Examples

Below are a few examples of how Home Price Protection^TM contracts would pay customers (or expire) in particular situations.

Example

In 2008 Mr. Jones purchases a home in Orlando for $300,000 and an EquityLock Home Price Protection^TM contract for $4,500. The local index at the time is 100. In 2011 Mr. Jones sells the home under one of the following potential scenarios:

• Scenario A
  Mr. Jones sells the home for $350,000 and the local index in Orlando is 105. Mr. Jones sells him home for a profit and the Home Price Protection^TM contract terminates with no value.
• Scenario B
  Mr. Jones sells the home for $290,000 and the local index has fallen to 90. EquityLock Financial pays Mr. Jones $30,000 at the time of sale (the loacl index fell 10%; therefore a payment of 10% of the original purchase price is paid).
• Scenario C
  Mr. Jones sells the home for $350,000 and the local index has fallen to 90. Mr. Jones receives a payment of $30,000, even though he did not lose money on the home. (The local index fell 10%; therefore, a payment of 10% of the original purchase price is paid.)

Below is a table summarizing the previous scenarios:

The Need: The Cyclical Real Estate Market

For most people, their home is their biggest investment. If their market crashes, so can the equity in their home and along with it, their plans for retirement, children's education, and so on.

The common perception is that real estate always appreciates. Overall, it is true that real estate tends to appreciate. But as recent events underscore, rising real estate values are not inevitable. And, even when real estate values increase overall, there are hundreds of real estate markets in the U.S. and some decline from time to time. Drops in value can be significant, reaching double digits crashes before recovering.

While the real estate market may appreciate over time, as with any investment, it involves risk. Homeowners never know when or where that market will skid. With real estate suffering an escalating roller-coaster ride, and being the cyclical and inefficient asset that it is, buyers want some protection that that their biggest investment won't crumble.

A sudden market downturn could eliminate the equity in your home, and have more far reaching financial effects, too. How would a decline in the real estate market affect your life and family? How would it affect your customer's lives and families? Would they still do business with you?