WO2008103057A1 - Loan auctioning system and method - Google Patents

Abstract

A system is provided for facilitating a loan agreement by conducting a reverse auction on behalf of a prospective borrower, including a processing means (51), a data communication means (52), and a plurality of client computers (53) adapted to communicate with the processing means (51) via the communication means (52). The processing means (51) is further adapted to read and write data to a database, and administer a reverse auction to facilitate a loan agreement between the prospective borrower and a lender. Also provided is a method of facilitating a loan agreement using the disclosed system, and a method of ranking a plurality of multiple-factor bids.

Description

LOAN AUCTIONING SYSTEM AND METHOD Field

This invention relates to a system and method for facilitating loan agreements, or other financial products, between borrowers and lenders. More specifically, the invention provides a system and method for conducting a reverse auction for loans.

Background

Traditionally, a person seeking a home loan, for example, would physically approach a bank or other lending institution and fill out a loan application form including details such as their name, contact details, identification numbers, relationship status, residency, customer number, employment details, income, loan amount, deposit, property value, IRD number, solicitor details, assets and liabilities. Lenders may often also require documents such as proof of income, valuation report, and/or a Sale and Purchase Agreement along with the application form. For joint applicants, much of the information must be supplied for each person.

The loan application submitted by the prospective borrower will then be reviewed by the lender to determine whether or not they qualify for a loan. The information supplied in the loan application is first checked for accuracy, and additional background checks such as credit history and/or property value appraisal may also be performed by the lending officer. If it is determined that the prospective borrower qualifies for a loan then a formal loan offer is made, otherwise the loan application is declined.

To ensure that they are getting the best deal, the prospective borrower may choose to approach multiple lenders, each of which will require the applicant to fill out their own application forms. Due to the volatility of the financial services market, each loan offer is typically only valid for a short period of time.

The application process and comparing offers can therefore be very time consuming for the potential borrower, and their choices may therefore be limited to a small number of lenders, most typically those with branches within geographical proximity of the prospective borrower.

Furthermore, the criteria and incentives offered by lenders can vary, and there are therefore many factors to consider when selecting the best offer, resulting in confusion for an inexperienced borrower. An alternative is to use the services of a mortgage broker, who acts as an intermediary between the borrower and multiple lenders, using their knowledge of the competitive mortgage market to assess and identify the most suitable lender, gather the necessary information and documents, and complete the application form on behalf of the borrower. These services are often free to the borrower, as the mortgage broker is typically paid a commission by the lender upon acceptance of the formal loan offer.

To the lender, use of mortgage brokers has the advantage of reduced overheads in the form of vehicles, salaries, premises and other expenses associated with employing staff to perform the role of a lending officer, effectively outsourcing the job of finding and qualifying borrowers. Mortgage brokers may not cover all of the mortgage options available, however, as certain banks or lending institutions may refuse to deal with brokers. Furthermore, commission rates may vary between lenders, causing mortgage brokers to favour some lenders over others.

To avoid the disadvantages of these traditional methods of arranging loans, it is desirable, at least from a borrower's perspective, to complete and submit a single home loan application for consideration directly by a number of potential lenders, and receive one or more loan offers for comparison and selection of the most suitable offer.

US Patent No. 5,995,947 entitled "Interactive Mortgage and Loan Information and Real-Time Trading System" to Fraser et al describes such a system for arranging a loan, whereby a single loan application is placed up for tender by a plurality of participating lenders, who may place bids until a bid is accepted or the application is withdrawn. Bids may have an associated expiration time, after which they may no longer be accepted.

US Patent No. 5,966,699 to Zandi entitled "System and Method for Conducting Loan Auction over Computer Network" describes an electronic loan auction system in which prospective borrowers electronically submit a loan application for auction, which participating lenders may view and bid on.

New Zealand Patent No. 508696 to Loansurf New Zealand Limited entitled "Loan Processing System and Method" describes a system whereby a loan application is submitted electronically by the prospective borrower, and immediately dispatched to participating lenders, inviting them to make an offer. Each lender submits a response which may include an indicative loan offer, and the list of responses is transmitted to the customer so that the prospective borrower may select the most competitive lender response. The advantage to the borrower of such systems is the access to a relatively large number of lending institutions, time saved by filling out a single loan application form, convenience of applying from home, and use of the system is generally not limited to regular hours of business. From the lender's perspective, these systems offer lower overheads, automation of many tasks, and access to a larger number of prospective borrowers.

