John S Mcmurray

US Patent:

7099843, Aug 29, 2006

Filed:

Mar 14, 2002

Appl. No.:

10/096584

Inventors:

Henry James Cassidy - Arlington VA, US
David Kevin Horne - Arlington VA, US
Tyler Taile Yang - Potomac MD, US
John Patrick McMurray - McLean VA, US

Assignee:

Freddie Mac, The Federal Home Loan Mortgage Co. - McLean VA

International Classification:

G06F 17/60

US Classification:

705 38, 705 35, 705 36 R

Abstract:

The disclosed systems and methods for hedging risk of differential loss related to separate pools of loan investments use criteria established by the parties for hedging risk of differential loss rates. The system monitors indirect performance indicators for a Reference Pool and a Subject Pool of loans, compares the indicators, and calculates a payment due between the parties (if any) based on performance differences for the two pools and a payment formula. Any payment due is paid according to a pre-established payment cycle. The loan pools may be formed and adjusted based on various factors, such as to compensate for changes in one of the pools. The payment formula may also be adjusted to compensate for changes or differences in the loan pools. The system may hedge either party's credit loss related to the Subject Pool if its loans perform differently than the loans in the Reference Pool.