WO2001091010A1

WO2001091010A1 - Online system and method for calculating the actual costs of a mortgage loan to a mortgage consumer

Info

Publication number: WO2001091010A1
Application number: PCT/US2001/016669
Authority: WO
Inventors: Franklin D. Raines; David N. Voth; Michael W. Koch; Peter A. Simon; Robert L. Washington
Original assignee: Fannie Mae
Priority date: 2000-05-23
Filing date: 2001-05-23
Publication date: 2001-11-29
Also published as: WO2001091010A9; AU2001264854A1

Abstract

A method and system (Figure 4) for helping mortgage consumers select the mortgage product that best meets their needs. An online tool is provided through a mortgage consumer's web browser that allows a mortgage consumer to calculate and compare the real or actual costs of various mortgage options available on the market. For each mortgage loan option, the online tool provides an easy to use interface that calculates and displays loan data for the mortgage consumer.

Description

ONLINE SYSTEM AND METHOD FOR CALCULATING THE ACTUAL COSTS OF A MORTGAGE LOAN TO A MORTGAGE CONSUMER

BACKGROUND OF THE INVENTION The present invention relates generally to a system and method for

calculating the costs of mortgage products and, in particular, to such a system and

method that provides mortgage consumers with an online tool to help select the

mortgage product that best meets their mortgage needs by providing an estimate of actual or real mortgage costs over a predefined term. Typical online tools, also known as mortgage calculators, allow a mortgage consumer to determine the monthly payments a mortgage consumer will

need to make for the purchase of a house or refinancing of an existing loan. These online calculators determine the monthly payment based on various factors including the purchase price of the property, the mortgage consumer's intended down payment,

the interest rate applicable to the purchase and the term or type of mortgage being considered (e.g., ARM, 30 year fixed).

However, such mortgage calculators are not capable of providing the

actual or real cost of a mortgage that takes into consideration all costs associated with financing a mortgage. In particular, such calculators do not factor in mortgage

insurance costs, appraisal fees, title insurance fees, and miscellaneous settlement charges. Moreover, such prior art mortgage calculators do not permit mortgage

consumers to calculate the effect of the additional costs over the full term of the loan or for the time they actually plan to hold the loan. By calculating the costs over the period of time the borrower actually plans to hold the loan, a more useful and realistic mortgage cost assessment can be made. It has also not been possible to compare the terms of one mortgage to another in prior art mortgage calculators because the different terms and conditions of competing mortgages can not be simultaneously evaluated by such systems.

Accordingly, it is most desirable to provide an online tool in the form of a mortgage calculator that overcomes the significant disadvantages of the prior art and that provides mortgage consumers an actual assessment of the various mortgage costs as they evaluate various mortgage products.

SUMMARY OF THE INVENTION Generally speaking, in accordance with the present invention, a mortgage calculator system and method is provided for calculating actual or real mortgage costs and providing appropriate comparable analyses between various mortgage products.

Through their on-line web browsers, mortgage consumers are able to calculate and compare the actual cost of various available mortgage options, and then choose the most desirable, lowest-cost option to meet their needs. For each mortgage loan being considered, the mortgage calculator of the present invention will provide an analysis that includes four key measures: (i) the actual cost rate of the mortgage including all expenses associated with financing the loan, expressed as an annual percentage rate based on the time the borrower plans to hold the loan; (ii) the actual cost rate of the mortgage rate after taking into account the tax savings derived by a borrower based on a tax deduction for the mortgage interest; (iii) the monthly mortgage payment that takes into account the expenses associated with financing the loan; and (iv) the estimated equity that the borrower can expect to accumulate during the time that the borrower plans to hold the loan. In accordance with an exemplary embodiment of the present invention, a method is provided for providing a client with mortgage loan costs over a computer network, the method steps including receiving over a computer network an electronic request from the client machine for information concerning the costs of a mortgage; providing, in response to the request, an input interface including one or more mortgage data fields to be populated by values; populating the mortgage data fields with at least one of values input by said client and default values; sending a request to calculate an actual cost rate of a mortgage; and calculating the actual cost rate of a mortgage based on the at least one of values input by said client and default values, including values for closing costs and settlement fees. The actual mortgage costs are preferably expressed as an annual percentage rate based on the expected time period that the mortgage will be held by a mortgage consumer.

In a further aspect of the exemplary method of the present invention, such method further comprises the step of using a default value or a client input value for a mortgage consumer' s tax bracket and calculating the actual cost rate of the mortgage to reflect a potential tax savings that would result from a mortgage consumer's tax deduction of the mortgage interest.

In another aspect of the exemplary embodiment of the present invention, such method further comprises the step of recalculating the actual mortgage costs based on values for the closing and settlement costs input by the mortgage consumer using the client machine.

In a still further aspect of the exemplary embodiment of the present invention such method further comprises the step of providing a mortgage consumer the option of initiating a calculation of the actual cost rate for a single mortgage loan or initiating a calculation of the actual cost rate for two mortgage loans, the results displayed on the client machine in a side by side comparison.

More specifically, a method is provided for making electronically available from a remote system mortgage cost data to a mortgage consumer having access to a client terminal electronically connectable to the Internet, including the steps of establishing a link between the client terminal and the remote system over the Internet; rendering in the client terminal a graphical user interface including a plurality of mortgage data fields to be populated by values; populating the mortgage data fields with at least one of values input by the mortgage consumer and default values; sending a request over the Internet to the remote system to calculate an actual cost rate of a mortgage loan; calculating an actual cost rate of a mortgage loan based on the at least one of values input by mortgage consumer and default values including values for closing costs and settlement fees; and rendering on the client terminal a results graphical user interface including the plurality of mortgage data fields and the at least one of values input by the mortgage consumer and default values. Preferably, the results interface displays the actual cost rate as an annual percentage rate over an expected time period that the mortgage will be held by the mortgage consumer.

