Steps to Achieving theBest Mortgage Lending Results by Prime Alliance Solutions, Inc.

6 5 Steps to Achieving the Best Mortgage Lending Results Dan Green

EVP Strategy, Prime Alliance

What’s Your Outlook?

We’re Bullish

Five Reasons for Optimism

[1] Rates Historically Low 30 - Year Conventional Mortgage Rate (MORTG) 20

(Percent)

1970

1980

1990

2000

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

Source: Board of Governors of the Federal Reserve System

2010

[2] Home Prices Historically Low, Too

[3] Congress Passes Stimulus

[4] CU Opportunity Enormous

[5] CUs Safe, Trustworthy

Economic Forecast Highlights 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%

Mortgage Forecast, 2009 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, 2007 - 2010 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

Why Mortgages?

Member Relationships

Home Loans are Profitable

Mortgage Programs Under Scrutiny “by credit unions”

[1] Promote

Three Kinds of Advertising

Unknown Unknown Save & Borrow at your CU

Three Kinds of Advertising

Known Unknown Place CU Logo Here

A Better Way to Buy and Sell a Home

Let 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

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

Three Kinds of Advertising

Known Known

[2] Shuffle the Deck

(3)

Is the Price Right?

Pricing Theory Secondary Market Price

{

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

Costs •Cost to Originate •Sales Discount •Hedge Cost •LLPA

Net Income / (Loss)

}

Pricing Practice

Part I - Revenue

Note Rate is 5.625%

Market Pricing

+ Sales Premium: 99.1593 - 100.0 =-0.841

+ Warehouse Spread =

.06678

+ Servicing Value =

1.25

+ Points =

0.00

+ Fees =

Total Revenue =

1.00

1.476

(Note Rate – Cost of funds) X 15 days 365

Retention Cross sell Fees Prepaid Float Escrow Float P&I Float Base Servicing

What Constitutes the Servicing Value?

Pricing Practice

Part II - Expense

Cost to Originate =

0.75

Sales Discount =

0.00

Hedge Cost =

0.12

Loan Level Price Adjustments =

0.25

Total Revenue =

1.476

Net Expense =

1.120

Net Revenue =

0.356

Cost to Originate?

Hedge Cost?

What Can We Affect?

LLPAs? Sales Discounts?

Mortgage Lending is Profitable

Interest paid, first five years: > $52,800

Present Value of Interest Paid: > $14,500

Putting Members in Homes: Priceless CU Housing RoundTable

ÂŠ

Credit Unions Building Community

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

Interest paid, first five years: > $2,400

Present Value of Interest Paid: >

$957

Putting Members in Cars: Ordinary CU Housing RoundTable

ÂŠ

Credit Unions Building Community

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

[4] More Matter, with Less Art

[5] FHA Makes a Comeback

[5] FHA Makes a Comeback Low, Fixed Rates

[5] FHA Makes a Comeback Low, Fixed Rates No Gotchas

[5] FHA Makes a Comeback Low, Fixed Rates No Gotchas Simple Origination

[5] FHA Makes a Comeback Low, Fixed Rates No Gotchas Simple Origination Low Down Payment

[5] FHA Makes a Comeback Low, Fixed Rates No Gotchas Simple Origination Low Down Payment Easier Qualification

[6] Paperless Lending?

Powerfully Green 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. ÂŠ 2000 - 2009 Prime Alliance Solutions, Inc. All Rights Reserved.

CU Housing RoundTable