SYSTEM FOR MANAGING THE TOTAL RISK EXPOSURE FOR A PORTFOLIO OF LOANS

• US 20080126267A1
• Filed: 11/28/2006
• Published: 05/29/2008
• Est. Priority Date: 03/15/2006
• Status: Active Grant

• Current Assignee: Entaire Global Intellectual Property, Inc.
• Original Assignee: Entaire Global Intellectual Property, Inc.
• Inventors: Rosen, Jonathan D., DeWitt, Robert E., Bush, Paul A., Metzger, David E.
• Granted Patent: US 7,797,217 B2
• Time in Patent Office: Days
• US Class Current: 705/36R
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A computer system for monitoring and enhancing the collateral security underlying a set of loans is provided, including a system for calculating the unsecured value of the set at any time and for initiating additional collateral enhancement instruments when the unsecured value exceeds a certain limit. The system may include a variety of modules in communication with a relational database for storing data about the loans and system elements. The computer system may also be configured to allocate, manage, and execute the waterfall or cascade of funds between and among the various participants in a financial plan. The invention also includes a structured finance plan and related methods for enhancing the collateral security of a loan obtained for a life insurance or annuity product, and a system and method for managing a portfolio of such loans in order to obtain favorable financing and to facilitate securitization.

Claims

1. A computer system for managing the total risk exposure for a plurality of loans, each of said loans used to purchase one or more life insurance products, the system comprising:

a gap enhancement module including a database of values associated with each of said one or more life insurance products, wherein said values in said database include a current gap value associated with each of said one or more products, said current gap value representing the difference between a premium paid and a current value of said product; and

a finance module in communication with said gap enhancement module, said finance module configured to;

(a) combine said plurality of loans into a portfolio;

(b) calculate an aggregate risk value for said portfolio, based on a current gap value of each of said one or more products in said portfolio; and

(c) provide said aggregate risk value to an initial credit provider for the purpose of obtaining and maintaining a credit facility for said portfolio of loans, said credit facility having terms favorably responsive to the presence of said one or more gap enhancement instruments.

2. The computer system of claim 1, wherein said database of said gap enhancement module is configured to receive commitments associated with one or more gap enhancement instruments designed to reduce said current gap value, said instruments comprising:

(a) a promissory note for one or more of said loans, executed by a borrower in favor of a loan originator;

(b) a collateral assignment of one or more of said life insurance products, executed by an insured in favor of said borrower; and

(c) an asset of said borrower pledged to said loan originator as collateral for one or more of said loans.

3. The computer system of claim 1, wherein said terms are more favorable than would be available for an individual loan selected from said plurality of loans.

4. The computer system of claim 2, wherein said gap enhancement module is further configured to:

(a) retrieve from said database a current amount at risk for each of said one or more life insurance products, said current amount at risk including a premium paid;

(b) retrieve from said database a current value of each of said one or more life insurance products, said current value based at least in part on (i) a current net cash value of said product, (ii) a current accumulated value of said product, and (iii) a current collateral value of said one or more gap enhancement instruments providing collateral security for said loan;

(c) calculate a current gap value for each of said one or more life insurance products, said current gap value representing the difference between said current amount at risk and said current value;

(d) compare said current gap value to a limit;

(e) if said current gap value exceeds said limit, identify and select one or more gap enhancement instruments from among said plurality of gap enhancement instruments;

(f) update said current collateral value to include the value of said selected one or more gap enhancement instruments; and

(g) transmit said current collateral value to said finance module.

5. The computer system of claim 1, wherein said finance module is further configured to:

calculate an aggregate yield for said portfolio, based on a yield for each loan in said portfolio; and

provided said aggregate yield to said initial credit provider for the purpose of obtaining and maintaining said credit facility.

6. The computer system of claim 1, wherein said finance module is further configured to:

provided said aggregate risk to a loan purchaser, wherein said aggregate risk is of sufficient quality to permit a loan purchaser to issue a variable funding note to finance the purchase of said portfolio of loans; and

coordinate the purchase of said variable funding note by a VFN purchaser.

7. The computer system of claim 1, wherein said finance module is further configured to:

establish a bankruptcy-remote special purpose entity, wherein said aggregate risk is of sufficient quality to permit said special-purpose entity to receive said portfolio of loans in a true sale, thereby further enhancing the creditworthiness of said portfolio of loans.

8. The computer system of claim 1, wherein said finance module is further configured to:

provide said aggregate risk to an investment bank, wherein said results are of sufficient quality to permit the issuance of asset-backed security interests in said portfolio of loans, suitable for trading in the capital markets to multiple investors.

9. The computer system of claim 5, wherein said finance module is further configured to:

provide said aggregate risk and said aggregate yield to an investment bank, wherein said results are of sufficient quality to permit the issuance of asset-backed security interests in said portfolio of loans, suitable for trading in the capital markets to multiple investors.

10. The computer system of claim 4, wherein said gap enhancement module is further configured to:

compare said one or more gap enhancement instruments;

identify a selected gap enhancement instrument from among said one or more gap enhancement instruments; and

initiate the execution of said selected gap enhancement instrument.

11. The computer system of claim 9, further comprising:

a trading module in communication with said gap enhancement module and said finance module,

said trading module configured to manage the trading of said asset-backed security interests.

12. The computer system of claim 4, further comprising:

an accounts management module in communication with said gap enhancement module and said finance module, said accounts management module configured to;

(a) retrieve payment data from one or more data tables, said payment data including details about payments received for said loans;

(b) maintain a list of instructions based on one or more contractual agreements established between and among the entities related to said portfolio of loans;

(c) distribute funds, based on said payment data, according to said list of instructions; and

(d) provide an auditable record of said distribution of funds.

13. The computer system of claim 12, wherein said accounts management module is further configured to:

prioritize said list of instructions according to said one or more contractual agreements such that said distribution of funds is executed according to said prioritization.

14. The computer system of claim 12, wherein said list of instructions comprises:

amounts due to one or more of said entities;

cash reserve amounts to be maintained in one or more reserve accounts; and

escrow amounts to be maintained in one or more escrow accounts.

15. The computer system of claim 4, further comprising:

a plan administration module in communication with said gap enhancement module and said finance module, said plan administration module configured to;

calculate a loan interest paid on each of said one or more loans during a period, based on the data stored in one or more data tables; and

generate a report to a borrower related to each of said one or more loans, said report based at least in part on said data, said report including said calculation of loan interest paid, recommendations about accounting related to the loan under GAAP, and a number of calendar days said product has been in-force during said period.

16. The computer system of claim 15, wherein said plan administration module is further configured to:

calculate a current death benefit reduction to be applied to one of said policies, based on the data stored in one or more data tables, said data including a current interest rate, a forecasted product yield, a hard minimum and maximum death benefit, a hard minimum and maximum death benefit, tax guidelines, policy requirements, surrender costs, and a past death benefit reduction already applied to said one of said policies;

provide a notice to one of said entities, said notice including the amount of said current death benefit reduction and a date upon which it should be applied; and

record said current death benefit reduction in the one or more data tables associated with said one of said policies.

17. The computer system of claim 16, wherein said plan administration module is further configured to:

calculate said current death benefit reduction based at least in part on collateral for said loan, such that said reduction provides a degree of protection for said collateral.

18. The computer system of claim 17, wherein said collateral comprises an asset of the borrower pledged to said loan originator as collateral for said loan.