US 20080103963 A1
A system and method for use by a business entity for loan origination and underwriting in connection with real estate investment using a computer implemented application having a plurality of data input and dialog screens requiring one-time entry of data. The method includes steps to be followed in any sequence by one or more users of the business entity for using the system. The method includes inputting and storing loan origination information via data input screens, the information including financial and physical information relating to a specific real estate investment. The input loan origination information is dynamically compared with pre-determined rules and a dialog screen is displayed on a near real-time basis if any of said rules are violated. The input data is dynamically compared with other rules for determining the ongoing sequence of data input and dialog screens. Comparison with other rules results in the calculation of calculated values and automatically generated dialog text, some of which is automatically populated 15 in word processing documents, an automated loan request and a credit application. The system includes both manual and automatic input of market data quantitatively describing the real estate market associated with the property, as well as multimedia data describing the property and the region surrounding the property. A report representing all of the stored input and calculated values are automatically produced in both paper and electronic form suitable for loan origination and underwriting.
20. A method for facilitating approval of a real estate investment in a system having a plurality of remote members of a business entity, each of said plurality of remote members entering data associated with said real estate investment, the method comprising:
periodically receiving and storing loan origination data from said plurality of remote members via a plurality of data input screens, said data including financial and physical data relating to said real estate investment;
automatically comparing the input loan origination data with first data input rules and if any of said data input rules are violated, then displaying an information screen including a text message corresponding to a respective violated rule;
automatically comparing the loan origination data with second pre-determined rules and, based on results of the comparison with said second pre-determined rules, dynamically determining a set of data input and dialog screens;
automatically comparing the loan origination data with third pre-determined rules and based on results of the comparison with said third pre-determined rules dynamically calculating at least one or more profitability values, said third pre-determined rules including at least one of a debt model and an equity financial model;
inputting and storing user comments from at least a second one of said plurality of remote users via at least one of said data input screens;
presenting said user comments, said stored loan origination data, and said at least one or more calculated values to at least one of said remote members for approval; and
generating at least one loan origination and underwriting report, said report including said stored loan origination data and said at least one or more profitability values.
21. A method for facilitating approval of a real estate investment using a computer implemented application connected to a spreadsheet application, said computer implemented application having a plurality of data input and information screens accessible by a plurality of remote members of a business entity, each of said plurality of remote members entering data associated with said real estate investment, the method comprising:
periodically receiving and storing loan origination data from at least one of said plurality of remote members via said data input screens, said data including financial and physical data relating to said real estate investment;
automatically comparing the input loan origination data with first data input rules and if any of said input rules are violated, then displaying an information screen including a text message corresponding to a respective violated rule;
automatically comparing the loan origination data with second pre-determined rules and based on results of the comparison with said second pre-determined rules dynamically determining a set of data input and dialog screens;
automatically comparing the input loan origination data with third pre-determined rules and based on results of the comparison with said third pre-determined rules dynamically calculating at least one of: one or more profitability values, said third predetermined rules including at least one of a debt model and an equity financial model, at least one of said calculated values displayed on said set of data input screens;
auto-populating fields of input screens and information screens with at least one of previously entered data and calculated values;
inputting and storing market data, said market data describing the real estate market associated with the real estate investment;
presenting said loan origination data, said calculated values, and said market data to at least one of said members for approval; and
generating at least one loan origination and underwriting report including the stored loan origination data, the stored market data, and the profitability values.
The present invention relates generally to the documentation and evaluation of real estate investments, and more particularly, to automated real estate loan origination and underwriting processes from initial customer contact to commitment.
Methods for documentation and evaluation of real estate loan applications are well known in the investment industry, however, the specific sequence of steps directed toward preparation of the substantial necessary documentation and chosen method of analysis of the financial parameters are a matter of choice. For commercial and industrial real estate investment, the volume of supporting documentation and analysis is substantial, as are the dollar amounts and investment risk. Furthermore, consistency of such procedures and expeditious processing is important. To this end, proprietary computer applications have been developed by individual business entities, which automate individual aspects of the loan preparation, evaluation and authorization process.