However, these systems are essentially match-making services seeking to match prospective borrowers with lenders, and do not easily allow the interaction and competitive bidding which would encourage the provision of the best possible loan terms to the borrower. The borrower still has the difficulty of assessing which bid is the best offer due to the number of factors to consider.

From the lender's perspective, while lending institutions presently collect data individually relating to accepted loan applications, they are unable to obtain any information relating to unaccepted loan offers and analyse why a potential customer may have chosen an offer from a competing lender. Furthermore, this data may be skewed towards the existing market of the lending institution, not providing accurate market intelligence. It is therefore difficult to assess customer priorities.

Object of the Invention

It is therefore an object of the invention to provide a competitive and interactive automated loan auctioning system or method for facilitating loan agreements online and in real-time between borrowers and lenders, which overcomes or ameliorates one or more disadvantages of known systems and methods.

Alternatively it is an object of the invention to provide a system and method for facilitating loan agreements between borrowers and lenders which will at least provide the public with a useful choice. Further objects of the invention will become apparent from the following description.

Summary of Invention

Accordingly in one aspect the invention may broadly be said to consist in a system enabling a borrower to conduct a reverse auction for a loan to two or more lenders, including: a data communication means allowing communication with a plurality of client computers; a database; and a processing means adapted to: communicate with said plurality of client computers via said communication means; read and write data to said database; and administer the reverse auction to establish mutually agreeable loan terms between the borrower and at least one of said lenders; and rank bids for the loan lodged by lenders, during and/or at the conclusion of the auction based on a plurality of prioritised criteria specified by the borrower.

Preferably said communication between the processing means and client computers includes the exchange of information relating to the loan agreement.

Preferably said communication includes serving web pages to said client computers.

Preferably said information may be viewed on a client computer using a standard Web browser.

Preferably said processing means includes one or more server computers coupled to said communication means.

Preferably said data includes information relating to one or more of said bids lodged by lenders.

Preferably the data communication means includes at least one computer network.

Preferably the at least one computer network includes the Internet.

In a further aspect, the invention may broadly be said to consist in a computer-implemented method for establishing a loan agreement between a borrower and two or more lenders, the method including the steps of:

conducting a reverse auction to establish mutually agreeable loan terms between the borrower and at least one of said lenders; requesting one or more prioritised requirements for the loan from the borrower; storing the prioritised requirement(s); receiving bids from one or more of said lenders; comparing the prioritised requirement(s) with data relating to the bid; and using an outcome of the comparison to advise the borrower in relation to the bid. Preferably the step of conducting a reverse auction for the loan includes the steps of: receiving an electronic loan application over a computer network submitted by a borrower; automatically validating at least part of the electronic loan application; storing information relating to the loan application in the database; making selected information from the loan application available for a predetermined period of time to one or more lenders using said client computers; accepting bids for the loan from lenders; making the bids available for the prospective borrower to view; and allowing the prospective borrower to accept a bid.

Preferably the electronic loan application includes a plurality of loan criteria prioritised by the applicant, the method further including the step of ranking bids according to the applicant's priorities.

Preferably bids are ranked using an algorithim weighted according to the prioritised loan criteria.

Preferably the predetermined period of time is specified by the borrower.

Alternatively the predetermined period of time is a default time period.

Preferably the step of conducting a reverse auction for the loan further includes the steps of receiving from the borrower notification of acceptance of a bid, and ending the auction.

Preferably the step of validating the application includes the step of cross-checking information supplied by the borrower using external sources.

According to a further aspect, the invention can broadly be said to consist in a method of conducting an auction for a multiple-factor auction item, including the steps of obtaining a prioritised list of criteria and ranking bids for said auction item based on the prioritised criteria.

Preferably the bids are ranked by an algorithm weighted according to the prioritised criteria specified by the auction lister. Preferably the bid best matching the lister's priorities is recommended.

Preferably the auction is a reverse auction.

Preferably the item is a financial product.

Preferably the financial product is a loan.