Similarly, a web based system is provided for delivering to a mortgage consumer mortgage cost data over the Internet which includes a client machine having a web browser associated with the mortgage consumer for inputting values for mortgage data including a purchase price of a home, an intended down payment and a mortgage interest rate; a remote sub-system having at least one server, means associated with the at least one server for rendering a web page in the web browser, including a graphical user interface having a plurality of data fields for receiving the mortgage data inputs from said client machine; a database of default values associated with the at least one server for populating at least one of the plurality of data fields; and means for calculating an actual cost rate for the mortgage based on the mortgage consumer input values and at least one default mortgage data values for closing and settlement costs and holding period. Accordingly, it is an object of the present invention to provide an improved mortgage calculator which overcomes the deficiencies and inadequacies of the prior art.

Another object of the present invention is to provide a mortgage calculator system and method which allows mortgage consumers to consider and compare various mortgage options.

A further object of the present invention is to provide a mortgage calculator system and method which allows consumers to calculate all costs of obtaining a mortgage to provide a more useful and realistic cost assessment.

A still further object of the present invention is to provide a mortgage calculator system and method which allows a mortgage consumer to perform a side by side comparison of two mortgages based on the actual cost rate of each of the mortgages.

Still other objects and advantages of the invention will in part be obvious and will in part be apparent from the specification. The invention accordingly comprises the several steps and the relation of one or more of such steps with respect to each of the others, and the system embodying features of construction, combination of elements and arrangement of parts which are adapted to effect such steps, all as exemplified in the following detailed disclosure, and the scope of the invention will be indicated in the claims. BRIEF DESCRIPTION OF THE DRAWINGS For a fuller understanding of the invention, reference is had to the following description, taken in connection with the accompanying drawings, in which: FIG. 1 is a screen display of an introductory interface for prompting a selection of one of the available options in accordance with an exemplary embodiment of the invention;

FIG. 2 is a screen display of a single loan input interface for a new purchase according to an exemplary embodiment of the present invention; FIG. 3 is a screen display of a single loan input interface for a refinance of an existing mortgage according to an exemplary embodiment of the present invention;

FIG. 4 is a screen display of a single loan results interface for a new purchase according to an exemplary embodiment of the present invention; FIG. 5 is a screen display of a single loan results interface for a refinance of an existing mortgage according to an exemplary embodiment of the present invention;

FIG. 6 is a screen display of a single loan results interface for a refinance of an existing mortgage where the loan type and term has been identified as a 5 year ARM loan according to an exemplary embodiment of the present invention; FIG. 7 is a screen display of a single loan results interface for a refinance of an existing mortgage where the loan type and term has been identified as a Balloon loan according to an exemplary embodiment of the present invention; FIG. 8 is a screen display of a two loan input interface for a new purchase according to an exemplary embodiment of the present invention; FIG. 9 is a screen display of a two loan input interface for a refinance of an existing mortgage according to an exemplary embodiment of the present invention;

FIG. 10 is a screen display a screen display of a two loan results interface for a new purchase according to an exemplary embodiment of the present invention;

FIG. 11 A- 1 IE are screen displays of a closing costs and other fees itemizer interface according to an exemplary embodiment of the present invention; and FIG. 12 is a screen display of a closing costs and other fees itemizer results interface according to an exemplary embodiment of the present invention

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS In an exemplary embodiment of the present invention, an online mortgage calculator is provided that calculates: (i) the actual cost of the mortgage including all expenses, expressed as an annual percentage rate based on the time the borrower actually plans to hold the loan; (ii) the actual cost rate after taking into account the borrower's potential tax savings, based on a deduction of the mortgage interest at an assumed or mortgage consumer provided tax bracket; (iii) the monthly mortgage payment; and (iv) the estimated equity that the borrower can expect to accumulate during the time that the borrower plans to hold the loan. The online mortgage calculator provides these calculations for a single loan or as a comparison of two loans. Overall the online mortgage calculator provides a mortgage consumer a way to calculate and compare all the built in costs associated with a mortgage loan including interest rate, points, mortgage insurance costs, appraisal fees, title and home insurance fees, closing or settlement costs and miscellaneous mortgage related expenses.

The online mortgage calculator of the present invention is preferably implemented as a web based feature of a home and mortgage related products web site that is accessible by a mortgage consumer over a network connection (e.g., over the World Wide Web). The functionality of the mortgage calculator is implemented by one or more programs running on a web server or application server associated with such home and mortgage related product web site.

The mortgage consumer accesses the home and mortgage product web site through the World Wide Web or Internet network using a client machine. The client machine may be located at a user's home or office and is connectable to the Internet through an Internet Service Provider (ISP), an online service provider (e.g., America Online) or other available connection means. The client system is preferably a personal computer such as, a desktop, notebook or palmtop device running one of many operating systems (e.g., Windows 98) and equipped with Internet browsing capabilities (e.g., Microsoft Internet Explorer, Netscape Navigator). The client system preferably includes a central processing unit, one or more storage mediums, a display having a graphical user interface (GUI) and a keyboard and pointing device for inputting data and navigating. As is well known, a client machine makes a request to a web server identified by a uniform resource locator (URL) and receives in return a web page formatted according to a Hyper Text Markup Language ("HTML") or similar markup language, such as SGML or XML. Once a user has accessed a web site featuring the mortgage calculator of the present invention, a mortgage consumer accesses the mortgage calculator by clicking on a link causing the web server to transmit a web page or GUI interface to the mortgage consumer's web browser for display on the mortgage consumer's client machine.

More specifically, when the mortgage consumer selects the mortgage calculator through his web browser, the mortgage consumer is presented with a GUI interface that introduces the mortgage consumer to the benefits and features of the mortgage calculator and helps the mortgage consumer navigate through the multiple and varied functions offered by the mortgage calculator of the present invention. As is well known, in a web based environment, a web based GUI interface may include virtual buttons (i.e., radio buttons) that are activated when clicked by a user using a mouse or keyboard. Thus in the exemplary embodiment of the present invention, the mortgage consumer navigates or initiates different features or functions of the mortgage calculator by selecting (i.e., clicking) a radio button that corresponds to a particular feature or functionality of the mortgage calculator.