In some cases, investment deals are compiled by business entity personnel who may be geographically distant from the central office, and possibly philosophically distant from the entity's investment policy and standards. Equally important, is early scrutiny of certain deal parameters against threshold parameters which serve to exclude potential real estate deals that fall outside the interests of the business entity. Consequently, the cost of compiling pertinent data and executing an appropriate and effective analysis of the data is an important factor. This is especially true for a business entity that conducts such transactions on a routine basis.
Computer applications directed toward compiling information about real estate property are known. For example, U.S. Pat. No. 5,794,216 describes an application program executed by a computer that includes a database containing multimedia information for each property, including images of the property, and database-stored parameters corresponding to portions of the image. The multimedia information includes market data and images of the property and neighboring circumstances.
Computer applications directed toward evaluating real estate are also known. For example, U.S. Pat. No. 5,680,305 describes a computer application that provides a method for evaluating real estate for use by a business entity. The application provides for storage of property description data, usage data, such as rental financial history, and other factors. A numerical “utilization indicator” is determined from these parameters, and after further processing, a “score” is developed, which represents a quantitative evaluation of the real estate property.
U.S. Pat. No. 5,966,699 describes a method for conducting electronic auctions of loan applications. In this method, a computer system connected to the Internet or other network electronically communicates “electronic” loan application forms from a prospective borrower to a loan authorizer, who maintains viable applications in a database, for subsequent electronic communication to one or more loan institutions for quotations.
Therefore, a data acquisition computer program is required for compiling loan origination information including financial and physical information relating to a specific property and multimedia real estate market information associated with the property, together with a credit request and 20 loan application. The architecture of the computer program needs to be configured so as to provide consistency of processing among a variety of potential users through use of embedded choices, rules and financial models. The application should require only one-time entry of data in a non-linear sequence of data input screens, and should auto-populate documents with input data and generated values wherever appropriate. The system should be capable of electronically communicating loan documents to business entity personnel at any point during the document preparation process.
The system and method according to the present invention employs a tool in the form of a personal computer application that automates the real estate loan origination and underwriting process for use by a business entity. The method of the present invention includes steps to be followed by one or more members of the business entity, as well as automated processes within the computer application. Some of the method steps are optional, and advantageously, all of the steps can be followed in any sequence.
While any of the steps of the method could be taken first, logically, and for purposes of description, the first described step of the method of the present invention is the step of storing in the computer application the basics of the real estate loan application, or “deal”, including property location, property metrics, estimated risks, loan terms and other loan and borrower details, by input of such values on one or more input screens. The next series of steps include data entry into a number of subsequent screens, in any order. Some of the subsequent screens test data inputs against pre-stored rules and based on the results of the tests, display information and commentary. The pre-stored rules are defined according to underwriting and pricing guidelines acceptable to the business entity. Other screens auto-populate certain fields with calculated results obtained by analysis of debt and equity data, using known financial models.
The system makes available to the user a set of computer screens presented in a generally non-linear sequence. The particular sequence of presentation is arranged to be under user control while at the same time, the sequence is also responsive on a real-time basis to the input data. In this way, the sequence of screens displayed for any given deal dynamically vary, depending on data entry.
Advantageously, in another step of the method, the system makes available to the user word processing-based documents, such as a loan application and credit request, which have been pre-formatted and auto-populated by the system with both input data and calculated data. In the preferred embodiment, the user initiates a one-way link (accomplished automatically by system utilization of known Windows-based, dynamic links) between the application and the word processing application present on the same computer as the system of the present invention.
For example, in the preferred embodiment, a “Key Metrics” portion arranged to appear within either a credit request or preliminary loan application is generated, in which selected financial data, such as profitability values such as investor rate of return (IRR), return on investment (ROI), net operating income (NOI), loan structure values, and performance calculations, are arranged in a standard format. These documents are available for editing by one or more members of the business entity, for example, by including paragraphs of text commentary and description. These documents become part of the overall loan origination package made available for subsequent evaluation internal to the business entity and quotation by financial institutions.
