Financing and securitization structure for a portfolio of loans

• US 7,797,214 B2
• Filed: 08/08/2005
• Issued: 09/14/2010
• Est. Priority Date: 08/06/2004
• Status: Expired due to Fees

• 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.
• Primary Examiner(s): Kalinowski; Alexander
• Assistant Examiner(s): Kanervo; Virpi H
• Application Number:
  US10/571,969
• Publication Number:
  US 20080249809A1
• Time in Patent Office: 1,863 Days
• Field of Search: 705 35- 38
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance

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 initialing 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 system for facilitating a financing structure, said system comprising:

a network;

one or more databases located on a data storage system and comprising;

(a) product data representative of one or more products, said products each comprising a financial instrument that employs or accomplishes a form of risk transfer and has an invested portion or component having a potential to grow in value over time; and

(b) portfolio data representative of a portfolio of loans, each loan obtained by a borrower from a loan originator to purchase said one or more of said products;

a processor configured to execute a gap enhancement module configured for;

retrieving said portfolio data and said product data from said one or more databases;

generating one or more gap enhancement instruments for execution by one or more executing parties other than the borrower, said one or more gap enhancement instruments each addressing a current gap value based upon at least a portion of said product data representative of a respective one of the products and said current gap value representing the difference between a premium paid and a value of said respective product, said one or more gap enhancement instruments comprising;

(a) a collateral assignment of said respective product executed by one or more assigning parties other than the borrower in favor of said borrower;

(b) a compensation agreement between an employee of said borrower and said borrower;

(c) an agreement to postpone payment of a portion of a commission earned on the sale of said respective product;

(d) a rider on said respective product waiving a portion of a surrender fee in favor of an affected loan originator, said surrender fee representing an amount charged in the event said respective product is surrendered or said borrower defaults on one or more of said loans associated with said respective product;

(e) an agreement to deposit funds in a reserve account, said funds representing a portion of a surrender fee, said surrender fee representing an amount charged in the event said respective product is surrendered or said borrower defaults on one or more of said loans associated with said respective product;

(f) an agreement by one or more lending parties other than the borrower, in the event of a surrender or default event, to extend a gap loan to said loan originator in an amount approximately equal to said current gap value, a repayment obligation of said loan originator to said one or more lending parties other than the borrower being ultimately secured by a pledged asset;

or

(g) an agreement by one or more paying parties other than the borrower to pay a marketing allowance to said loan originator, said marketing allowance including a portion of the costs associated with marketing said respective product;

receiving and storing in said one or more databases enhancement data representative of execution of said one or more gap enhancement instruments by said one or more executing parties other than the borrower, said enhancement data being stored in association with said product data;

wherein said enhancement data supports a credit facility, for funding said portfolio of loans, having terms more favorable to said borrower than alternative terms available in the absence of said enhancement data; and

a communications controller configured for transmitting said product, portfolio and enhancement data over said network.

2. The system for facilitating the financing structure of claim 1, wherein said terms are more favorable than would be available for an individual loan selected from said portfolio of loans.

3. The system for facilitating the financing structure of claim 1, wherein said collateral assignment of said respective product is executed by said one or more assigning parties other than the borrowers in favor of said loan originator.

4. The system for facilitating the financing structure of claim 1, wherein said portfolio of loans has an aggregate risk based on said current gap values of the one or more products associated with said portfolio of loans, said aggregate risk reduced at least in part by said execution of said one or more gap enhancement instruments by said one or more executing parties other than the borrower, and wherein said aggregate risk and said enhancement data are of sufficient quality to permit a purchase of one or more variable funding notes (VFN) by a VFN purchaser, to finance a purchase of said portfolio of loans by said VFN purchaser.

5. The system for facilitating the financing structure of claim 1, wherein said portfolio of loans has an aggregate risk based on said current gap values of the respective products associated with said portfolio of loans, said aggregate risk reduced at least in part by said execution of said one or more gap enhancement instruments by said one or more executing parties other than the borrower, and wherein said aggregate risk and said enhancement data are of sufficient quality to permit a bankruptcy-remote special purpose entity to receive at least a portion of said portfolio of loans in a true sale transaction.

