1) CV.m = Cancellation value on last day of month, after all transactions or cancellation date, whichever is the sooner.
CV,m = Cancellation value on last day of month m after all transactions.
25 d = d~h day of the month.
ICm = Daily rate of cancellation interest applicable in month m.
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~ 3 IIm = Daily rate of intra-month interest applicable in month m.
ILm = Daily rate of legal constraint interest applicable in month m.
e = The day on which cancellation occurs, if it occurs in the month in question;
otherwise the number of days in the month.
l = last day of the month.
LCm - Maximum allowable balance in terms of legislative constraints, in month m.
m = Month number.
MGRm = Monthly gross remuneration in month m.
MTGm = Remaining term, or months-to-go, or number of instalments still due, from and including month m. Calculated in month m-1.
SPm = Schedule percentage for month m, calculated in month m-1.
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-VCm = Valuable consideration in month m.
SteP 1 - Calculate averaae monthlY aross remuneration If the customer has been classified as self-employed (not employed by an approved employer), an imputed monthly gross remuneration is calculated, as in Step 9.
The relevant data files are accessed and updat~d.
The average monthly gross remuneration is calculated: it is the cumulative moving average of the customer's latest 12 months' monthly gross remuneration:-~2 AMGRl2 = ~ MGRm/12 -m~l AMGRm = AMGRml ~ (MGRm - MGRm.l2) / 12 , Eor m ~ 13 The latter formulation requires reference to only 3 QUANTITIES records.
Customers whose agreements have been cancelled are excluded, but all others are included, even if they have as yet had no transactions. The relevant data files are updated.
If it is the end of the fiscal year, the appropriate year end processing is done. New convenience percentage "`, ' ` ~
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are calculated for customers, and these are communicated to them. The relevant data files are accessed and updated.
If notification of cancellation of the agreement has been given during the month by the customer, the average monthly gross remuneration is (optionally) not used as the basis for the investor's return, nor for the cancellation value; the chances are that the monthly gross remuneration might not be available at the time of a cancellation. A market-related interest rate for cancellations is applied for that month and thereafter and capitalized monthly. The formula is.-CVo,m = CV~,ml * (1 + ICm) + ATom + ATSPCm * ICm The relevant files are accessed and updated.
Ste~ 2 - Calculate the current cancellation value After all data has been received fr.om employers, or has been imputed as above, the cancellation value as at the end of the current month is calculated:-CV = AMGRm * MTGm * ASPm + AT,,m + ATSP,,m * IIm ~ AMGRm * SPm ; There is no cancellation before the first accounting transaction, but a cancellation value can exist before the first instalment is paid. For example, an advance ; can be paid to commence (and complete) a residential dwelling even before the first instalment is due. The cancellation value rises at the same rate as the average ~;
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monthly gross remuneration during this period.
The current average monthly gross remuneration is as calculated in Step 1 above.
MTGm is found in MTG-NEXT of the preceding month's QUANTITIES records. If the first instalment date has ; not been reached, the remaining term is equal to the total term.
The ASPm and SPm are found in the preceding month's QUANTITIES record.
The cancellation value on any day d (other than the last day) in the month following month m, is CVd,m+l = CVI,m* (1 + IIm,1) ~ ATdm,,, ~ ATSPdm~, * IIm~, The relevant files are read and updated.
Step 3 - Calculate the leqislative constraint (LC) balance Certain countries employ legislative constraints to limit the cancellation value: a ceiling (IL) is placed on interest rates. As stated, the monthly return or "interest rate" in a salary linked advance is the rate of growth of the customer's average monthly gross remuneration over the last month, plus the component due to the "lead" of monthly gross remuneration over the , - ,: ~
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average monthly gross remuneration.
If no legislative constraint applies, go to Step 4.
If such a constraint applies, the program calculates a legislative constraint balance tLCm), for the month, which reflects the maximum allowable cancellation value in terms of the applicable legislation.