Preferably the multiple factors include one or more of loan type, interest rate, term, fees, and/or loan amount.

Further aspects of the invention, which should be considered in all its novel aspects, will become apparent from the following description.

Drawing Description

A number of embodiments of the invention will now be described by way of example with reference to the drawings in which:

Figure 1 is a flow diagram illustrating the process for a borrower applying for a loan according to the invention, Figure 2 is a flow diagram illustrating the process for a lender viewing pending loan applications according to the invention,

Figure 3 is a flow diagram illustrating the auction process according to the invention, and

Figure 4 is a flow diagram illustrating the process upon completion of the auction.

Figure 5 is a network diagram of a system according to the invention. Figure 6 is a flow diagram illustrating the process for automatically selecting the best bid according to the invention.

Detailed Description

Throughout the description like reference numerals will be used to refer to like features in different embodiments.

In a first embodiment, the invention consists in a system for facilitating loan agreements between a plurality of borrowers and lenders. This embodiment provides a system for conducting a reverse auction for home and other types of loans or other financial products, wherein prospective borrowers may place a loan application up for auction, and participating lenders (including banks and other lending institutions) may place bids for each loan auction, competing with other lenders to provide their services to the prospective borrower.

Referring first to figure 5, the system includes a processing means 51 , a communication means 52, and a plurality of client computers 53 adapted to communicate with the processing means 51 via the communication means 52. The processing means 51 is further adapted to read and write data to a database, and administer a reverse auction to facilitate a loan agreement between the prospective borrower and a lender.

The processing means 51 may include a single server computer, or multiple server computers communicating via a computer network to achieve the benefits of redundancy, distributed computing, scalability and/or load balancing.

In the preferred embodiment, the processing means 51 includes one or more server computers operating under the control of an operating system such as Microsoft^® Windows Server^® 2003, and including Web server software such as Microsoft^® Internet Information Server 6.0, database management software such as Microsoft^® SQL Server 2005, and control software for administering the auctions.

The Web server is adapted to deliver Web pages to users of the system, both prospective borrowers and participating lenders, over the communication means 52 using the Hypertext Transfer Protocol (HTTP), through Secure Socket Layers (SSL) for security as required.

Preferably the Web pages are in Hypertext Mark-up Language (HTML), vector-graphic animations such as the Adobe^® Flash^®, or any other such format suitable for presenting the required information. The Web server is coupled with the database (or a database server), either directly or via the communication means 52. Web pages are created dynamically using a server-side scripting language such as PHP: Hypertext Pre-processor (PHP) or

Active Server Pages (ASP) to extract, store and/or modify information in the database stored on the data storage means using Structured Query Language (SQL) commands, for example.

The web site has three distinct sections, including a static section including general information and financial calculators, a borrower section where registered users can fill out an application form and administer an auction or auctions, and a lender section where approved lenders can place bids and monitor auctions. Prospective borrowers may register using the static section of the website to gain access to the borrower section.

The lender section also provides lenders with a private section of the website in which they can record specific or general policy instructions and bidding parameters for lending staff, track their bids (including which staff member has placed each bid), follow the progess of various lender steps including credit approvals etc, and set out loan-term templates for specific types of loans, for example, loan application information can be downloaded, either manually or automatically directly into the lender's credit scoring software.

The server preferably includes the ASP .NET 2.0 framework connecting to the database instance and running the control software preferably written in C#. The control software is responsible for management of auctions, filtering, communication, 'match advice' on bids and the validation of applications, and is adapted for execution by the processing means of the server 51.

Preferably the communication means 52 includes one or more computer networks, which may include a Local Area Network (LAN), Metropolitan Area Network (MAN), Wide Area Network (WAN), and/or a network of interconnected networks such as the Internet. A firewall 54 may be placed between communication networks, for example the LAN of Lender A and the Internet, to enforce security policies. Preferably a firewall 54 is placed between the processing means 51 and communication means 52 to prevent unauthorised access to the processing means 51.

The plurality of client computers 53 preferably include a plurality of Personal Computers (PCs) coupled to the communication means 52 for data communication with the Web server. Each client computer 53 operates under the control of an operating system such as Microsoft^® Windows^® XP, and preferably includes a web browser such as Microsoft^® Internet Explorer^® or Mozilla^® Firefox^®, for example. Preferably the primary communication means 52 between the client computers 53 and the Web server is via the internet.

