Map Program Presentation 11/4/2014

Mortgage Alternative Program

Eric L. Frazier, MBA

National Sales Manager

NMLS#461807

Intercap Lending

Office: 800-261-163 x 703

Direct: 714-475-8629

[email protected]

Business Partnership Opportunity 2014

Elizabeth Shermerhorm, Business Development Manager

Cove’s Mission - Transforming Home Ownership

Cove Financial Group Inc. (“Cove”) is a real estate investment company operating in 16 states1 that purchases and then leases and sells single family residential (“SFR”) homes through its Mortgage Alternative Program (“MAP”)

1. Cove currently offers its MAP in AZ, CA, CO, FL, GA, IL, MI, MN, NV, OH, OR, PA, TX, VA, WA, WI

Cove’s Mission - Transforming Home Ownership

MAP is an innovative “lease and later own” program that features a standard form real estate purchase contract, a lease and a proprietary purchase agreement with an escrow period of up to 6 years, giving customers time to cure the issues preventing them from getting a mortgage while enjoying many benefits of home ownership

1. Cove currently offers its MAP in AZ, CA, CO, FL, GA, IL, MI, MN, NV, OH, OR, PA, TX, VA, WA, WI

Cove’s Mission - Transforming Home Ownership

• Customers may close escrow and buy the home from Cove at

any time during the 6 year period, at the SAME PRICE Cove buys the house for today!

• Cove expands the market for Lenders and Real Estate

Professionals by buying homes TODAY

• Cove is well funded to purchase homes ranging from $150,000 to $2 Million

– $250 Million joint venture investment fund purchases

property

1. Cove currently offers its MAP in AZ, CA, CO, FL, GA, IL, MI, MN, NV, OH, OR, PA, TX, VA, WA, WI

What is the Market Opportunity ?

Source: John Burns Real Estate Consulting, LLC.

Home Ownership % is 4% below “normal”*

• Massive dislocation in home ownership rates caused by financial recession • Over 50 Million households potentially affected by tightening credit markets

Impact of Foreclosures on the Market Opportunity

Sources: CoreLogic, Zillow

Foreclosures Since 2005

Foreclosure volume has decreased since the crisis but is still above pre-crisis levels, leaving a large pool of potential MAP customers

533

718

1,286

2,330

2,825 2,872

1,888 1,837

1,362

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2005 2006 2007 2008 2009 2010 2011 2012 2013

Tth

ou

san

ds o

f H

om

es

• Have had a recent foreclosure, short sale,

bankruptcy or credit problem

• May be self-employed and need to use bank

statements to verify income

• Able to cure credit issues and qualify for a

mortgage within 6 years

Who Are MAP Customers? They are consumers that . . .

MAP Helps Customers Locked Out of Home Ownership

• Are tired of renting for both emotional and

economic reasons and ready to purchase today, if

they could

• Eager for more stability in their living situation

Who Are MAP Customers? They are consumers that . . .

MAP Helps Customers Locked Out of Home Ownership

Family Recovering from Financial Crisis

• Credit: Low to mid range

• DTI: High 40’s

• HH Income: Greater than $100K

• Purchase Price: $150K - $500K

The Professional

• Credit: Mid range

• DTI: Low 40’s

• High monthly income and capacity to pay

• Purchase Price: $750K - $2MM

The Entrepreneur

• Credit: 700+

• DTI: Low 40’s

• Limited W-2 income

• Purchase Price: $220K - $2MM

MAP’s Core Target Customers Include:

Why they don’t qualify:

• Bankruptcy coinciding with job loss or divorce

• Foreclosure • Loan modification failed

• Self-employed • Foreclosure on investment

property

• Complicated K-1 reporting

• Self-employed • Limited W-2 income • Foreclosure and/or high

DTI

Sources: Mortgage Bankers Association; US Census Bureau; Fair Isaac Corp., SBA.gov, Federal Reserve, Corelogic REAS, U.S. Courts Bankruptcy Statistics

–FICO 640

–HHI $174,000

–DTI 40%

–20% Will Cure in Year 1

–80% Will Cure in less than 3 years

Coves “Average” Customer

Customers lease and live in the home of their choice today while they seek to qualify for a mortgage to purchase the home in the future at a locked-in price

MAP Overview: Innovative “Lease and Later Own”

• Customer and Cove enter into two 6-year term agreements:

– Lease Agreement with locked-in monthly

payments*

• Not locked in lease

– Purchase Agreement with purchase price locked-

in*

• 6 years to purchase

• Escrow opened with a national title company

MAP Overview: Innovative “Lease and Later Own”

* MAP offers more than one purchase price & lease payment option; all payments are locked in for the 6-year period.