If in any month the legislative constraint balance is exceeded by the cancellation value in Step 2 above, a legislative journal transaction is generated, crediting the customer with the difference. When incorporated into the calculations, this additional transaction reduces the previously calculated cancellation value to the maximum permissible in terms of the constraint. The relevant data files are accessed and updated.
Additional transactions which have been used to limit the cancellation value will not again be used in deriving the current maximum. These are called excluded transactions.
LCm = LC~l ~ ILm * LCm, + LCATm + ILm on each transaction of LCTAm from the transaction date to the month end, or date of cancellation, whichever is sooner.
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where LCATm is the sum of the non-excluded accounting transactions in month m.
SteP 4- Calculate valuable consideration (VCI
The valuable consideration (gross profit, "interest") is calculated by two methods, which, although mathematically identically equal, provide a good check on the correctness of the calculations and the variables used.
The first method uses the fact that the valuable consideration is the sum of the ~rowth in the customer's average monthly gross remuneration, and the "lead"
component as described previously. The formulae are:-VCm~ = VCgl~h~ VC,.~, where VCg~ h = ( AMGRm ~ AMGRm.l ) / AMGRm~l * C'VI m-VClolsd = ( MGRm ~ AMGRm ) * SPm20 The growth component is calculated only in the month after the customer's first transaction has occurred.
The lead component is calculated only after the first instalment (ie. after commencement of the payment term).
Both are zero otherwise.
In the second method, the valuable consideration is calculated along more conventional lines:-~ . .
VCm2 = CVm ~ CVm.l + SPm * MGRm ~ AT,m (In current usage: "Interest = closing balance - Opening balance ~ Instalment paid - Other credits") This calculation is done only in the month after the customer's first transaction: it is zero otherwise. The data files are updated with the VC.
If the two methods yield unequal results (ie. VCm' is not equal to VCmz) there is a programming error.
SteP 5 - Charqe the customer for the schedule payment on the last daY of the month A schedule of percentages is produred for each customer at the commencement of the contract. If the stated percentage of the customer's monthly gross remuneration at that time ls paid on due date tlhroughout the payment term, the advance will be exactly and finally liquidated in the last month of the payment term.
However, this is seldom the case. Payments are made early or late. Payments are missed. Extra payments are made. Charges are incurred. Credits are passed when legislative constraints must be observed. Intra-month interest is earned or paid on these transactions. All the preceding are examples of accounting transactions.
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The only transactions which are not accounting transactlons are those in which the charge is made for the scheduled payment on each due date. These charges are not additional transactions because they do not themselves alter the cancellation value or the schedule of percentages, ~which have already reflected the charge in the changing AMGR, the remaining term and other accounting transactions), but are 'memo' entries.
A 'memo' entry is generated only once the payment term has started. The transaction is dated the last day of the month. The calculation is:
Schedule amount = SPm * MGRm The data files are accessed and updated.
Comment When an additional transaction occurs the schedule of percentages changes, and a convenience percentage made ; 20 on behalf of the customer by the approved employer will not equal the schedule percentage. Thereafter, the convenience payment differs from the scheduled payment for a while (see below).
It is not feasible for the employer to alter the convenience payment every time there is an additional transaction and a resultiny alteration to the next month's schedule percentage.
The adopted technique is to allow convenience percentages to differ from schedule percentages for a period of up to a year, and then to bring the situation into line at the end of the financial year (or other period) by (contractually) adjusting the convenience percentage to equal the schedule percentage at that time. In fact the schedule percentages is recalculated automatically each month (see Step 8)~
In familiar jargon, the concept of "due and payable" is, in the case of salary linked advances, divisible. What is "due" is the sum of the outstanding percentages, multiplied by the current average monthly gross remuneration. What is "payable" is the percentage lS agreed upon annually or by renegotiation.
Step 6 - Calculate the new remaininq term (months-to-qo, MTG) each month The formula is:
MTGm~j = payment term - (max (0, m-s+1)) where the payment term is established in the agreement or by renegotiation m is the current month number s is the starting month number o~ the payment term (month of first instalment) .