The system therefore requires no specialised software on the client computer, and access to the sections of the website is controlled by the login using the chosen username and password, which dictates whether the user is a prospective borrower or an approved lender. In the preferred embodiment, information relating to loan applications may therefore be accessed securely by either borrowers or lenders from any computer with internet access and a Web browser.

The system is adapted to implement a method for conducting a reverse auction for home loans, wherein prospective borrowers may place a loan application up for auction, and participating lenders (including banks and other lending institutions) may place bids for each loan auction, competing with other lenders to provide their services to the prospective borrower.

Referring now to figure 1 , a flow diagram illustrating the process for a borrower applying for a loan in a manner according to the invention is shown by way of example. The process includes registration, collection and validation phases.

The registration phase consists of borrowers registering to use the service by supplying their details and answering a number of preliminary questions. Referring to flow point 1.1 , in a preferred embodiment the invention is implemented using the internet. Thus a website is provided and visitors to the website are invited to register as a borrower by submitting basic details such as their name and contact details, and receive a username and password which are used to provide secure access to the service. Upon subsequent visits to the website, the borrower is required to log into the system using the given username and password to access the borrower section of the website.

Once registered, reminders can be sent to loan applicant's based upon their past useage. For example, as a two year fixed-rate loan nears expiration a reminder can be sent advising the applicant that their details are recorded and inviting them to list an auction to refix the loan.

Referring now to step 1.2, borrowers who wish to proceed with a loan application are invited to answer a series of introductory sorting questions (for example, relating to the type and amount of the loan sought), and identify their priorities by ranking the importance to them of certain factors. For example, the applicant is asked to rank the importance of factors such as the total cost of borrowing (interest and fees), having the lowest regular payments, paying the loan off quickly, and/or getting the requested maximum loan amount, on a scale of 1-5. These factors and priorities are used by the system to rank the bids. At flow point 1.3, the correct loan application form, or components of an application form, is selected for the borrower to complete based on the answers provided to the introductory questions, completing the registration phase. The content of the form may change depending on the type of applicant (eg individual trust etc) or answers to certain questions, i.e. additional questions may be asked or information sought depending on the answer to previous questions. The form automatically adapts so that inapplicable questions are not displayed.

The collection phase consists of obtaining and storing the borrower's details in the form of a detailed loan application form. At step 2.1 , the borrower is required to complete the application form online. The application form is a generic form requesting all the information which would be required by lenders for the type of loan specified by the borrower in the introductory questions. The borrower is therefore only required to complete a single application form. The borrower may complete the parts of the form in any order, although there will be a logical progression to follow. Progress may be saved at any time, allowing the borrower to return and complete the form later. Preferably the system automatically saves data which is completed on the form as the borrower moves between pages of the form, with client-side validation being performed as the applicant moves between pages, giving the applicant the option of either completing questions which have been answered, or returning to answer them later.

Upon submitting or saving the form, client-side validation of the form is performed at flow point 2.2 to ensure that all relevant questions have been answered and there are no obvious errors based on the expected type of information required compared to that provided. If problems are identified, the borrower will be notified of where the problem is, preferably by way of a pop-up dialog box. Help is also available at any stage by clicking on a help box, regardless of whether or not there is a problem. If the borrower chooses to save the form, only the valid data is saved. Server-side form validation, with a focus on security, is performed at step 2.3.

The final step in the collection phase is to store the data from the form in a way which enables the system to undertake searches on key criteria within the form, in addition to being able to recover the entire loan application. Storage of the data occurs at step 2.4, preferably using a relational database. The validation phase consists of cross-checking certain key details provided by the prospective borrower. Once the application form is complete, relevant information is extracted for display in the auction listing at flow point 3.1. Any details which would identify the borrower are not made available to lenders. The borrower can choose to save the application and return to it later, or immediately commence an auction for their home loan at flow point 3.2. Once the borrower requests an auction, the application form is locked and no changes may be made for the duration of the auction. The borrower may set any one of a number of parameters or filters for the auction, such as lenders to be excluded, whether they wish to retain confidentiality, and whether the borrower is willing to have their auction open to viewing by the public.