In the exemplary embodiment, the mortgage consumer is presented with a first screen (not shown) that asks the mortgage consumer to indicate the purpose of the mortgage loan (i.e., new purchase or refinancing an existing loan). Upon identifying the purpose of the loan, a second screen is rendered in the mortgage consumer's web browser, as shown in FIG. 1, that requests the mortgage consumer to choose a single loan option, two loan comparison option or closing cost itemizer option. This screen shown in FIG. 1 appears whether the mortgage consumer has identified the mortgage as being used for a new purchase or to refinance and existing mortgage. By clicking on the radio buttons shown in FIG. 1 , a mortgage consumer may select one of three types of user interfaces — a Single Loan Input Interface, a Two Loans Input Interface or a Closing Costs and Other Fees Itemizer Interface that is rendered in the mortgage consumer's web browser. 1. Single Loan Input Interface

When a mortgage consumer clicks on the radio button that corresponds to the one loan option, the Single Loan Input Interface is rendered in the mortgage consumer's web browser. Referring to FIGS. 2 and 3, a Single Loan Input Interface includes a plurality of mortgage data fields (text boxes or drop down menus) for the mortgage consumer to enter a value or select a type. The value entered by the mortgage consumer for the first two data fields will depend on the mortgage consumer's selected purpose for the loan (i.e., purchase or refinance). As shown in FIG. 2, if the mortgage consumer indicated (in the previous interface) that the mortgage loan is for a new purchase, the mortgage consumer is prompted to enter in the first two data fields the Home Purchase Price and Down Payment, respectively. However, as shown in FIG. 3, if the mortgage consumer indicated that the mortgage loan was to be used to refinance an existing loan, the potential buyer is prompted to enter an Estimated Home Value and the Refinance Amount, in the first two data fields.

The third input data field is a combination of Loan Type and Term and is common to the Single Loan Input Interfaces of both FIGS. 2 and 3. The most widely used values of loan type and term are combined to create a user- friendly drop down menu of the most common loan products in the market. The drop down menu assists the mortgage consumer in quickly selecting a loan type and term (e.g., 15 year fixed, 20 year fixed, 25 year fixed, 30 year fixed, 40 year fixed, 30 year Balloon, 1 year ARM, 3 year ARM, 5 year ARM, 7 year ARM, 10 year ARM). The Single Loan Interfaces of FIGS. 2 and 3 also includes separate data fields for Mortgage Interest Rate and Points. In the exemplary embodiment, the Mortgage Interest Rate data field displays a default value of 8% and the Points data field displays a default value of 1 point. However, the mortgage consumer may change these default values to enter actual values for Interest Rate and Points. Once values for all the data fields are present (either as entered by the mortgage consumer or as a default value) the mortgage consumer initiates an initial calculation by clicking on a "Continue" button provided on the interface. A "Back" button is also preferably provided that allows a mortgage consumer to return to the pervious screen, FIG. 1.

To initiate an initial calculation the mortgage consumer clicks the "Continue" button that calls a server side script or application (e.g., Java Bean application) that processes the values present in the mortgage data fields shown in FIGS. 2 and 3 and returns the results for the single loan option to the mortgage consumer's web browser for display as a Single Loan Results Interface rendered in the mortgage consumer's browser. As shown in FIGS. 4 and 5, the Single Loan Results Interfaces repeat the data fields and values from the Single Loan Input Interfaces of FIGS. 2 and 3, respectively.

In accordance with a further aspect of the present invention, the Single Loan Results Interfaces include additional data fields that are populated by default or assumed values. The assumed values or default values are preferably stored and retrieved from a database (e.g., xBase, relational, hierarchical) associated with the web server or application server. The default values that are retrieved to populate these additional fields will depend on the loan type and term and whether the mortgage is for a new purchase or to refinance an existing loan. For example, when a mortgage consumer selects an ARM loan, a server side application automatically accesses the database and retrieves the default values that correspond to an ARM loan and transfers the values to the mortgage consumer's web browser for display in the appropriate data fields.

More particularly, as shown in FIGS. 4 and 5, the Single Loan Results Interfaces include additional data fields for Estimated (Est.) Closing Costs and Other Fees; Holding Period (number of years mortgage will be held by consumer); Tax Bracket; and estimated Mortgage Insurance (MI) Premium. The following default values are used: the Closing Costs and Other Fees are assumed to be approximately 3.0 % of the specified loan amount; the Holding Period is assumed to be seven (7) years, the Tax Bracket is assumed to be 15% and the MI Premium is calculated based on the loan to value ratio and the loan type.

It should be noted that the default or assumed value for the MI Premium is only provided if the down payment, as indicated by the mortgage consumer, is less than 20% of the total purchase price. Also, the 3.0% estimate is a conservative estimate based on industry wide averages of closing costs that typically run between 1.5% and 3.0%. The estimated 3.0% is represented as an aggregate dollar value in the Est. Closing Cost and Other Fees Fields of FIGS. 4 and 5. As will be discussed in detail, the mortgage consumer may replace the assumed values (including the assumed 3.0%) with actual values to calculate a more accurate value of the costs of financing the mortgage loan. As shown in FIGS. 4 and 5, the actual or real costs of the mortgage are displayed as an Actual or True Cost Rate (based on the estimated 7 year holding period); a Monthly Payment, an Actual or True Cost Rate After Tax (based on the estimated 15% tax bracket and estimated 7 year holding period) and Equity Build Up (also taken over the estimated 7 year holding period). For all loan types, the Single Loan Results Interface of FIGS. 4 and 5 preferably include the following mortgage dated fields and their corresponding input or assumed values: (1) Purpose of loan (Purchase or Refinance); (2) Home Purchase Price Estimated Home Value ($); (3) Down payment (S and %) /Refinance Amount ($); (4) Loan Type and Term (from drop down menu); (5) Interest Rate; (6) Points; (7) Est. Closing Costs and Other Fees (expressed as an aggregate dollar value); (8) Holding Period; (9) Tax Bracket; and (10) Estimated Mortgage Insurance Payment