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This formulation ensures that the remaining payment term does not start decrementing by 1 until the first instalment is raised. The months-to-go startinq next month is stored in the record for the current month m in the QUANTITIES data file.
steP 7 - Calculate averaqe schedule Percentaae for next month As shown in the first formula in Step 2, the cancellation value changes each month as a result of late, early, failed, extra payments etc., and interim interest paid and earned on them. Also, with each passing month (once the payment term has commenced) the remaining term decreases. Bringing these to account:-CVm = AMGRm * ASPm,,l * MTGm,~.~
where CVm i s known from Step 2, AMGRm is known from Step 1, MTGm+l is known from Step 6, SO ASPm+l can be found:
ASPm 1 l = CVm / ( AMGRm * MTGm ~ l ) SteP 8 - Recalculate schedule_of Percentaqes ..
~s stated above, monthly payments of the average schedule percentage ~ASP) of monthly gross remuneration will completely liquidate the current cancellation value over the remaining term, provided that there are no deviations arising from late, early, extra, missing transactions.
The customer may contract to make repayments at percentages other than the average schedule percentage.
The option offered will ordinarily be a plan in which the schedule percentage decreases by a fixed amount at the end of each fiscal or financial year.
Given the average schedule percentage, the terminating schedule percentage (established at the time of the agreement), the current month number, the current calendar month, and the remaining term, the schedule of percentaqes and the new annual decrement is calculated for the remainder of the payment term.
As a check, when these schedule percentages are added and divided by the number of months remaining in the term, the result will be the average schedule percentage.
The results of Steps 6, 7, 8 are updated into data files.
SteP 9 - _ Calculation of imPuted monthl~ qross ' `' ' ~ 1 ~ ~ `
2~
remuneration for self-em~loYed customers.
This calculation is triggered by a change in status of the customer to 'self-employed'.
; 5 Suppose that the customer's average monthly gross remuneration with the approved employer in his/her final month (f) which is the n~h month of the fiscal year is AMGR,. This is on the QUANTITIES dataset.
Latest official figures show that the average annual rate of income increases is r,. This rate is stored in a table which is accessible by the program.
A contractually-permitted 'loading' rate, r2, is added to r,. This is on the customer master file; it is decided by the managers in each individual customer's case. A
general default value is available in a table.
The object is to find a constant, imputed monthly gross remuneration, M, which will cause the average monthly gross remuneration to rise at an annual rate of r, + r2 at the next annual review date (in 12 - n months) or the expiry of the agreement, whichever is the sooner.
The formula is ; M = (12 * AMGR, * (1 + d/12 * (r, + r2)) - T) / d where ~, .
. ~ , 2a d = min (12-n, no of instalments to go) T = Total MGR in last n months This amount is recorded in tne data file, and updated annually at each review date for the following year.
Contents of dataset OUANTITIES
One record per customer per month ACC-NO Customer number 10 MONTH CCYYMM: last day of month m AMGR AMGRm CV CVm (on last day of month m, after all transactions in month m) VC VCm 15 IMPU-MGR-IND Imputed indlcat:or. 0 if MGRm not imputed; 1 if imputed.
VC-ERR-IND VC error indical:or; 0 if VCa~ + VC~d = VC~m; I if nol:.
; 20 VC-RENEG-IND 1 if a renegotiation took place in month m; 0 if not.
EXCL-TA-I~D 1 if there are excluded transactions in month m, 0 if not.
25 FTFP-IND FTFP/imputed indicator for month m's data. Advised by employer; based on whether customer was on full time, full pay in month m.
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SAL-INFO-REF Employer's transaction reference for month m's salary info.
BANK-ACC-NO Customer's bank account reference for salary information in month m.
MTG-NEXT MTGm~ Remaining term, starting next month.
DECRMNT-NEXT DECRmt, Annual decrement in schedule percentage, applicable from next month.
ASP-NEXT ASPm+, Average schedule percentage from next month.
SP-NEXT SPm~l Schedule percentage due next month.
AT-VAL ATm Total additional transactions, excluding int:erim interest, in month m.