At step 3.3, certain details from the application form will be validated using external sources. Possible examples of validation include verifying the prospective borrower's identity using drivers licence or passport records, telephone directories or electoral roles for example.

Additional external validations might include verification of the property proposed to be used by the borrower as security, using an online property information service. Example of such services in New Zealand are provided by Quotable Value Limited and Terralink International Limited via their website, http://www.qv.co.nz/ and http://www.terralink.co.nz respectively. The system may automatically submit an electronic request for the appropriate report, and parse the resulting report to extract the relevant data. A similar process may be used to perform a credit check of the prospective borrower using services from companies such as Veda Advantage. Ideally, these external validations are done automatically and electronically.

If all external validations confirm the details provided by the borrower, then the application will be approved for auction at step 3.4, and selected details, identifying the loan terms the borrower is seeking, made available for viewing by lenders at flow point 3.5, concluding the validation phase. Details made available to lenders may include elements of the data obtained in step 3.3, such as credit reports and/or property valuations. It is also envisioned that the borrower may have the option of specifying a 'starting bid' including one or more bid attributes which the borrower considers as a minimum likely to be acceptable.

If an external validation fails, however, the borrower is automatically notified at flow point 3.6, preferably by e-mail, and advised of the reason for the failure. The borrower may also be asked to check the details of their application form, make any corrections and resubmit the application if appropriate. Borrowers are also given the option of requesting a call or e-mail advice from a representative if it is not clear to them what the problem is, in which case they will be contacted at flow point 3.7.

Referring now to figure 2, a flow diagram illustrating a possible process for a lender viewing pending loan applications according to the invention is given by way of example. Referring first to flow point 4.1 , each lender is required to log into the system using a unique usemame and password obtained when they register. Upon registration, it is envisaged that each lender will be required to sign a Terms of Use agreement setting the terms for participation in the system. Participating lenders, or nominated people within the participating lender organisations, may also receive periodic emails with key statistics from the site, such as the number of auctions in progress and/or the amount of money currently sought in loans, to encourage lenders log in regularly as shown at flow point 4.2.

Upon logging in, each lender will access an individualised web page, hereinafter referred to as the lender homepage, at step 4.3. The lender homepage contains details of the auctions that the lender is presently bidding on (including the capability for the lender to track the status of their credit approval process in relation to bids on a particular loan), details of auctions in which bids by that lender have been accepted enabling the lender to track the status of those loans, which staff are, or have been, logged on and/or placed bids, and also includes a facility for the lender to search the database for auctions. The lender homepage may also be used to provide notices or messages to the lender. In particular, it may include a list of newly listed auctions which meet a set of filter criteria predefined by the lender. The listed auctions displayed on the lender homepage may be selectively ordered by any of the displayed details, such as an Auction ID Number, Principal of the loan, Loan-to-Value Ratio (LVR), type (e.g. floating/fixed/mixed), time remaining until the auction closes, etc.

At step 4.4, lenders may select filters to search the database for auctions that they may be interested in bidding on. The search criteria can be easily changed by the lender to undertake new database searches. For example, the lender may choose to filter auctions based on property location, Loan to Value Ratio (LVR), loan amount, type of property (e.g. townhouse, apartment, house and section, section only), title (e.g. freehold, leasehold, cross lease), and/or use of the property (borrower residence, rental/investment property or holiday home) etc. The system applies the filters selected by the lender together with any filters set by the borrower at step 4.5, determining which auctions meet the filter criteria.

The lender may then choose to view key information regarding each auction by choosing to 'watch' the relevant auctions at flow point 4.6. At flow point 4.7, the lender has the option of downloading the key data from the application forms of selected auctions to enable them to use that data to obtain credit approval to bid on the auction.

At step 4.8, the lender selects the auctions that it wants to watch or bid on. The lender may be required to pay a nominal fee on first viewing each auction. It is envisaged that the relevant amount will be automatically direct debited from a bank account nominated by the lender upon registration.

All pending auctions previously selected for watching by the lender are displayed on the lender homepage, together with details of all live auctions which the lender has bid on at flow point 4.9. In a preferred embodiment, the lender is able to identify auctions where it has lodged a bid by way of displaying such auctions in a different colour or by displaying the lender's logo immediately adjacent, for example. Colour or other methods might also be used to identify other auctions of interest to the lender, such as auctions in which they have been out-bid. Also displayed are details of the time remaining to close of any current auction selected by the lender.