6. The system for facilitating the financing structure of claim 1, wherein said portfolio of loans has an aggregate risk based on said current gap values of the respective products associated with said portfolio of loans, said aggregate risk reduced at least in part by said execution of said one or more gap enhancement instruments by said one or more executing parties other than the borrowers, and wherein said aggregate risk and said enhancement data are of sufficient quality to support an issuance of asset-backed security interests in said portfolio of loans, suitable for trading in the capital markets to multiple investors.

7. The system for facilitating the financing structure of claim 6, wherein said asset-backed security interests comprise commercial paper.

8. The system for facilitating the financing structure of claim 6, wherein said asset-backed security interests comprise a ratable pool of asset-backed securities.

9. The system for facilitating the financing structure of claim 1, wherein said system further comprises a display device configured for displaying said product, portfolio and enhancement data.

10. The system for facilitating the financing structure of claim 1, wherein said gap enhancement module is further configured for calculating, based upon said product data, said current gap value associated with said product.

11. The system for facilitating the financing structure of claim 1, wherein said gap enhancement module is further configured for comparing one or more of said gap enhancement instruments to a set of parameters.

12. The system for facilitating the financing structure of claim 11, wherein said set of parameters comprises at least one of:

(1) a relative value of each of said one or more gap enhancement instruments;

(2) a net cost of executing each of said one or more gap enhancement instruments;

or

(3) an ease of obtaining each of said one or more gap enhancement instruments.

13. The system for facilitating the financing structure of claim 12, wherein said gap enhancement module is further configured for selecting one or more of said gap enhancement instruments based on one or more of said parameters.

14. The system for facilitating the financing structure of claim 1, wherein said product comprises a life insurance policy or an annuity contract.

15. The system for facilitating the financing structure of claim 1, wherein said agreement to extend said gap loan comprises an agreement by an insurance carrier that has written one of said products on an employee of the borrower;

and wherein said pledged asset securing repayment of said gap loan comprises accounts receivable of said borrower.

16. A system for facilitating a business structure, said system comprising:

a memory configured for storing data in one or more databases located on a data storage system, said data comprising;

loan data representative of a loan obtained by a borrower from a loan originator; and

product data representative of a product purchased using proceeds of said loan and naming an employee of the borrower as an insured, wherein said product comprises a financial instrument that employs or accomplishes a form of risk transfer and has an invested portion or component having a potential to grow in value over time, wherein said product has a current gap value, said current gap value being based upon said product data and representing the difference between a premium paid and a value of said product; and

a processor coupled to said memory and configured to perform steps comprising;

generating one or more gap enhancement instruments for execution by one or more executing parties other than the borrower, said one or more gap enhancement instruments each addressing said current gap value, said one or more gap enhancement instruments comprising;

(a) a collateral assignment of said product executed by one or more assigning parties other than the borrower in favor of said borrower;

(b) a compensation agreement between said employee of said borrower and said borrower;

(c) an agreement to postpone payment of a portion of a commission earned on a sale of said product;

(d) a rider on said product waiving a portion of a surrender fee in favor of an affected loan originator, said surrender fee representing an amount charged in the event said product is surrendered or said borrower defaults on said loan;

(e) an agreement to deposit funds in a reserve account, said funds representing a portion of a surrender fee, said surrender fee representing an amount charged in the event said product is surrendered or said borrower defaults on said loan;

(f) an agreement by one or more lending parties other than the borrower, in the event of a surrender or default event, to extend a gap loan to an affected loan originator in an amount approximately equal to said current gap value, wherein said affected loan originator'"'"'s repayment obligation to said one or more lending parties other than the borrower is ultimately secured by a pledged asset;

or

(g) an agreement by one or more paying parties other than the borrower to pay a marketing allowance to one or more of said loan originators, said marketing allowance including a portion of the costs associated with marketing said product;

receiving and storing in said one or more databases enhancement data representative of execution of said one or more gap enhancement instruments by said one or more executing parties other than the borrower, said enhancement data being stored in association with said product data;

wherein said enhancement data supports a credit facility, for funding said loan, having terms more favorable to said borrower than alternative terms available in the absence of said enhancement data.