($)•

When the mortgage consumer has selected an ARM product or a Balloon loan from the pull down menu shown in FIGS. 2 and 3, additional data fields are included in the Single Loan Results Interface. More particularly, as shown in FIG. 6, if the mortgage consumer selected an ARM product, data fields for the following additional ARM data inputs are included: (1) ARM Index Value; (2) ARM Margin; (3) ARM Years Until First Adjustment; (4) ARM Years from First to Second Adjustment; (5) Period Rate Cap; and (6) Lifetime Rate Cap. Alternatively, if the user indicated a Balloon loan, the Results Interface includes the assumption for the number of years to the Balloon Date, as shown in FIG. 7. These additional data fields are preferably populated using server side values.

After the user is presented with the Single Loan Results Interface, as represented in FIGS. 4 through 7, including the aforementioned input and assumed values in the data fields, the mortgage consumer may enter new values for one or more of the assumed values and recalculate the Monthly Payment, True Cost Rate, True Cost Rate After Tax and Equity Build Up. That is, the mortgage consumer may elect to change any of the assumed values with real data, if available, including replacing the default or assumed value for the Total Closing Costs and Other Fees. The mortgage consumer may input a new value for all the data fields, except for the tax bracket data field and loan type and term data field. These fields are drop down menus that require the mortgage consumer to select one of a predefined number of choices. For example, a mortgage consumer may edit the Est. Closing Costs and Other Fees by simply entering a new aggregate dollar value that replaces the initial aggregate dollar value that is derived from the 3% default value. With this new aggregate value entered, a mortgage consumer may calculate a new Monthly Payment, True Cost Rate, True Cost Rate After Tax and Equity Build Up. As before, once the new values have been entered a calculation is initiated by clicking on the "Calculate" button, as shown in FIGS. 4 through 7. Alternatively, a mortgage consumer may edit the Est. Closing Costs and Other Fees, previously assumed as 3% of the specified loan amount, by clicking on a link to a separate web page or interface (i.e., Closing Costs Input Itemizer Interface) where the mortgage consumer can enter specific values for the different components that comprise the Est. Closing Costs and Other Fees. This aspect of the present invention will be discussed in detail hereinafter.

The data input by the mortgage consumer or that has been assumed is processed by a server side application that calculates certain prerequisite or interim values that are used to derive Monthly Payment, Actual or True Cost Rate, Actual or True Cost Rate After Tax and Equity Build Up. Specifically, the following interim values are calculated when a mortgage consumer has identified the mortgage loan as being used for either a purchase or refinance: Current Balance; Base Mortgage Payment; Closing Costs Payment; Interest Payment; MI Payment; and Total Payment. If a user has identified the loan as being used for a purchase, the following additional values are derived: Discount Points Payment Purchase; and Total Payment After Tax

Purchase, or, if the mortgage consumer has identified the loan as being used to refinance an existing loan, the following additional values are derived: Discount

Points Payment Refinance; and Total Payment After Tax Refinance.

A brief description of each of these interim components and the

applicable algorithms/formulas for deriving the value of these components is provided

below. The noteRate value in the formulas below corresponds to the interest rate on the loan that was entered by the user. In the case of an ARM loan the value of the

noteRate is calculated, as shown below in paragraph 11. 1. CurrentBalance is the outstanding value of the loan at the end of any month in the holding period.

loanAmount[(l + noteRate_month /i2)^mort^^T - (1 + noteRate_month /12)^^πth]

CurrentBalance month (l + noteRate_momh /12)^mort^^Te™ - l

2. BaseMortgagePayment is the required monthly payment for a given loan amount, note rate (interest rate) and mortgage term. This is the amount the borrower will actually remit to the lender every month. For adjustable rate loans the note rate will vary by month according to the specified arm repricing rules.

currentBalance_month (noteRate _m t

BaseMortgagePayment _ ^■'month V m_oo_nn_lt_hh /12)(V1 + no e^wRate_mm_oo_nn_tt_hh /ι₂)^m«™*

(1 + noteRate _monlh /^ \ m""o"r"tg^age^eT^le^er^πmn-- m^mo^onⁿtuh, _ _χ

3. DiscountPointsPaymentPurchase represents the monthly payment required to amortize the discount points over the holding period (the amount of time the borrower expects to hold the loan).

„ . „ „ , discountPoints * loanAmount(noteRate_start /12)(l + noteRate ,_tιn / 12) ^hoIdi"^^od

DiscountPo mt sPaymentPurchase = ^start , , . I . . ≥!_2 ^.

(1 + noteRate _m / 12) ^to"^ta*^taod - 1 4. DiscountPointsPaymentRefi represents the monthly payment required to amortize the discount points over the mortgage term (the amount of time required to amortize the loan balance to zero).

„ . ., „ _c discountPoints * loanAmoιlnt(noteRate_s._art /12)(l + noteRate_stIIrl /12)^moπ ^^TOT,

DiscountPo mt sPayment Re fi = ^sla" „ » '- y (1 + noteRate_staπ / 12) "^»«w^τ™ _ i

ClosingCostsPayment represents the monthly payment required to amortize the total closing costs over the holding period.

closingCosts(noteRate_start /12)(l + noteRate_start /i2)^holdins^Period

Clo sin gCostsPayment = ^■

(l + noteRate_start /12) holdingPeriod

6. InterestPayment is the portion of the BaseMortgagePayment that is allocated to cover interest on the outstanding loan amount. In a fully amortizing mortgage, the interest payment declines over the mortgage's life.