The system takes advantage of intranet and Internet connectivity to enable collaborative data input and evaluation among potentially geographically disparate users. Accordingly, in another optional step of the method, a user can instruct the system to initiate a network communication with other members of the business entity regarding a particular loan application. Optionally, the system can be instructed to copy selected data screens to a server storage location and automatically populate an email message with either attached data screens or hyperlinks to the storage location of the data screens.
Other steps of the method of the present invention include accessing the remaining data input screens of the system. It is expected that an implementation of the present invention includes screens tailored to the needs of the business entity, and therefore specific screens and screen contents will vary, depending on the needs and preferences of the business entity. As a non-limiting example, additional screens include a “Loan” screen for input of loan-related data, a “Cash Flow/Evaluation” screen, which includes various income/expense-related sub-screens, a “Deal Recap” screen, which summarizes the deal, based on all subsisting data, a “Market” screen which provide for input of the results of an analysis of the market associated with the property to be financed, and an “Asset” screen, which provides for input of the physical features of the property. In some cases, the system provides commentary dynamically responsive to the input.
Also included in the preferred embodiment is an “Execution” screen, which provides for input of subjective information characterizing the borrower in terms such as, for example, property experience, market experience, financial wherewithal, and forecasted reaction to adverse conditions, including specified types of litigation and criminal activity.
A “Deal Analysis” screen is included, which dynamically adjusts to the input data and calculated values, thereby providing a summary listing of attributes Advantageously, this screen displays in a single location, the rules/guidelines which have been activated as a result of data input. Also included are “Loan Application” and “Credit Request” screens, in which pertinent data is input and organized into final form for processing. An “Execution” screen is included, which provides input of subjective information characterizing the borrower in terms such as, for example, property experience, market experience, financial wherewithal, and forecasted reaction to adverse conditions, including specified types of litigation and criminal activity.
A work pad screen taking the form of a spreadsheet, is provided for general use. An “Image” screen is provided, in which images captured by known Microsoft Windows-based methods, or the equivalent, can be added, deleted, arranged and reviewed. Typically, imaged maps and photographs of the site are included as input to the Image screen.
The result of operation of the steps of the system and method of the present invention is the compilation of information that is input, screened and edited by one or more team members having expertise pertinent to individual data types. This compilation includes calculated values obtained by execution of algorithms, i.e., financial models, that analyze debt and equity investments. Also included are multimedia files, such as imaged maps and photographs of the property and surrounding geographic area. This compilation is automatically arranged in any desirable output format, including a loan origination package made available for subsequent evaluation internal to the business entity and, as desired, quotation by financial institutions. Other automated outputs are possible, such as, for example, a loan request.
Embodiments of the present invention include a data acquisition computer program for compiling loan origination information including financial and physical information relating to a specific property and the real estate market associated with the property, together with a credit request and loan application, other outputs as desired, and steps of a method for using the program. The architecture of the computer program, or application, is configured to provide the benefit of consistency of processing among a variety of potential users, in some cases through ample use of embedded menus, from which the user makes an informed selection among fixed choices for a given data field. Rules imbedded within the application and associated with one or more data input fields automatically operate to assist the user in compiling a data conforming to standards and policies of the business entity. Similarly, use of known fixed financial models, although optionally, a choice among models can be provided, further contributes to consistency of loan origination and underwriting. The application is configured so that specific data entries are made only once by the user, leaving to the application the task of populating copies of that input data into other fields, as necessary.
Importantly, as a result of the non-linear flow of the data input screens, input can be made at the convenience of each user, and is not system-driven. Moreover, emphasis on network-connectivity among users and interested parties, enables conveyance of early (partially complete) versions of a particular compilation of data describing pertinent real estate market demographics, the physical, financial, and usage data relating to a specific real estate property, together with loan and credit applications, collectively referred to as a “deal”, to business entity personnel who, in other loan originating arrangements, might be the last, or nearly the last to review the deal. Such early scrutiny has been shown to be very effective in forestalling deals which fall outside the standards or interests of the business entity. It has been recognized that input from such individuals helps to formulate the initial version of the deal and avoid unnecessary delay resulting from re-writes.