Referring next to figure 3, a flow diagram illustrating the auction process according to the invention is shown by way of example. Once the prospective borrower has completed the application form, they may choose to commence the auction. At step 5.1 , the borrower's auction starts, and runs for a period of time specified by the borrower, subject to a maximum time limit. A default time period will apply if no preference is specified by the borrower and the borrower may elect to accept a bid and close the auction early. Similarly, lenders may specify that a bid is open only for a specified time. Relevant extracts from the prospective borrower's application form are made available to lenders in the auction. Preferably, the identity of the prospective borrower remains anonymous, however. If the prospective borrower has an existing loan with a lender which they are refinancing, or has another existing loan, it may be indicated only to that lender that the prospective borrower to an existing customer. Referring to steps 5.2 and 5.3, lenders can, at any point during the auction, view the auction at will; watching, bidding, re-bidding and withdrawing bids according to the auction rules. Example rules may include a limit to 2 current bids on each auction at any one time; bids must remain in place for at least one day, etc. Preferably lenders may view summary details of bids placed on an auction by competing lenders, including details such as the loan amount, maximum term, annual interest rate, and repayment profile. Preferably lender bids are anonymous, however, and the lender responsible for each bid is not identified. Lenders may, however, be notified if the auction is for a prospective borrower repeatedly reapplying for the same loan over a specified period.

Preferably, a facility is provided for lenders to request further information from the borrower upon or prior to lodging their bid. Lenders will also be able to use this facility to highlight particular terms of their offer, in particular those terms or incentives which may not apply directly to the home loan sought, e.g. waiving of credit card fees.

Preferably, the method and system also provide the feature of allowing lenders to log their internal processes in relation to each auction as they occur, allowing other lender staff to view the status of each auction, such as credit approval applied for/not applied for/pending, special conditions required by credit, rating their degree of interest in getting the loan and therefore bidding strategy/rate they may be prepared to go to. This information would be private to the lender, not viewable by the prospective borrower, other lenders, or staff administering the system. This information could be used to generate a status report for each lender, listing a summary of the statuses of all pending auctions the lender is interested in.

Bids are made by entering the relevant information in a specific format, so that bids from competing lenders may be easily compared and explained. An "auto . bid" facility may be provided, allowing bids to be placed automatically on behalf of a lender in response to bids from competing lenders, incrementally revising the loan offer up to a limit specified by the lender.

Referring to flow points 5.4-5.6, at any point during the auction the prospective borrower may view the details of their auction; viewing bids lodged on the auction, accepting or rejecting bids prior to the close of the auction, or withdrawing their auction. The borrower will see summaries of all bids that have been lodged in their auction, and will be able to selectively view the full details and full legal terms and conditions which would apply to that loan. Preferably the borrower may select two or more bids to view side-by-side for simple comparison between the offers. The borrower will also be able to view and respond to any questions from lenders.

At step 5.7, the auction comes to an end if either the prospective borrower accepts a bid before the expiry of the auction period, in which case the auction terminates immediately, or at the expiration of the time period for the auction, whichever occurs first. The auction then ends at flow point 5.8. Lenders may be given an online or email warning that an auction they have nominated to "watch" is near closing.

Referring now to figure 4, a flow diagram illustrating the process upon completion of the auction is given by way of example. At flow points 6.1 and 6.2 respectively, the bidding lenders and borrower are notified of the results of the auction.

The system provides best match advice regarding bids, based on the priorities specified by the borrower in completing the introductory questions of step 1.2. This advice is derived using an algorithm that takes the percentage or cost difference between the bids and weights the difference according only to the preferences selected by the borrower, and is described in further detail below. The borrower will then have a fixed period of time, such as one business day, following the end of the auction within which to accept a bid lodged during the auction. It may be, but is not necessarily, the bid which, objectively, should best meet the borrower's circumstances. The advice may further include calculations and comparisons of total cost of credit for each bid, which may be presented graphically.