InterestPayment_month = currentBalance_month_, (noteRate/ 12)

7. MlPayment is the monthly mortgage insurance premium payment. This payment will be a function of a specific MI premium schedule and cancellation assumptions.

MIpayment_month = loanAmount * MIpremium_month /12

8. TotalPayment is the sum of the monthly payments for the loan and closing cost components described above. It represents all the costs related to obtaining a mortgage converted to a monthly payment basis. This value will serve as the basis for computing the True Cost Interest Rate.

TotalPayment _month = BaseMortgagePayment_month + DiscountPo int sPayment + Clo sin gCostPayment + MlPayment _month 9. TotalPaymentAfterT ax-Purchase is the sum of the after tax monthly payments for the loan and closing cost components described above. It represents all the costs related to obtaining a mortgage converted to a monthly payment basis and adjusted to reflect the tax deductibility of mortgage interest payments. This value will serve as the basis for computing the True Cost After Tax Interest Rate.

TotalPaymentAfterTax_momh = (BaseMortgagePayment _month - InterestPayment_month ) +

InterstPayment_month (1 - taxRate) +

DiscountPo int sPaymentPurchase(l - taxRate) +

Clo sin gCostPayment + MIPayment_month

10. TotalPaymentAfterT ax-Refinance is the sum of the after tax monthly payments for the loan and closing cost components described above. It represents all the costs related to obtaining a mortgage converted to a monthly payment basis and adjusted to reflect the tax deductibility of mortgage interest payments. This value will serve as the basis for computing the True Cost After Tax Interest Rate.

TotalPayment AfterTax_month = (BaseMortgagePayment_month - InterestPayment_month ) +

InterstPayment_month (1 - taxRate) +

(DiscountPo int sPaymentPurchase - DiscoutPo int s Re fi) +

DiscountPo int s Re fi(l - taxRate)

Clo sin gCostPayment + MlPayment _month

11. Adjustable Rate Mortgage (ARM) interest rate. The ARM interest rate at future points in time is a function of the ARM repricing rules, which are governed by data entered by the user. These rules require the following user-entered data elements:

ArmStartRate Months to first adjustment Months to subsequent adjustment

Period Cap Lifetime Cap Index value Margin

The ARM interest rate is then calculated using the following sequence of equations:

FloorLife = ArmStartRate - LifeTimeCap CapLife = LifeTimeCap + ArmStartRate LidexAndM arg in = Index Value + M arg in

If month = Months to first adjustment + 1 or

(month - 1 - Months to first adjustment)/Months to subsequent adjustment = 0

then

LowestPossible = max(ARMInterestRate_monU,_₁ - PeriodCap, FloorLife) HighestPossible = min(ARMInterestRate_monΛ_, + PeriodCap, CapLife)

ARMInterestRate_raonth = middlevalue(LowestPossible, IndexAndMargin, HighestPossible

else

ARMInterestRate^,.,,, = ARMInterestRate_monUl_,

As previously explained, the values of the above identified components are used to derive values for the Monthly Payment, Actual or True Cost Rate, Actual

or True Cost Rate After Tax and Equity Build Up. These values are calculated and returned to the mortgage consumer's web browser for display in the output or results web page. The Monthly Payment is calculated for the first month of the loan and the Equity Build Up indicates the values for the specified holding period of the loan.

1. Actual or True Cost Rate (Effective Rate). This will be the primary metric of the mortgage calculator of the exemplary embodiment of the present invention. The actual or true cost rate reflects all the disparate costs of the mortgage origination process and the mortgage loan itself as a single rate which represents the total cost associated with a particular offering. The Actual or True Cost Rate will satisfy the following equation:

holdingPeriod TotalPayment month loanAmount = 0 mo Σnth=l (l + TrueCostRate/12) month -

Equation 1 must be solved in an iterative manner using a numerical technique designed to compute the roots of multidimensional nonlinear equations. The above calculation uses a variant of the Newton-Raphson method.

Actual or True Cost After Tax Rate (After Tax Effective Rate). The actual or true cost rate after tax reflects all the disparate costs of the mortgage origination process and the mortgage loan itself as a single after tax rate which represents the total cost associated with a particular offering. The actual or true cost after tax rate is the actual or true cost rate adjusted to reflect the tax savings based on a borrower's marginal federal tax rate. The Actual or True Cost After Tax Rate will satisfy the following equation:

holdingPeriod TotalPaymentAfterTax_momh loanAmount = 0 mo Σnth=I (1 + TrueCost AfterTaxRate / 12) ^month

Equation 2 must be solved in an iterative manner using a numerical technique designed to compute the roots of multidimensional nonlinear equations. The above calculation uses a variant of the Newton-Raphson method.

Equity Calculator-Percent. The equity calculator computes how much equity is built up in the loan's associated property after given number of months

CurrentBalance

CurrentEquity_month = 1 month purchase Price

Equity Calculator-Dollars. The equity calculator computes how much equity is built up in the loan's associated property after given number of months.

CurrentBalance

CurrentEquityDollars month month Purchase Price purchase Price

5. Monthly Payment. Monthly Payment is the sum of the results of BaseMortgagePayment and MlPayment calculations.

The Monthly Payment, Actual or True Cost Rate, Actual or True Cost Rate After Tax and Equity Build Up metrics are displayed on the right hand side of the Results Interfaces, as depicted in FIGS. 4 through 7. The Single Loan Results Interface also preferably includes at least four buttons that allow mortgage consumers to navigate and implement the mortgage calculator functions. As discussed, first the interface includes a "Calculate" button to generate new results based on new data. The interface also includes a "Print" button to allow the mortgage consumer to print the current page. A "Save" button is also provided to allow the mortgage consumer to save the results and last inputs to the data fields. According to the exemplary embodiment, if a mortgage consumer selects this button, the screen is changed to a screen having a "cookie disclaimer" and an "OK" and "Cancel" button. If the mortgage consumer clicks the "OK" button , the loan information is written as a cookie to the mortgage consumer's machine. If the mortgage consumer clicks the "Cancel" button, the mortgage consumer is returned to the results of the calculations without saving. Additionally, a "Compare Two Loans" button is provided that transfers the mortgage consumer to a Two Loans Interface to compare options for two loans, as described below. 2. Two Loans Input Interface

