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 efrazier@intercaplending.com

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 ?

• •

Massive dislocation in home ownership rates caused by financial recession Over 50 Million households potentially affected by tightening credit markets Home Ownership % is 4% below “normal”*

Source: John Burns Real Estate Consulting, LLC.

Impact of Foreclosures on the Market Opportunity Foreclosure volume has decreased since the crisis but is still above pre-crisis levels, leaving a large pool of potential MAP customers Foreclosures Since 2005 3,500

3,000

2,825

Tthousands of Homes

2,500

2,872

2,330

1,888

2,000

1,500

1,837

1,362

1,286

1,000 718 533 500

0 2005

Sources: CoreLogic, Zillow

2006

2007

2008

2009

2010

2011

2012

2013

MAP Helps Customers Locked Out of Home Ownership Who Are MAP Customers? They are consumers that . . .

• 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

MAP Helps Customers Locked Out of Home Ownership Who Are MAP Customers? They are consumers that . . .

• 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

MAP’s Core Target Customers Include:

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

Why they don’t qualify: • Bankruptcy coinciding with job loss or divorce • Foreclosure • Loan modification failed

• Self-employed • Foreclosure on investment property

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

The Entrepreneur • Credit: 700+ • DTI: Low 40’s • Limited W-2 income • Purchase Price: $220K - $2MM

• Complicated K-1 reporting • Self-employed • Limited W-2 income • Foreclosure and/or high DTI

Coves “Average” Customer

–FICO 640 –HHI $174,000 –DTI 40% –20% Will Cure in Year 1 –80% Will Cure in less than 3 years

MAP Overview: Innovative “Lease and Later Own�

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 lockedin* • 6 years to purchase • Escrow opened with a national title company * MAP offers more than one purchase price & lease payment option; all payments are locked in for the 6-year period.

MAP Overview: Innovative “Lease and Later Own” • 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 offers more than one purchase price & lease payment option; all payments are locked in for the 6-year period.

MAP Customers Need Three Things To Qualify

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”

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

16

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

17

The Economics and Value Proposition Projected appreciation average over 36 months Rate

3%

6%

8%

10%

12%

15%

20%

25%

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

Price

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.

MAP Gives Customers Peace of Mind, Security, Upside • 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 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%.

MAP: Incremental Benefits to its B2B Partners

• 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 Transaction Process Steps Step 1

Lead Origination

Step 6

Approval to Shop

Step 2

Lead Qualification

Step 7

Offer

Step 3

Application Sent

Step 8

Escrow

Step 4

Application Received

Step 9

Cove Purchases Property

Step 5

Underwriting

Step 10

Customer Purchases Property from Cove (0 – 6 years)

Why Trust Cove? • 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

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 efrazier@intercaplending.com