AT-RAND-DAYS Sum of product of each transaction of ATm and the number of days to the end of month m, or cancellation date, whichever occurs first.
AT-INTM-INT Daily rate of interim interest on AT's in month m.
BDB-PENSN-PD Retirement fund contribution paid by customer in month m. Advised by employer.
BDB-MGR MGR earned in month m. Advised by employer.
BDB-TAX-PD Tax paid in month m. Advised by - : -, : : ..
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employer.
BDB-DEDN-PC Deduction percentage paid in month m. Advised by employer.
LC LCm maximum cancellation value in month m, consistent with the legal constraint.
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remuneration for self-em~loYed customers.
This calculation is triggered by a change in status of the customer to 'self-employed'.
; 5 Suppose that the customer's average monthly gross remuneration with the approved employer in his/her final month (f) which is the n~h month of the fiscal year is AMGR,. This is on the QUANTITIES dataset.
Latest official figures show that the average annual rate of income increases is r,. This rate is stored in a table which is accessible by the program.
A contractually-permitted 'loading' rate, r2, is added to r,. This is on the customer master file; it is decided by the managers in each individual customer's case. A
general default value is available in a table.
The object is to find a constant, imputed monthly gross remuneration, M, which will cause the average monthly gross remuneration to rise at an annual rate of r, + r2 at the next annual review date (in 12 - n months) or the expiry of the agreement, whichever is the sooner.
The formula is ; M = (12 * AMGR, * (1 + d/12 * (r, + r2)) - T) / d where ~, .
. ~ , 2a d = min (12-n, no of instalments to go) T = Total MGR in last n months This amount is recorded in tne data file, and updated annually at each review date for the following year.
Contents of dataset OUANTITIES
One record per customer per month ACC-NO Customer number 10 MONTH CCYYMM: last day of month m AMGR AMGRm CV CVm (on last day of month m, after all transactions in month m) VC VCm 15 IMPU-MGR-IND Imputed indlcat:or. 0 if MGRm not imputed; 1 if imputed.
VC-ERR-IND VC error indical:or; 0 if VCa~ + VC~d = VC~m; I if nol:.
; 20 VC-RENEG-IND 1 if a renegotiation took place in month m; 0 if not.
EXCL-TA-I~D 1 if there are excluded transactions in month m, 0 if not.
25 FTFP-IND FTFP/imputed indicator for month m's data. Advised by employer; based on whether customer was on full time, full pay in month m.
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SAL-INFO-REF Employer's transaction reference for month m's salary info.
BANK-ACC-NO Customer's bank account reference for salary information in month m.
MTG-NEXT MTGm~ Remaining term, starting next month.
DECRMNT-NEXT DECRmt, Annual decrement in schedule percentage, applicable from next month.
ASP-NEXT ASPm+, Average schedule percentage from next month.
SP-NEXT SPm~l Schedule percentage due next month.
AT-VAL ATm Total additional transactions, excluding int:erim interest, in month m.
AT-RAND-DAYS Sum of product of each transaction of ATm and the number of days to the end of month m, or cancellation date, whichever occurs first.
AT-INTM-INT Daily rate of interim interest on AT's in month m.
BDB-PENSN-PD Retirement fund contribution paid by customer in month m. Advised by employer.
BDB-MGR MGR earned in month m. Advised by employer.
BDB-TAX-PD Tax paid in month m. Advised by - : -, : : ..
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employer.
BDB-DEDN-PC Deduction percentage paid in month m. Advised by employer.
LC LCm maximum cancellation value in month m, consistent with the legal constraint.
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Claims (22)
1. A financial instrument for financing the purchase of a home, which comprises a salary linked mortgage.
2. The financial instrument claimed in Claim 1, which includes an obligation on the part of the borrower to repay to a lender percentages of the borrower's salary for a predetermined period of time.
3. The financial instrument claimed in Claim 2, in which the percentages are fixed for the entire period of time.
4. The financial instrument claimed in Claim 2, in which repayments are to be made on specified dates, the percentages are fixed for the entire period of time if repayments are made on the specified dates, and the percentages vary in a predetermined manner if repayments are not made on the specified dates.