17. The system for facilitating the business structure of claim 16, wherein said collateral assignment of said product is executed in favor of said loan originator.

18. The system for facilitating the business structure of claim 16, said system further comprising:

a network;

said memory further configured for storing portfolio data representative of a portfolio of a plurality of said loans in said one or more databases, wherein said portfolio data includes an aggregate risk based on the respective current gap values of the products associated with said portfolio of the plurality of said loans, said aggregate risk reduced at least in part by said execution of said one or more gap enhancement instruments by said processor;

wherein said aggregate risk and said enhancement data are of sufficient quality to permit a purchase of one or more variable funding notes (VFN) by a VFN purchaser, to finance a purchase of said portfolio of the plurality of said loans;

a display device configured for displaying said product, said loan, said portfolio of the plurality of said loans and said enhancement data; and

a communications controller configured for transmitting said product, said loan, said portfolio of the plurality of said loans and said enhancement data over said network.

19. The system for facilitating the business structure of claim 18, wherein said credit facility terms are more favorable than alternative terms available in the absence of said enhancement data for an individual loan selected from said portfolio of the plurality of said loans.

20. The system for facilitating the business structure of claim 18, wherein said aggregate risk and said enhancement data are of sufficient quality to permit a bankruptcy-remote special purpose entity to receive at least a portion of said portfolio of the plurality of said loans in a true sale transaction.

21. The system for facilitating the business structure of claim 18, wherein said aggregate risk and said enhancement data are of sufficient quality to support issuance of asset-backed security interests in said portfolio of the plurality of said loans, suitable for trading in the capital markets to multiple investors.

22. The system for facilitating the business structure of claim 21, wherein said asset-backed security interests comprise commercial paper.

23. The system for facilitating the business structure of claim 21, wherein said asset-backed security interests comprise a ratable pool of asset-backed securities.

24. The system for facilitating the business structure of claim 16, wherein said product comprises a life insurance policy or an annuity contract.

25. The system for facilitating the business structure of claim 16, wherein said agreement to extend said gap loan comprises an agreement by an insurance carrier that has written one of said products on an employee of the borrower;

and wherein said pledged asset securing repayment of said gap loan comprises accounts receivable of said borrower.

26. A computer program product, comprising a computer-readable storage medium having an executable program code stored thereon, wherein said program code instructs a processor to perform steps for facilitating acquisition of a credit facility for a plurality of loans provided by a loan originator to one or more borrowers, said steps comprising:

A) accessing one or more databases and distinct software modules, wherein said one or more databases are located on a data storage system, and wherein said distinct software modules comprise a gap enhancement module and a computer program module;

B) retrieving product data representative of a product, said product comprising a financial instrument that employs or accomplishes a form of risk transfer and has an invested portion or component having a potential to grow in value over time, wherein said retrieving is performed by said gap enhancement module in response to being called by said computer program module;

C) retrieving from said one or more databases portfolio data representative of a portfolio of loans, each loan obtained by a borrower from a loan originator, wherein said retrieving is performed by said gap enhancement module in response to being called by said computer program module;

D) generating one or more gap enhancement instruments for execution by one or more executing parties other than the borrower, said one or more gap enhancement instruments each addressing a current gap value based upon product data representative of a respective one of the products and said current gap value representing the difference between a premium paid and a value of said respective product, and wherein said generating is performed by said gap enhancement module in response to being called by said computer program module; and

E) receiving and storing in said one or more databases enhancement data representative of said execution of said one or more gap enhancement instruments by said one or more executing parties other than the borrower, wherein said enhancement data is stored in association with said product data, wherein said enhancement data supports a credit facility for funding said portfolio of loans, said credit facility provided to said loan originator by a credit provider, said credit facility having terms more favorable to said borrower than alternative terms available in the absence of said enhancement data, and wherein said receiving and storing is performed by said gap enhancement module in response to being called by said computer program module.