At flow point 6.3, the auction is considered successful if there has been at least one bid, and a bid has been accepted by the borrower. Acceptance of a loan offer may or may not be legally binding, as it may be subject to conditions. If a bid is accepted, the borrower will be provided with details of the lender whose bid they have accepted and details of the documentation that they will need to provide to that lender, and how they should go about completing and signing their loan and mortgage documents.

If the auction is unsuccessful, then the borrower's application form is unlocked at step 6.4, and the prospective borrower may either make changes to a new version (or copy) of the application form, or start another auction based on the same application form. If the auction is successful, however, the application form is sent to the lender of the accepted bid at step 6.5, advising them to commence preparation of documents and providing details for contacting the borrower to finalise the loan and mortgage documentation. Lenders are required to provide feedback on the progress made on each accepted bid. This may be provided at flow point 6.6 by e-mail or through the lender homepage.

Preferably once the loan has been signed by the borrower, or alternatively when the loan has been drawn down, the lender is required to provide notification, and the commission charged may be automatically direct debited from the lender's account at flow point 6.7.

At step 6.8, data and feedback relating to the successful auction is recorded to maintain statistics on the overall usage of the system. Exemplary statistics might include the number of applications made, how many in each geographical location, how many prospective borrowers were looking for the lowest costs, and how often the best bid advice is followed. Analysis of this data could be used to generate reports to give lenders a feel for trends and borrower priorities. This Summary Report may be made available to lenders for a fee, as it provides useful market intelligence across all participating lenders.

Upon successful completion of the auction, borrowers are requested to provide feedback on the process at flow point 6.9.

Traditionally, auctions have been used to sell or, in the case of reverse auctions, purchase goods or services in which bids consist of a single factor for the auction lister to consider, i.e. price. This allows for simple comparison between competing bids. Difficulty arises, however, when bids consists of multiple factors which the lister, such as the prospective borrower in this example, needs to evaluate and to compare with competing bids. The invention therefore includes a method of automatically evaluating each bid by inviting the prospective borrower to prioritise a number of criteria and scoring or ranking the competing bids based on these priorities. The method therefore allows a simple comparison and is capable of recommending the bid which best matches the borrower's priorities.

Referring now to figure 6, an exemplary algorithm for providing automated advice as to the bid which best matches the prospective borrower's loan criteria is illustrated. At step 61 , the loan selection criteria corresponding to the criteria of the introductory sorting questions are retrieved from memory, and ranked in order from most important to least important as specified by the prospective borrower in step 62. The relative difference factor between each loan selection criteria is then calculated at flow point 63.

The relative difference factor is a weighting reflecting the importance of each of the loan selection criteria as rated by the prospective borrower. In a preferred form, it is a fraction calculated as the loan selection criteria value divided by the sum of each loan selection criteria value subtracted by one, for example:

(a - l)+ (b - l)+ (c - l)+ {d - l)+ {e - l) where a to e represent each loan selection criteria.

At step 64, for each bid a score is calculated for each of the individual selection criteria. A total score for each bid is then calculated at step 65 by multiplying each loan selection criteria by the relative difference factor and summing the results. At flow point 66 the bid having the best total score is considered the best match and the prospective borrower is advised accordingly. Alternatively, the borrower may be provided with a ranked list of bids according to the calculated scores.

it will be appreciated that the illustrated flow diagram is merely an example of a weighted algorithm for ranking bids, and many variations or modifications may be made without departing from the scope of the invention.

From the foregoing it will be seen that a system and method is provided which offers a convenient, simple, and competitive interactive reverse auction process for facilitating loan agreements or other financial products between a plurality of borrowers and lenders. Also provided is a method of ranking multiple-factor bids in an auction to provide an indication of bid suitability according to criteria chosen by the auction lister.

Where in the foregoing description reference has been made to specific components or integers of the invention having known equivalents, then such equivalents are herein incorporated as if individually set forth. Although this invention has been described by way of example and with reference to possible embodiments thereof, it is to be understood that modifications or improvements may be made thereto without departing from the scope of the invention.

