System And Method For Optimizing Fixed Rate Whole Loan Trading

Abstract

Optimizing fixed rate whole loan trading. Specifically, the invention provides computer-based systems and methods for optimally packaging a population of whole loans into bonds in either a senior/subordinate bond structure or into pools of pass through securities guaranteed by a government agency. Models for each type of bond structure are processed on the population of loans until either an optimal bond package is found or a user determines that a solution of sufficient high quality is found. Additionally, the models can account for bids for whole loans by allocating whole loans that meet requirements of the bid but are least favorable to be securitized.

What is claimed is: 
     
         1 . A computer-implemented method comprising:
 creating, by a computer, a model comprising an objective function representing a total market value of the senior/subordinate bond structure for the plurality of loans; and   maximizing, by the computer, the objective function to maximize the total market value of the senior/subordinate bond structure.   
     
     
         2 . The computer-implemented method of  claim 1 , wherein the step of maximizing the objective function comprises:
 determining a market price of each loan;   determining a first weighted average execution coupon for the plurality of loans corresponding to the market price of each loan;   determining the total market value of the senior/subordinate structure at the first weighted average execution coupon;   iterating the weighted average execution coupon and determining a total market value for the senior/subordinate structure at each iteration; and   determining the weighted average execution coupon having the highest total market values for the senior/subordinate structure.   
     
     
         3 . The computer-implemented method of  claim 1 , further comprising developing and maximizing an objective function to optimally split at least one of the loans into two pseudo loans to prevent a creation of an interest only bond or a principal only bond, the two pseudo loans comprising different coupon values. 
     
     
         4 . A computer-implemented method for optimally pooling a population of loans into pass through bond pools, the method comprising:
 selecting the population of loans;   determining, by the computer, an optimal execution of each loan from the population of loans by a buy up or a buy down of a guarantee fee;   determining one or more pools for which each loan is eligible;   building a model based on at least one constraint for at least one determined pool; and   allocating loans to the one or more pass through bond pools.   
     
     
         5 . The computer-implemented method of  claim 4  further comprises determining, by the computer, at least one module of one or more modules that is configured to pool the population of loans into pass through bond pools based on a received input, wherein the at least one module comprises a pass-through module. 
     
     
         6 . The computer-implemented method of  claim 4 , wherein the model comprises an objective function comprising a linear combination of a market value of each of the population of loans. 
     
     
         7 . The computer-implemented method of  claim 6 , wherein allocating the loans comprises executing the model to maximize the objective function. 
     
     
         8 . The computer-implemented method of  claim 4 , further comprising transforming the at least one constraint of each pass through bond pool into a conditional constraint. 
     
     
         9 . The computer-implemented method of  claim 4 , further comprising converting at least a portion of the at least one constraint of each pass through bond pool into a conditional constraint prior to processing the model to ensure that the model is solvable. 
     
     
         10 . The computer-implemented method of  claim 4 , further comprising transforming each of the at least one constraints into a conditional constraint to allow constraints to be applicable to only pass through bond pools that are allocated. 
     
     
         11 . The computer-implemented method of  claim 4 , further comprising allocating at least one of the population of loans to an unallocated pool. 
     
     
         12 . The computer-implemented method of  claim 4 , further comprising allocating loans into an unallocated pool if each of the pass through bond pools cannot be allocated with the population of loans, wherein loans in the unallocated pool are given zero market value and wherein processing the model further comprises minimizing the number of loans allocated to the unallocated pool. 
     
     
         13 . The computer-implemented method of  claim 4 , wherein the model accounts for the constraint of each pass through bond pool and a payup associated with each pass through bond pool. 
     
     
         14 . A system comprising:
 a memory comprising a set of instructions for allocating a portion of a plurality of loans to a loan package; and   a computer coupled to the memory and configured to execute the set of instructions to:
 determine which of the plurality of loans meet one or more constraints of the loan package; 
 determine a market price of each of the plurality of loans based on a securitization model; 
 model an objective function to determine which loans in the plurality of loans that meets the one or more constraints are least profitable for securitization in the securitization model; and 
 allocate the loans that meets the one or more constraints and are least profitable for securitization into the loan package. 
   
     
     
         15 . The system of  claim 14 , wherein the securitization model comprises a senior/subordinate model. 
     
     
         16 . The system of  claim 14 , wherein the objective function is modeled to minimize a spread between a weighted average price of the loans in the loan package and a To Be Announced (TBA) bond price of the weighted average coupon of the loans in the loan package. 
     
     
         17 . The system of  claim 14 , wherein the objective function is modeled to minimize a dollar value of a spread between a weighted average price of the loans in the loan package and a To Be Announced (TBA) bond price of the weighted average coupon of the loans in the loan package. 
     
     
         18 . A method for optimizing fixed rate whole loan trading, the method comprising:
 selecting a population of loans;   selecting, by a computer, one or more loans that meet a constraint of a bid;   determining, by the computer, a price for each loan that meets the constraint based on a securitized model;   determining, by the computer, whether to use an efficient model to select which of the one or more loans are least favorable to be securitized; and   if the efficient model is used, then selecting, by the computer, which of the one or more loans are least favorable to be securitized by minimum dollar value of spread.   
     
     
         19 . The method of  claim 18 , further comprising: determining, by the computer, at least one module of one or more modules that optimizes fixed rate whole loan trading based on a received input, wherein the at least one module comprises a whole loan module. 
     
     
         20 . The method of  claim 18 , further comprising the step of allocating, by the computer, a portion of the plurality of whole loans to a package of whole loans for selling as whole loans, the portion comprising whole loans meeting at least one constraint and being less profitable than the other whole loans when executed into a bond in the bond structure if the efficient model is not used, then selecting, by the computer, which of the one or more loans are least favorable to be securitized by minimizing spread. 
     
     
         21 . A system comprising:
 a network; and   a computer communicably coupled to the network and configured to:
 create a model corresponding to a plurality of excess coupon bond pools and an unallocated pool, each excess coupon bond pool comprising at least one constraint; and 
 process the model to allocate each of the loans into either an excess coupon bond pool or into the unallocated pool in order to maximize the total market value of the excess coupon that gets allocated to the excess coupon bond pools. 
   
     
     
         22 . The system of  claim 21 , wherein the model comprises an objective function representing the total market value of the excess coupon that gets allocated to the excess coupon bond pools. 
     
     
         23 . The system of  claim 21 , wherein the computer is further configured to transform each of the at least one constraints into a conditional constraint. 
     
     
         22 . The system of  claim 21 , wherein the computer is further configured to transform each of the at least one constraints into a conditional constraint to allow constraints to be applicable to only excess coupon bond pools that are allocated. 
     
     
         24 . The system of  claim 21 , wherein the computer is further configured to:
 identify the excess coupon pools for which each of the loans can be allocated based on collateral attributes of the loans; and   collapse each loan identified for an excess coupon pool into a single loan to reduce the number of loans in the model.