27. The computer program product of claim 26, further comprising a step of displaying said product, portfolio and enhancement data on a display device, wherein said displaying is performed by said display device in response to being called by said computer program module.

28. The computer program product of claim 26, further comprising a step of, prior to step “

C”

, calculating, based upon said product data, the current gap value associated with said product, wherein said calculating is performed by said gap enhancement module in response to being called by said computer program module.

29. The computer program product of claim 26, further comprising a step of, prior to step “

C”

, comparing, based upon a set of parameters, the current gap value associated with said product to a user-defined limit associated with said product, wherein said comparing is performed by said gap enhancement module in response to being called by said computer program module.

30. The computer program product of claim 29, wherein during said step of comparing, said set of parameters comprises at least one of:

(1) a relative value of each of said one or more gap enhancement instruments;

(2) a net cost of executing each of said one or more gap enhancement instruments;

or

(3) an ease of obtaining each of said one or more gap enhancement instruments.

31. The computer program product of claim 29, further comprising a step of, subsequent to said step of comparing and prior to step “

C”

, selecting one or more of said one or more gap enhancement instruments based on one or more of said parameters.

32. A computer-implemented method for facilitating a financing structure, said method comprising:

A) accessing one or more databases located on a data storage system by one or more computer devices comprising at least one processor;

B) retrieving by said processor product data representative of a product, said product comprising a financial instrument that employs or accomplishes a form of risk transfer and has an invested portion or component having a potential to grow in value over time;

C) retrieving by said processor portfolio data representative of a portfolio of loans, each loan obtained by a borrower from a loan originator to purchase said product; and

D) executing by said processor a gap enhancement module of said one or more computer devices to;

(1) generate one or more gap enhancement instruments for execution by one or more executing parties other than the borrower, said one or more gap enhancement instruments each addressing a current gap value based upon product data representative of a respective one of the products and said current gap value representing the difference between a premium paid and a value of said respective product; and

(2) receive and store in said one or more databases enhancement data representative of said execution of said one or more gap enhancement instruments by said one or more executing parties other than the borrower, said enhancement data being stored in association with said product data, said enhancement data supporting a credit facility for funding said portfolio of loans, having terms more favorable to said borrower than alternative terms available in the absence of said enhancement data.

33. The computer-implemented method of claim 32, further comprising a step of displaying said product, portfolio and enhancement data on a display device.

34. The computer-implemented method of claim 32, wherein during step “

D 2”

, said one or more gap enhancement instruments comprise;

(a) a collateral assignment of said product executed by one or more assigning parties other than the borrower in favor of said borrower;

(b) a compensation agreement between an employee of said borrower and said borrower;

(c) an agreement to postpone payment of a portion of a commission earned on a sale of said product;

(d) a rider on said product waiving a portion of a surrender fee in favor of an affected loan originator, said surrender fee representing an amount charged in the event said product is surrendered or said borrower defaults on one or more of said loans;

(e) an agreement to deposit funds in a reserve account, said funds representing a portion of a surrender fee, said surrender fee representing an amount charged in the event said product is surrendered or said borrower defaults on one or more of said loans;

(f) an agreement by one or more lending parties other than the borrower, in the event of a surrender or default event, to extend a gap loan to an affected loan originator in an amount approximately equal to said current gap value, wherein said affected loan originator'"'"'s repayment obligation to said one or more lending parties other than the borrower is ultimately secured by a pledged asset;

or

(g) an agreement by one or more paying parties other than the borrower to pay a marketing allowance to one or more of said loan originators, said marketing allowance including a portion of the costs associated with marketing said product.

35. The computer-implemented method of claim 34, wherein said agreement to extend said gap loan comprises an agreement by an insurance carrier that has written one of said products on an employee of the borrower;

and wherein said pledged asset securing repayment of said gap loan comprises accounts receivable of said borrower.