In an alternative embodiment, a database application running on a central sever is arranged to capture and archive summary information or file copies for general use within the business entity, or to facilitate collaboration. Personal computers 11 suitably network-connected to computer 12 enable other members of the business entity to communicate with the user of computer 12. In the preferred embodiment, computers 11 and 12 are configured to be interconnected upon demand, via intranet 14 and also by corporate LAN/WAN networks (not shown). Such communication includes electronic mail. Optionally, at least one of personal computers 11 is a server configured and arranged to perform known server functions, including storage of data files, and operation of web-related applications for communicating stored data to users via intranet and internet connections.
The desktop application 16 is configured and arranged to include local user input 27, i.e., data entered by a user at the personal computer on which application 16 is running. Local user input 27 is verified against a set of pre-determined input rules 21 resident in application 16. Input rules 21 are automatically activated by application 16 upon data entry by the user, and are configured to screen input for typographical errors and logical errors. Remote user input 28, i.e., data communicated over a suitable network from other business entity personnel is communicated to the local user generally in the form of email and optionally, via documents attached to email. The local user transfers this information, as appropriate, as data input 27 to the application. Similarly, the local user accesses commercial sources 29 external to the business entity, and initiates data transfer to application 16.
A desirable operating system 26 is Windows (trademark of Microsoft Corporation), OS/2 (trademark of IBM Corporation), or any such other operating system that supports the use of an extended memory, a DLL loading function, and a virtual storage, multi-window GUI environment.
System 10, in the preferred embodiment, is configured and arranged to automatically populate one or more associated spreadsheets by way of a data input and display application including data input screens such as screen 50 and other screens to be described. Also, informational screens are provided, which generally reflect calculated results of data entered into the associated spreadsheet, and may pose summaries, questions or 25 warnings to the user, based on subsisting input data. Return On Investment (ROI), Internal Rate of Return (IRR) and Net Income are displayed at the top of every screen, and represent the deal's (either debt or equity) profitability. These values are constantly updated as the user provides information into the system. In a separate embodiment, system 10 also populates selected input 30 and calculated values into a database associated with a commercially available database application that is dynamically linked with the input and display application, and is a part of, system 10.
Screen Deal input screen 50 includes several features that advantageously appear on all screens of the present invention. Generally, included is a display of any set of icons, which, upon user selection using known Windows techniques, direct system 10 to display a corresponding, respective screen. For example, in the preferred embodiment, button icon channels 52, called “channels” for convenience, are displayed on the left side of screen 50, which direct system 10 to display screens corresponding to each major screen or suite of screens, described below. As a result, the user can conveniently navigate randomly from any particular screen to any other screen by known Windows navigation techniques.
Additional features in common with all screens of system 10 include functional pull-down menus 54, which also are a known feature of Windows applications. These pull-down menus are screen-specific and offer functionality tailored to the currently displayed screen. For example, in the preferred embodiment, the pull-down menus labeled “File”, “Edit”, “Online”, “Activities”, and “Help”, appear at the top of screen 50.
Other features in common with all screens of system 10 include guideline warnings representing rule violations, which are displayed throughout the application, as well as being summarized in a “Deal Analysis” channel. Guideline warnings are displayed as appropriate, based on system logic, which responds to both input data as well as calculated values.
The screens of system 10 optionally are suites of screens corresponding to the channels 52. For a given channel, a corresponding suite of screens are identified by tab icons 56 near the top of the input area of each screen. These tabs enable the user to switch among members of the suite. Any set of input or informational screens sufficient to display pertinent fields can be included. For example, in the preferred embodiment, Screen Deal suite of screens 50 includes “General Information”, “Programs” and “Property Cash Flow” tabs and corresponding screens, described below. Inclusion of such screens in the design of the system 10 is based both on the need for input data, as well as providing direction to the system, based on the data input. For example, in the preferred embodiment, the “Programs” tab provides a screen that offers a selection of programs to the user, each program being arranged to employ a respective financial model to be used for debt and equity analysis. Moreover, the content and availability of other screens is dynamically determined according to specific data entered on any given screen, as described further, below. This process comprises automatic application of a set of pre-determined rules 23, stored within application 16, as data fields are entered.
