Map Program Presentation 11/4/2014
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Transcript of Map Program Presentation 11/4/2014
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Mortgage Alternative Program
Eric L. Frazier, MBA
National Sales Manager
NMLS#461807
Intercap Lending
Office: 800-261-163 x 703
Direct: 714-475-8629
![Page 2: Map Program Presentation 11/4/2014](https://reader034.fdocuments.net/reader034/viewer/2022042721/568ca6311a28ab186d902a38/html5/thumbnails/2.jpg)
Business Partnership Opportunity 2014
Elizabeth Shermerhorm, Business Development Manager
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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
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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
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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
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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
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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
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2005 2006 2007 2008 2009 2010 2011 2012 2013
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• 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
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• 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
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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
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–FICO 640
–HHI $174,000
–DTI 40%
–20% Will Cure in Year 1
–80% Will Cure in less than 3 years
Coves “Average” Customer
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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”
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• 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.
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• 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.
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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
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• 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
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16
Typical $300,000 Cove Transaction 5% Deposit, Fixed Rent & Purchase Price
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17
Typical $400,000 Cove Transaction 5% Deposit, Fixed Rent & Purchase Price
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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.
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• 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
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• 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
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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
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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%.
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• 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
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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)
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• 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?
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What Kind of Homes ???
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Sample Colorado Homes
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Arvada CO $520,000
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Aurora CO $345,000
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Erie CO $390,000
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Highlands Ranch CO $420,000
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Sample Nevada Homes
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Las Vegas NV $200,000
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Las Vegas NV $325,000
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Las Vegas NV $245,000
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Sample Texas Homes
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Austin TX $495,000
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Dickinson TX $273,000
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Flower Mound TX $319,500
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Frisco TX $435,240
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Grand Prairie TX $341,760
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Tomball TX $420,000
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Sugar Land TX $295,000
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Sample Arizona Homes
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Queen Creek AZ $365,000
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Queen Creek AZ $400,000
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Glendale AZ $416,500
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Chandler AZ $300,000
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Gilbert AZ $423,000
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Sample California Homes
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Fontana CA $485,105
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Temecula CA $510,000
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San Diego CA $887,000
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Encinitas CA $1,265,000
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El Dorado Hills CA $703,193
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Rancho Cucamonga CA $680,000
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Sample Washington Homes
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Puyallup WA $371,950
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Federal Way WA $408,775
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Gig Harbor WA $555,000
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Camas WA $500,000
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Seattle WA $354,000
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Mortgage Alternative Program
Eric L. Frazier, MBA
National Sales Manager
NMLS#461807
Intercap Lending
Office: 800-261-163 x 703
Direct: 714-475-8629