Claims

ClaimsWhat we claim is:

1. A system enabling a borrower to conduct a reverse auction for a loan to two or more lenders, including: a data communication means allowing communication with a plurality of client computers; a database; and a processing means adapted to: communicate with said plurality of client computers via said communication means; read and write data to said database; administer the reverse auction to establish mutually agreeable loan terms between the borrower and at least one of said lenders; and rank bids for the loan lodged by lenders, during and/or at the conclusion of the auction based on a plurality of prioritised criteria specified by the borrower.

2. A system as claimed in claim 1 , wherein said communication between the processing means and client computers includes the exchange of information relating to the loan agreement.

3. A system as claimed in claim 1 or claim 2, wherein said communication includes serving web pages to said client computers.

4. A system as claimed in claim 2, wherein said information may be viewed on a client computer using a standard Web browser.

5. A system as claimed in claim 1 , wherein the processing means includes one or more server computers coupled to said communication means.

6. A system as claimed in any one of the preceding claims, wherein said data includes information relating to one or more of said bids lodged by lenders.

7. A system as claimed in any one of the preceding claims, wherein the data communication means includes at least one computer network.

8. A system as claimed in claim 7, wherein the at least one computer network includes the Internet.

9. A system substantially as herein described with reference to the accompanying drawings.

10. A computer-implemented method for establishing a loan agreement by reverse auction between a borrower and two or more lenders, the method including the steps of: conducting a reverse auction to establish mutually agreeable loan terms between the borrower and at least one of said lenders; requesting one or more prioritised requirements for the loan from the borrower; storing the prioritised requirement(s); receiving bids from one or more of said lenders; comparing the prioritised requirement(s) with data relating to the bid; and using an outcome of the comparison to advise the borrower in relation to the bid.

11. A method as claimed in claim 10, wherein the step of conducting a reverse auction for the loan includes the steps of: receiving an electronic loan application over a computer network submitted by a borrower; automatically validating at least part of the electronic loan application; storing information relating to the loan application; making selected information from the loan application available for a predetermined period of time to one or more lenders; accepting bids for the loan from lenders; making the bids available for the prospective borrower to view; and

allowing the prospective borrower to accept a bid.

12. A method as claimed in claim 11 , wherein the electronic loan application includes a plurality of loan criteria prioritised by the applicant, the method further including the step of ranking bids according to the applicant's priorities.

13. A method as claimed in claim 12, wherein bids are ranked using an algorithim weighted according to the prioritised loan criteria.

14. A method as claimed in claim 11 , wherein the predetermined period of time is specified by the borrower.

15. A method as claimed in claim 11 , wherein the predetermined period of time is a default time period.

16. A method as claimed in any one of claims 10-15, wherein the step of conducting a reverse auction for the loan further includes the steps of receiving from the borrower notification of acceptance of a bid, and ending the auction.

17. A method as claimed in claim 11 or any one of claims 12-16 when dependent on claim 11 , wherein the step of validating the application includes the step of cross-checking information supplied by the borrower using external sources.

18. A method of conducting an auction for a multiple-factor auction item, including the steps of obtaining a prioritised list of criteria and ranking bids for said auction item based on the prioritised criteria.

19. A method as claimed in claim 18 wherein the bids are ranked by an algorithm weighted according to the prioritised criteria specified by the auction lister.

20. A method as claimed in claim 18 or claim 19, wherein the bid best matching the lister's priorities is recommended.

21. A method as claimed in any one of claims 18-20, wherein the auction is a reverse auction.

22. A method as claimed in any one of claims 18-21 , wherein the item is a financial product.

23. A method as claimed in claim 22, wherein the financial product is a loan.

24. A method as claimed in claim 23, wherein the multiple factors include one or more of loan type, interest rate, term, fees, and/or loan amount.

25. A networked system for facilitating a loan agreement between a borrower and a lender, including: a data communication means; a plurality of client computers coupled to said communication means; a database; and a processing means adapted to: communicate with said plurality of client computers via said communication means; read and write data to said database; and administer a reverse auction to facilitate said loan agreement.

26. A method for facilitating a loan agreement between a borrower and a lender, the method including the steps of: providing a networked system according to claim 25; and conducting a reverse auction to facilitate the loan agreement.

27. A method for facilitating a loan agreement between a borrower and a lender substantially as herein described with reference to the accompanying drawings.

28. A method of conducting an auction for a multiple-factor item substantially as herein described with reference to the accompanying drawings.