5. The financial instrument claimed in Claim 4, in which the percentages of salary that are repaid are also varied in a predetermined manner if advance repayments are made.
6. The financial instrument claimed in Claim 2, which includes an obligation on the part of an employer of the borrower to repay the said percentages of the borrowed salary on behalf of the borrower to the lender.
7. The financial instrument claimed in Claim 2, which includes a cession on the part of the borrower of an asset of his to the lender as collateral.
8. The financial instrument claimed in Claim 7, in which the asset is the home.
9. The financial instrument claimed in Claim 7, in which the asset is a portion of the borrower's funds in a retirement fund.
10. The financial instrument claimed in Claim 2, which includes an instrument of deposit for a funding body which invests funds with the lender to be lent to the borrower.
11. The financial instrument claimed in Claim 10, in which a specified borrower is linked to the instrument of deposit.
12. The financial instrument claimed in Claim 10, in which the instrument of deposit includes a pledge obligation on the funding body to provide funds on demand by the lender.
13. The financial instrument claimed in Claim 10, which includes an entitlement on the part of the funding body to redeem the instrument of deposit if funds are available.
14. A method of acquiring a home by a person which includes borrowing a sum of money from a lender thereof;
paying for the home or at least a part thereof with the said money; and repaying the said money by paying at specified times for a predetermined period of time an amount equal to specified percentages of the person's salary.
paying for the home or at least a part thereof with the said money; and repaying the said money by paying at specified times for a predetermined period of time an amount equal to specified percentages of the person's salary.
15. The method claimed in Claim 14, in which the home is acquired by building it.
16. The method claimed in Claim 14, in which the home is acquired by purchasing it.
17. A method of financing the purchase by a person of a home, which includes lending a sum of money to the person; and collecting an amount equal to specified percentages of the person's salary from the person at specified times for a predetermined period of time.
18. In combination in a system for processing and supervising a plurality of home financing accounts for a plurality of borrowers who have borrowed money from a lender to finance the acquisition of a home, each of the accounts being repaid by each borrower repaying percentages of his salary, said system including borrower account data file means for storing information characterizing each borrowers account;
manual entry means for entering details of repayments made by at least one borrower to the lender;
data receiving and verifying means for receiving and verifying details of repayments made in favour of the lender by employers of at least some of the borrowers on behalf of these borrowers and repayment details from said manual entry means;
means responsive to said borrower account data file means and said data receiving and verifying means for generating an updated schedule percentage for each account at the end of each month; and communicating means for communicating said updated schedule percentage for each account to each borrower.
manual entry means for entering details of repayments made by at least one borrower to the lender;
data receiving and verifying means for receiving and verifying details of repayments made in favour of the lender by employers of at least some of the borrowers on behalf of these borrowers and repayment details from said manual entry means;
means responsive to said borrower account data file means and said data receiving and verifying means for generating an updated schedule percentage for each account at the end of each month; and communicating means for communicating said updated schedule percentage for each account to each borrower.
19. A combination as claimed in Claim 18, wherein said updated schedule percentage generating means for each account includes means for determining an average monthly gross remuneration (AMGR), a cancellation value based on such AMGR, a valuable consideration, a remaining term in months and an average schedule percentage.
20. A combination as in Claim 19, wherein said schedule percentage is determined at the beginning of a financial year and is kept constant for that year at a convenience value and wherein said system includes a means for determining an actual schedule percentage and a means for determining a percentage journal transaction amount if the actual schedule percentage is different from the convenience value, which percentage journal transaction amount results in the actual schedule percentage equalling the convenience value, and which percentage journal transaction amount is stored in said data file.
21. A combination as in Claim 19, wherein said updated schedule percentage generating means comprises means for determining if the cancellation value complies with legislative constraints and if not for generating a legislative journal transaction amount which will provide an acceptable cancellation value, said legislative journal transaction amount being stored in said data file means.
