Other Financial Transactions Case Studies
Student Loan Debt Cancellation
Situation: In a tragic bus accident, 20 college students in Illinois were killed. In the case of death or disability of a student loan borrower, state or private lenders have the distasteful task of attempting to collect the outstanding loan from the borrower's estate or from the co-signer (typically the student's parents).
Issue: The State of Illinois faced the unenviable task of notifying each family that the student loans were immediately in default. As a fiduciary of the State, program administrators had to pursue these claims vigorously.
Result: Risk Capital Partners recently co-developed Debt Cancellation coverage in cooperation with a leading insurer that is similar to protection only found in federally backed loan programs. By selecting a loan with Debt Cancellation, borrowers will be comforted knowing that their families or co-signers will not be facing collection calls or burdened with the debt repayment following their death or disability. According to Injury Facts 2002 Edition, published by the National Safety Council, for every 100,000 persons age 15 to 24, 81 will die each year. Between the ages of 25 to 34, another 108 will die each year. Therefore, for every 100,000 borrowers over a 20 year loan repayment period, Debt Cancellation will benefit nearly 2,000 families.
Reverse Mortgage Coverage
Situation: A reverse mortgage is a loan available to seniors (62 and over in the United States), and is used to release the home equity in the property as one lump sum or multiple payments. The homeowner's obligation to repay the loan is deferred until the owner dies, the home is sold, or the owner leaves.
Issue: However, the maximum amount that may be borrowed is subject to an FHA limit of $362,790, compelling a substantial sub-set of seniors who could borrow a greater amount if not for the HECM limit, to procure a non-HECM reverse mortgage. Furthermore there is currently no consideration given to a borrower for impaired health or other factors which would increase the available amount that may be borrowed.
Result: RCP has developed an insurance coverage that allows lenders to offer non-HECM backed programs with such advantages as the ability to offer Reverse Mortgage product for homes well in excess of HECM limits ($3million) and also to introduce a short-form medical underwrite to increase LTV's offered to homeowners.