A mortgage consumer may enter the Two Loans Input Interface from either the interface shown in FIG. 1, by clicking on the radio button that corresponds to the two loan option or from any of the Single Loan Results Interfaces, shown in FIGS. 4 through 7. In either case, a Two Loans Input Interface as depicted in FIGS. 8 and 9 is rendered in the mortgage consumer's web browser. In FIG. 8, a Two Loan Input Interface is shown for a new purchase, and in FIG. 9, a Two Loan Input Interface is shown for a refinancing. The functionality of the Two Loan Input Interfaces of FIGS. 8 and 9 is the same as for the Single Loan Interfaces of FIGS. 2 and 3, respectively, except that the mortgage consumer is presented with a screen display having two sets of identical mortgage data fields. Briefly, like the Single Loan Input Interface, the Two Loan Input Interface includes a plurality of data fields (text boxes and drop down menus) for the mortgage consumer to enter a value or select a type. Here, however, the mortgage consumer can enter data for two loans and compare the results. As with the Single Loan Interface, the values for these data fields are entered by the mortgage consumer and filled in by values extracted from a database associated with the web server or application server (i.e., assumed values).

Likewise, if the mortgage consumer indicated that the mortgage loan is for a new purchase, the mortgage consumer is prompted to enter for each of the two loans the Purchase Price and Down Payment, as shown in FIG. 8, and, if the mortgage consumer indicated that the mortgage loan was to be used to refinance an existing loan, the potential buyer is prompted to enter an Estimated Home Value and Refinance Amount, as shown in FIG. 9.

The third variable input data fields in the Two Loan Input Interfaces of FIGS. 8 and 9 are the same user-friendly drop down menu of the most common loan products in the market. The drop down menu assists the mortgage consumer in quickly selecting a loan type and term (e.g., 15 year fixed, 20 year fixed, 25 year fixed, 30 year fixed, 40 year fixed, 30 year Balloon, 1 year ARM, 3 year ARM, 5 year ARM, 7 year ARM, 10 year ARM). As with the Single Loan Interface, the mortgage consumer can accept default values for Interest Rate and Points or enter actual values, if available for each of the two loans.

The Two Loans Input Interfaces include a "Continue" button that calculates the input and assumed data for both loans and transfers the mortgage consumer to a Two Loans Results Interface. As depicted in FIG. 10, the Two Loans Results Interface repeats all data fields and their values from the Two Loans Input Interface, and displays them in two columns for a side by side comparison. FIG. 10 is a screen shot of a Two Loan Results Interface for a new home purchase and is representative of the screens displayed in accordance with an exemplary embodiment of the present invention. As shown in FIG. 10, the data fields of the Two Loans Results Interface are also identical to the data fields for the Single Loan Results interface, as shown in FIG. 4, except that these fields are repeated in a neighboring column. This is true for all the Single Loan Results Interfaces, including those depicted in FIGS. 5 through 7. Thus, although not show, the Two Loan Results Interfaces that correspond to the Single Loan Results Interfaces shown in FIGS. 5 through 7 merely display the data fields shown in the single column in two separate columns in order to effectively compare two loans.

Most importantly, the Monthly Payment, Actual or True Cost Rate, Actual or True Cost Rate After Tax and Equity Build Up are displayed in a side by side manner, thereby allowing the mortgage consumer to make a realistic assessment of the pros and cons of the mortgage loans. The mortgage consumer can change all input data fields at anytime, recalculate, and see the updated results instantly. To recalculate a loan, the mortgagee consumer clicks on the "Calculate" button shown in FIG. 10. The mortgage consumer can recalculate with the single button the results for both loans based on new user defined data. In a further aspect of the invention, the mortgage consumer is given an option to select one of the loans from the Two Loan Results Interface to compare against a third loan. More specifically, the mortgage consumer can click on the "Compare this loan to another" button that corresponds to one of the two original loans. For example, by clicking the "Compare this loan to another" button under the loan in the left column of FIG. 10, the data in the right column is automatically cleared and the mortgage consumer may enter a new set of data in the right column for another loan for purposes of comparison. By clicking the "Compare this loan to another" button under the loan in the right column, data is shifted from the right column to the left column and the data in the right column is cleared allowing the mortgage consumer to enter data for another loan. As further shown in FIG. 10, a "Print" button and a "Save" button are also provided.

The mortgage consumer may also enter a Two Loan Results Interface from the Single Loan Results Interfaces of FIGS. 4 through 7, by clicking on the "Compare Two Loans" button. In this case, the displayed Two Loans Results Interface displays all data inputs and outputs that were formerly present in the Single Loan Results Interface in a column on the left, and a column on the right will contain open data fields for all the corresponding data inputs of the loan to be compared. 3. Estimated Closing Costs and Other Fees Itemizer

As previously discussed, a mortgage consumer is given the option to input values for the individual components that comprise the Closing Costs and Other Fees. In accordance with the exemplary embodiment of the present invention, a Closing Costs Input Itemizer is provided that may be accessed from the Interface shown in FIG. 1. or from either the Single Loan Results Interface or the Two Loans Results Interface. As shown in FIGS. 4 through 7 and 10, the Single Loan and Two Loans Interfaces include a link, depicted as the letter "i," that may be clicked by the mortgage consumer to access the Closing Costs Input Itemizer Interface.