22. A combination as in Claim 19, wherein said updated schedule generating means comprises means for generating an imputed monthly gross remuneration value for self employed borrowers.
Applications Claiming Priority (2)
| Application Number | Priority Date | Filing Date | Title |
|---|---|---|---|
| ZA908847 | 1990-11-05 | ||
| ZA90/8847 | 1990-11-05 |
Publications (1)
| Publication Number | Publication Date |
|---|---|
| CA2054956A1 true CA2054956A1 (en) | 1992-05-06 |
Family
ID=25580374
Family Applications (1)
| Application Number | Title | Priority Date | Filing Date |
|---|---|---|---|
| CA002054956A Abandoned CA2054956A1 (en) | 1990-11-05 | 1991-11-05 | Financing management system |
Country Status (8)
| Country | Link |
|---|---|
| JP (1) | JPH0540771A (en) |
| AU (1) | AU8698791A (en) |
| CA (1) | CA2054956A1 (en) |
| DE (1) | DE4136320A1 (en) |
| FR (1) | FR2669449A1 (en) |
| GB (1) | GB9123408D0 (en) |
| IT (1) | ITMI912924A0 (en) |
| ZA (1) | ZA919494B (en) |
Cited By (1)
| Publication number | Priority date | Publication date | Assignee | Title |
|---|---|---|---|---|
| US6148293A (en) * | 1995-01-18 | 2000-11-14 | King; Douglas L. | Method and apparatus of creating a financial instrument and administering an adjustable rate loan system |
Families Citing this family (5)
| Publication number | Priority date | Publication date | Assignee | Title |
|---|---|---|---|---|
| DK16596A (en) * | 1996-02-02 | 1997-08-03 | Realkredit Danmark A S | Data processing system and method for calculating the size of financial instruments |
| US6826544B1 (en) | 1997-07-09 | 2004-11-30 | Advanceme, Inc. | Automated loan repayment |
| JP2001509628A (en) * | 1997-07-09 | 2001-07-24 | カウントリーワイド ビジネス アライアンス， インコーポレイテッド | Automatic loan repayment |
| GB9903766D0 (en) * | 1999-02-18 | 1999-04-14 | Wood Jocelyn T G | Data processing system for initiating & administering financial products |
| KR100438997B1 (en) * | 2001-07-24 | 2004-07-03 | 최정우 | Method for supervising a financial property and debt, and recording medium recorded the same method |
-
1991
- 1991-11-04 DE DE4136320A patent/DE4136320A1/en not_active Ceased
- 1991-11-04 AU AU86987/91A patent/AU8698791A/en not_active Abandoned
- 1991-11-05 GB GB919123408A patent/GB9123408D0/en active Pending
- 1991-11-05 FR FR9113621A patent/FR2669449A1/en not_active Withdrawn
- 1991-11-05 JP JP31513791A patent/JPH0540771A/en active Pending
- 1991-11-05 IT IT91MI2924A patent/ITMI912924A0/en not_active IP Right Cessation
- 1991-11-05 CA CA002054956A patent/CA2054956A1/en not_active Abandoned
- 1991-12-02 ZA ZA919494A patent/ZA919494B/en unknown
Cited By (1)
| Publication number | Priority date | Publication date | Assignee | Title |
|---|---|---|---|---|
| US6148293A (en) * | 1995-01-18 | 2000-11-14 | King; Douglas L. | Method and apparatus of creating a financial instrument and administering an adjustable rate loan system |
Also Published As
| Publication number | Publication date |
|---|---|
| ITMI912924A1 (en) | |
| GB9123408D0 (en) | 1991-12-18 |
| JPH0540771A (en) | 1993-02-19 |
| ZA919494B (en) | 1992-08-26 |
| ITMI912924A0 (en) | 1991-11-05 |
| DE4136320A1 (en) | 1993-03-04 |
| FR2669449A1 (en) | 1992-05-22 |
| AU8698791A (en) | 1992-05-07 |
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Legal Events
| Date | Code | Title | Description |
|---|---|---|---|
| FZDE | Discontinued |