Why it Works

The EquityLock Home Price Protection^TM products are designed to be able to pay buyers in a declining market, whether one local market, or the real estate markets on a national level are in decline.

Following are some of the variables that allow EquityLock Financial to make payments even in a down market or a general housing slump. Feel free to contact us for more information regarding underwriting policies, reserves and investment management policies.

• Conservative reserves

  EquityLock Financial retains on reserve enough revenues from the sale of Home Price Protection^TM contracts to pay all projected losses, even assuming that 100% of the markets decline each year given historical turnover (or mobility rates) and projected loss amounts. These reserves are managed by a third party custodian and are invested in a diversified portfolio designed to protect principal and achieve safe growth.

• Diversification and the law of large numbers

  EquityLock Financial's eposure to the risk of real estate downturns is diversified geographically and over time. By writing contracts on a national level, in different markets, and at different times, the Company is able to absorb losses from contract payments made in declining areas with contract revenues from areas that do not decline.

• Underwriting standards

  In addition to establishing conservative reserves EquityLock Financial will only underwrite a certain percentage of business within markets that are perceived to be 'higher risk'; and often we may elect to exclude some very risky markets all together. The Company uses third party sources and our own proprietary data and modeling processes to constantly assess the relative risks of our current and future contracts.

• The Company's "Hedging" Strategies

  Just as you are able to manage your risk on your home by purchasing a contract against your general market index, EquityLock Financial can manage risk by investing in financial instruments that hedge pools of our contracts. These instruments can include insurance agreements, reinsurance treaties, and innovative future contracts based on housing indexes. (See www.macromarkets.com and www.radarlogic.com for examples of financial derivatives).

The combination of our reserve policies, diversification, adherence to our underwriting standards and the ability to access additional financial resources further protects the Company’s ability to satisfy obligations under Home Price Protection^TM contracts through strong and weak markets.