The Closing Costs Itemizer Interface includes five costs and fees headings and a running total. Each of the headings may include one or more data fields. More specifically, as shown in FIGS. 11 A through 1 IE, an Origination Heading is provided that includes loan origination fee, broker fee and other origination fee data fields. Next, an Appraisal Heading is provided that includes appraisal fee and other appraisal fee data fields. A Processing Heading is also provided that includes credit report fee, underwriting fee and other fee data fields. A Settlement Heading is provided that includes settlement fee, document preparation fee, attorney fee and other fee data fields. Finally, a Title Heading is provided that includes title search fee, title insurance, title exam fee and other fee data fields. It should be appreciated that still other subject headings including related data fields may be provided.

As shown in FIGS. 11 A through 1 IE, each of the above identified data fields accepts a value input by the mortgage consumer. More specifically, a mortgage consumer is prompted to enter values for each of the data fields for a heading, one heading at a time. As shown in FIG. 11 A, the mortgage consumer is first prompted to enter the values that correspond to the data fields of the Origination heading. Values are entered on right side of the display of FIG. 11 A. When the mortgage consumer clicks on the "Continue" button, the values are automatically entered on the left side under the corresponding heading and the next heading and its data fields are displayed on the right side of the screen for data entry. Accordingly, as shown in FIG. 1 IB, the Appraisal heading and its related data fields are next displayed on the right side. The mortgage consumer enters the values for these fields and again clicks on the "Continue" button. This process continues until all the values for all the headings have been entered as shown in FIGS. 11C through 1 IE.

The Closing Costs Itemizer Interfaces shown in FIGS. 11A through 1 IE preferably include four buttons: a "Back" button to take the user to the previous page; a "Continue" button to drive the mortgage consumer to the next screen in the Itemizer Input Interface; a "Save" button (that operates in a manner identical to the earlier described "Save" button); and a "Finished" button to take the mortgage consumer to an Itemizer Results Interface, as shown in FIG. 12.

The Closing Costs Results Interface, as shown in FIG. 12, displays all the mortgage consumers data entries together with a running total. An "Apply total" button is provided which may be clicked to transfer the mortgage consumer to a Results Interface, either a Single Loan Results Interface or a Two Loan Results Interface and to apply the itemized total to the Est. Closing Costs and Other Fees data field, as shown in FIGS. 4 through 7 and 10. More specifically, if the mortgage consumer entered the Closing Costs Itemizer interface from the first screen, as shown in FIG. 1 , a Single Loan Results Interface is rendered in the mortgage consumer's web browser including the itemized total displayed in the Est. Closing Costs and Other Fees data field. If the mortgage consumer enters the Closing Costs Itemizer from the Single Loan Results Interface, as shown in FIGS. 4 through 7, then when the mortgage consumer clicks the "Apply total" button the Single Loan Results Interface is rendered in the mortgage consumer's web browser including the itemized total. Similarly, if the mortgage consumer enters the Closing Costs Itemizer Interface from the Two Loans Results Interface, then the Two Loans Interface is rendered in the mortgage consumer's browser including the itemized total. This actual aggregate dollar amount is then used to perform the calculation of the Monthly Payment, Actual or True Cost Rate, Actual or True Cost Rate After Tax and Equity Build Up. As shown in FIG. 12, the Closing Costs Results Interface also preferably includes a "Recalculate" button; a "Back" button that returns the mortgage consumer to the previous closing cost itemizer screen; a "Print" button; and a "Save" button.

It will thus be seen that the objects set forth above, among those made apparent from the preceding description, are efficiently attained and, since certain changes may be made in carrying out the above method and in the system set forth without departing from the spirit and scope of the invention, it is intended that all matter contained in the above description and shown in the accompanying drawings shall be interpreted as illustrative and not in a limiting sense. It is also to be understood that the following claims are intended to cover all of the generic and specific features of the invention herein described and all statements of the scope of the invention which, as a matter of language, might be said to fall therebetween.

Claims

CLAIMSWHAT IS CLAIMED IS:

1. A method of providing a client with mortgage costs over a computer network, comprising:

receiving over a computer network an electronic request from a client for information concerning the costs of a mortgage;

delivering to said client, in response to said electronic request, an input interface including one or more mortgage data fields to be populated by values;

populating said data fields with at least one of values input by said client and default values;

calculating an actual cost rate of a mortgage loan based on said at least one of values input by said client and default values including values for closing costs and settlement fees, said actual cost rate being calculated over an expected time period that the mortgage will be held by a mortgage consumer.

2. The method of claim 1 wherein said actual cost rate is expressed as an annual percentage rate based on said expected time period that the mortgage will be held by a mortgage consumer.

3. The method of claim 1 further comprising the step of indicating whether the mortgage is to be used for a new home purchase or to refinance an existing mortgage loan.

4. The method of claim 1 further comprising the step of delivering to said client a results interface displaying said one or more mortgage data fields and said at least one of values input by said client and default values, said results interface also displaying said actual cost rate.

5. The method of claim 1 wherein a default value is used for said closing costs and other fees.

6. The method of claim 1 further comprising the step of indicating that the mortgage is to be used for a new home purchase and wherein said input interface includes mortgage data fields for a purchase price of a home, down payment, loan type, loan term and mortgage interest rate.

7. The method of claim 6 wherein values for said purchase price, down payment, loan type and loan term are input by said client.

8. The method of claim 6 wherein said input interface further includes a mortgage data field for mortgage points.

9. The method of claim 1 further comprising the step of indicating that the mortgage is to be used to refinance an existing mortgage loan and wherein said input interface includes mortgage data fields for an estimated home value, refinance amount, loan type, loan term and mortgage interest rate.

10. The method of claim 9 wherein values for said estimated home value, refinance amount, loan type and loan term are input by said client.

11. The method of claim 9 wherein said input interface further includes a mortgage data field for mortgage points.

12. The method of claim 1 further comprising the step of receiving a request from said client to calculate said actual cost rate for a first mortgage option and second mortgage option.

13. The method of claim 12 further comprising the step of delivering to said client an interface for displaying said mortgage data fields and said actual cost rate for each of said first and second mortgage options in a side by side comparison.