• Purchase agreement is “recorded” giving public

notice on title

– This is the next best thing to being on Title &

owning the property

• Customer can close escrow and purchase the home

from Cove at any time during the 6-year period

MAP Overview: Innovative “Lease and Later Own”

* MAP offers more than one purchase price & lease payment option; all payments are locked in for the 6-year period.

The capacity to make a down payment, capacity to

make monthly payments and to show high

probability of qualifying for a mortgage within the

next six years

MAP Customers Need Three Things To Qualify

• Down Payment –5% to deposit in escrow (held fbo

consumer)

–3% to Cove to pay the transaction fee • Monthly lease payments consistent with the

purchase price of selected home (comparable to a 30-year fixed mortgage payment with PMI)

• On path to qualify for a mortgage • “Time to cure/season”

MAP Customers Need Three Things To Qualify

16

Typical $300,000 Cove Transaction 5% Deposit, Fixed Rent & Purchase Price

17

Typical $400,000 Cove Transaction 5% Deposit, Fixed Rent & Purchase Price

The Economics and Value Proposition Projected appreciation average over 36 months

Rate 3% 6% 8% 10% 12% 15% 20% 25%

Price

300k 328 359 381 404 429 469 543 630

350k 382 418 444 471 500 547 635 735

400k 437 478 508 539 572 625 725 840

The price represents the original purchase price by Cove. The Buyers purchase price will include a 1.5% fee on the original purchase price. Rates of returns are estimates and are not guaranteed.

• Consumers get to choose their school district,

neighborhood and can customize home

• Recorded Memo of Purchase gives legal notice on

title of consumer’s intent to purchase

• Lease and purchase deposits held in FDIC insured

bank for the benefit of the consumer

MAP Gives Customers Peace of Mind, Security, Upside

• Consumer has ability to get out of the purchase

contract if needed:

o If the home is worth more than the price to

buy from Cove, the house can be sold, pay off

Cove and consumer keeps UPSIDE!

o If not, pay 3% breakup fee, get remainder of

deposit back

MAP Gives Customers Peace of Mind, Security, Upside

MAP Examples: Limited Downside, More Upside

• Customer closes escrow in year 1-6, home is then worth more than the price to buy from Cove = upside to customer • Customer has a need to get out of the contract, home is then worth more than the price to buy from Cove, customer sells house, pays off Cove = customer keeps upside

MAP Examples: Limited Downside, More Upside

• Customer has a need to get out of the contract, home is then worth less than price to buy from Cove = customer pays only 3% break-up fee, remainder of deposit returned • Housing market declines 20%, result is the same as above. • Once in the program, maximum downside is 3%.

• Real Estate Professionals

• Cove can act quickly if a lender falls out

• Cove pays all cash for purchases which

facilitates the purchase process

• Cove retains a licensed real estate agent for

SFR purchases and pays full commission

MAP: Incremental Benefits to its B2B Partners

MAP Transaction Process Steps

Approval to Shop

Offer Escrow

Cove Purchases Property

Customer Purchases Property

from Cove

Lead Origination

Lead Qualification

Application Sent

Application Received

Underwriting

Step 1 Step 2 Step 3 Step 4

Step 10

Step 5

Step 6 Step 7 Step 8 Step 9

(0 – 6 years)

• Cove has a track record of buying millions of

dollars of Single Family Residences

• Cove retains licensed real estate professionals and

does not act as its own broker

Why Trust Cove?

What Kind of Homes ???

Sample Colorado Homes

Arvada CO $520,000

Aurora CO $345,000

Erie CO $390,000

Highlands Ranch CO $420,000

Sample Nevada Homes

Las Vegas NV $200,000

Las Vegas NV $325,000

Las Vegas NV $245,000

Sample Texas Homes

Austin TX $495,000

Dickinson TX $273,000

Flower Mound TX $319,500

Frisco TX $435,240

Grand Prairie TX $341,760

Tomball TX $420,000

Sugar Land TX $295,000

Sample Arizona Homes

Queen Creek AZ $365,000

Queen Creek AZ $400,000

Glendale AZ $416,500

Chandler AZ $300,000

Gilbert AZ $423,000

Sample California Homes

Fontana CA $485,105

Temecula CA $510,000

San Diego CA $887,000

Encinitas CA $1,265,000

El Dorado Hills CA $703,193

Rancho Cucamonga CA $680,000

Sample Washington Homes

Puyallup WA $371,950

Federal Way WA $408,775

Gig Harbor WA $555,000

Camas WA $500,000

Seattle WA $354,000

Mortgage Alternative Program

Eric L. Frazier, MBA

National Sales Manager

NMLS#461807

Intercap Lending

Office: 800-261-163 x 703

Direct: 714-475-8629

[email protected]