steps to achieving thebest mortgage lending results

Dan GreenEVP Strategy, Prime Alliance

5 Steps to Achieving theBest Mortgage Lending Results

What’s Your Outlook?

We’re Bullish

Five Reasons for Optimism

30 - Year Conventional Mortgage Rate (MORTG)

Shaded areas indicate US recessions as determined by the NBER.2009 Federal Reserve Bank of St. Louis: research.stlouisfed.org

1970 1980 1990 2000 2010

Source: Board of Governors of the Federal Reserve System

[1] Rates Historically Low

[2] Home Prices Historically Low, Too

[3] Congress Passes Stimulus

[4] CU Opportunity Enormous

[5] CUs Safe, Trustworthy

Indicator 2007 2008 2009 2010

30 Year FRM 6.30% 6.00% 5.10% 5.30%

Mortgage Originations in trillions $2.30 $1.77 $1.93 $1.89

Median Home Price, existing homes $219.00 $197.70 $190.80 $194.60

Mortgage Forecast, 2007 - 2010

Indicator QI 09 QII 09 QIII 09 QIV 09

10 Year T-Bond 2.50% 2.70% 2.90% 3.10%

30 Year FRM 5.20% 5.00% 5.10% 5.20%

Mortgage Originations in billions $378 $552 $541 $463

Median Home Price, existing homes $183.90 $199.00 $195.80 $184.70

Mortgage Forecast, 2009

Indicator QI 09 QII 09 QIII 09 QIV 09

GDP -4.1 -0.1 1.5 2.5

Residential Investment -31.9 -18.6 -0.1 15.7

Consumer Prices -3.2 1.2 1.3 0.9

Unemployment 7.50% 8.10% 8.40% 8.70%

Economic Forecast Highlights

Why Mortgages?

Member Relationships

Home Loans are Profitable

“by credit unions”

Mortgage Programs Under Scrutiny

[1] Promote

Unknown Unknown

We don’t know who they are, we don’t know what they want

Save & Borrow at your CU

Three Kinds of Advertising

Known Unknown

*Real Estate Brokerage services provided by carefully selected local broker.

A Better Way to Buy and Sell a HomeLet us help you realize the dream of home ownership and/or selling your existing home.

> Cash Back Program > Dedicated Member Advocates > Credit Union Certified Real Estate Agent* > Homebuyer Privileges Package®

Let us help you realize the dream of home ownership and/or selling your existing home. Call CU Name for more details at 000.000.0000

Place CU Logo Here

We know who they are, we don’t know what they want

Known Known

We know who they are, weknow what they want

[2] Shuffle the Deck

Is the Price Right?

Secondary Market Price

Revenue

•Sales Premiums•Warehouse Spread•Servicing Value•Points•Fees

•Cost to Originate•Sales Discount•Hedge Cost•LLPA{ }

Net Income / (Loss)

Pricing Theory

Pricing Practice Part I - Revenue

+ Sales Premium: 99.1593 - 100.0 =-0.841

+ Warehouse Spread = .06678

+ Servicing Value = 1.25

+ Points = 0.00

+ Fees = 1.00 (Note Rate – Cost of funds) X 15 days

Total Revenue = 1.476

Market PricingNote Rate is 5.625%

What Constitutes the Servicing Value?

P&I Float

Prepaid Float

Escrow Float

Cross sell

Retention

Base Servicing

Pricing Practice Part II - Expense

Cost to Originate = 0.75

Sales Discount = 0.00

Hedge Cost = 0.12

Loan Level Price Adjustments = 0.25

Net Revenue = 0.356

Total Revenue = 1.476

Net Expense = 1.120

What Can We Affect?

Cost to Originate?

LLPAs?

Sales Discounts?

Hedge Cost?

Mortgage Lending is Profitable

Interest paid, first five years: >

Present Value of Interest Paid: >

Putting Members in Homes: Priceless

$14,500

$52,800

Founded by: BECU, Callahan Associates and Prime Alliance Solutions, Inc.

Interest paid, first five years: >

Present Value of Interest Paid: > $957

$2,400

Putting Members in Cars: Ordinary

Founded by: BECU, Callahan Associates and Prime Alliance Solutions, Inc.

[4] More Matter, with Less Art

[5] FHA Makes a Comeback

Low, Fixed Rates

No Gotchas

Low, Fixed Rates

Simple Origination

No Gotchas

Low, Fixed Rates

Low Down Payment

Simple Origination

No Gotchas

Low, Fixed Rates

Easier Qualification

Simple Origination

No Gotchas

Low, Fixed Rates

Low Down Payment

[6] Paperless Lending?

Paper manufacturing emits the 4TH HIGHEST LEVEL OF CARBON DIOXIDE of all manufacturers. It also consumes 390 GALLONS OF OIL PER TON OF PAPER.

The MORTGAGE INDUSTRY has a large CARBON FOOTPRINT due to our reliance on PAPER. How large is our FOOTPRINT? We use between 21,750 and 36,250 TONS of PAPER per year. The STATUE OF LIBERTY weighs just 24,634 TONS. Our PAPER usage CONSUMES between 200,000 and 340,000 BARRELS of OIL. We take a toll on TREES, too: between 370,000 and 620,000 are chopped down annually to fulfill our needs. It takes 17 TREES to produce a ton of PAPER.

Powerfully Green

CU Housing RoundTable

steps to achieving thebest mortgage lending results

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Documents

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