14. The method of claim 1 further comprising the step of using a default value for a tax bracket of a mortgage consumer associated with said client and calculating an actual cost rate to reflect said mortgage consumer^'s tax savings as a result of deduction of the mortgage interest.

15. The method of claim 1 wherein said input interface includes a mortgage data field for a mortgage insurance premium and a value for said mortgage insurance premium is used to calculate said actual cost rate.

16. The method of claim 15 wherein said value for said mortgage insurance premium is a default value.

17. The method of claim 1 further comprising the step of providing a link on said interface to an itemizer interface for receiving through said itemizer interface from said client mortgage data for said closing and settlement costs.

18. The method of claim 1 wherein said closing costs and settlement fees comprise: one of at least a loan origination fee and broker fee; an appraisal fee; one of at least a credit report fee and an underwriting fee; one of at least a document preparation fee and attorney's fees; and one of at least a title search fee, a title insurance fee and title exam fee.

19. A method of providing a client with mortgage costs over a computer network, comprising:

calculating an actual cost rate of a mortgage loan based on said at least one of values input by said client and default values, said actual cost rate including values for closing costs and settlement fees and being calculated over an expected time period that the mortgage will be held by a mortgage consumer.

delivering to said client a results interface displaying said one or more mortgage data fields and said at least one of values input by said client and default values, said results interface also displaying said actual cost rate.

20. The method of claim 19 wherein the values for closing and settlement costs are input in said results interface by said client.

21. The method of claim 19 further comprising the step of providing a link on said results interface to an itemizer interface for receiving through said itemizer interface from said client values for said closing costs and settlement fees.

22. The method of claim 21 comprising the further step of calculating a new actual cost rate based on said client provided values for said closing costs and settlement fees

23. The method of claim 19 further comprising the step of indicating that the mortgage is to be used for a new home purchase and wherein said input interface includes mortgage data fields for a purchase price of a home, down payment, loan type, loan term and mortgage interest rate.

24. The method of claim 19 further comprising the step of indicating that the mortgage is to be used to refinance an existing mortgage loan and wherein said input interface includes mortgage data fields for an estimated home value, refinance amount, loan type, loan term and mortgage interest rate.

25. A method of delivering from a remote system data concerning the costs of a mortgage loan to a mortgage consumer having access to a client terminal electronically connectable to the internet, comprising the steps of :

establishing a link between said client terminal and said remote system over the Internet;

rendering in said client terminal an input graphical user interface including a plurality of mortgage data fields to be populated by values;

populating said plurality of data fields with at least one of values input by said mortgage consumer and default values;

sending a request over the Internet to said remote system to calculate an actual cost rate of a mortgage loan; calculating an actual cost rate of a mortgage loan based on said at least one of values input by said mortgage consumer and default values including values for closing costs and settlement fees; and

rendering on said client terminal a results graphical user interface including said plurality of mortgage data fields and said at least one of values input by said mortgage consumer and default values, said results interface displaying said actual cost rate as an annual percentage rate over an expected time period that the mortgage will be held by said mortgage consumer.

26. The method of claim 25 wherein said input interface receives mortgage data from said mortgage consumer for a single mortgage loan option.

27. The method of claim 25 wherein said input interface receives mortgage data from said mortgage consumer for a first mortgage loan option and a second mortgage loan option.

28. The method of claim 27 wherein said results interface displays said results of said calculation for said first and second loan options in a side by side comparison.

29. The method of claim 24 further comprising the step of determining whether said mortgage loan is to be used to finance a home purchase or to refinance an existing mortgage loan.

30. The method of claim 25 further comprising the step of providing a link on at least one of said first and second interfaces to an itemizer interface for receiving through said itemizer interface from said client terminal new values for said mortgage data fields.

31. The method of claim 25 further comprising the step of receiving a request from said mortgage consumer for either a single mortgage loan analysis or a side by side two loan comparison before receiving said mortgage data inputs from said mortgage consumer.

32. A system for delivering to a mortgage consumer mortgage cost data over a computer network, comprising:

a client machine associated with said mortgage consumer for inputting mortgage data;

a remote sub-system having at least one server, means associated with said at least one server for receiving said mortgage data inputs from said client machine over said computer network;

a database of default values including estimated values for closing costs and settlement fees associated with said at least one server; and

means for calculating an actual cost rate of a mortgage based on at least one of said mortgage consumer input values and said default mortgage data values, said actual cost rate being calculated over an expected time period that the mortgage will be held by a mortgage consumer.

33. The system of claim 32 wherein said actual cost rate is displayed on said client machine as an annual percentage rate.

34. A web based system for delivering to a mortgage consumer mortgage cost data over the Internet comprising: a client machine having a web browser associated with said mortgage consumer for inputting mortgage data;

a remote sub-system having at least one server, means associated with said at least one server for rendering a web page in said web browser, including a graphical user interface having a plurality of data fields for receiving said mortgage data inputs from said client machine;

a database associated with said at least one server for storing default mortgage data including values for closing and settlement costs and holding period; and

35. The system of claim 34 further comprising means for calculating an actual cost rate of a mortgage that reflects a mortgage consumer's tax savings.

36. The system of claim 34 further comprising means for calculating the estimated equity that said mortgage consumer can expect to accumulate over said expected time period that the mortgage will be held by a mortgage consumer.

37 The system of claim 34 wherein said means for calculating said actual cost rate of a mortgage comprises a computer program running on an application server associated with said remote sub-system.

38. The system of claim 34 comprising means for rendering in said web browser a second interface for displaying in a plurality of data fields the results of said calculation, said displayed data including values for home purchase price, intended down payment, closing costs and other fees, mortgage insurance premium and said actual cost rate.

39. The system of claim 38 wherein data displayed in said data fields of said second interface can be replaced by new data input by said mortgage consumer and wherein said client terminal can initiate a recalculation of said actual mortgage costs based on said new data input by said mortgage consumer by clicking on a virtual button provided on said second interface.