Advantageously, if the deal is an equity deal, as determined by selection of “Equity Deal Type” on the General Information screen of the Screen Deal suite of screens, then the suite of loan screens is replaced with a Deal Structure suite of screens (not shown). Deal Structure screens include data input fields characteristic of equity deal types, and are comparable to the 35 suite of loan screens. In addition, the Loan Application and Credit Request suites of screens are also changed to be reflective of the information/structure needs of an equity transaction.
In the preferred embodiment, with the general terms screen 75 displayed, the user can select from pull-down menus options for “Lien Position” 76, which includes, for example, selectable fields labeled “First” or “Second Mortgage” or “Equity/Joint Venture”. Advantageously, this fixed assortment of options results in consistent processing by multiple users. Input for “Loan Term” is provided. The user can also select from fixed menu options the “Loan Purpose” 77, such as “Acquisition”, “Refinance” and 10 “Construction”, as appropriate. Other input fields including “Amortization Schedule” and “Participation” 78, which includes input fields for “% of Cash Flow”, % of Residual”, and “Minimum Residual Participation”. “Origination and Prepayment Fees and “Rate” input fields 79 and “Prepayment Options” fields 80, including parameters known in the loan origination industry.
In one embodiment, the suite of “Loans” screens represented by the General Terms screen 75, optionally includes other screens (not shown), each accessed by a tab. For example, in
In the preferred embodiment, the market demand screen 101 includes market descriptors such as, for example, number of jobs, employment growth, employment volatility, job diversity, population growth, demographic diversity, business environment, cost of services, defense employment exposure, single employer risk, single industry risk, infrastructure, size of skilled workforce, quality of life.
Also in the preferred embodiment, the market demand screen 101 includes “User Selected Market Risk” field 105, which is auto-populated by system 10 with a value developed from previously entered numeric risk data, and a “Calculated Market Risk Rating” field, which is auto-populated by a calculated sum representing the above-described, subjective data indicated by checked grid buttons. Optionally, guideline warnings characterizing the disparity between these two risk rating values are auto-populated in a word processing document. A user, who edits such a document, would thereby have the opportunity to further expand on the reasons surrounding the difference in risk assessment.
Another metropolitan statistical area (MSA) analysis screen titled, for example, “MSA Supply”, (not shown) includes market descriptors such as, for example, metropolitan statistical area total inventory, metropolitan statistical area total inventory trend, metropolitan statistical area total inventory condition, metropolitan statistical area occupancy, metropolitan statistical area absorption per year, and metropolitan statistical area growth constraints.
Still another metropolitan statistical area titled, for example “Sub market Demand & Supply”, (not shown) includes market descriptors such as, for example, overall metropolitan statistical area demand, overall metropolitan statistical area supply, overall submarket demand, overall submarket supply.
A third borrower grouping of input fields 205 are intended to answer the question “How do we expect the Borrower to behave in bad times on their history?” These fields include check-mark icon entries for criminal activity, various civil litigation-related actions, and history with the business entity. Similar questions in connection with the tenant(s) can be provided.
As indicated in connection with
Referring to any of
Advantageously, a copy of the deal recap screen 90, illustrated in
Another optional menu choice is a tracking function, which enables the user to view all posted documents. All data which has been changed over the initial input is graphically highlighted, so that a viewer is able to view the change history by clicking on the data. This information becomes visible in a pop-up window because the data is tagged with at least the revised data author's name, date and time, and old and new value.
Still other optional menu choices include direct links to web pages providing commercially available market research data and financial reporting data, such as Dunn & Bradstreet (registered trademark). If the user has already provided the postal ZIP Code to system 10, as part of the property description, such links will automatically route system 10 to data pertinent to the deal.
Similarly, links to commercial map sources, including orbital images as well as area street maps and aerial photographs are accessed the same way. Copies of such information are obtained by known Windows editing methods.