An introduction to the Home Ownership Accelerator ®

A smarter way to borrow. A significant opportunity to grow your business

Transcript

1. A Home Ownership Accelerator presentation for Professionals Copyright 2011, CMG Mortgage, Inc. All rights reserved. Home Ownership Accelerator , the yellow flying house logo, and other marks are registered trademarks of CMG Financial Services, Inc. Content and concepts presented here are proprietary information which is made available for the sole purpose of training and educating CMG-approved agents, and is non- transferrable, non-distributable, and may not be copied or repurposed. Any other use outside CMG approved educational efforts is unauthorized, except with the express written permission of CMG Mortgage Inc. Welcome An introduction to the Home Ownership Accelerator ® A smarter way to borrow. A significant opportunity to grow your business. CMG Financial Services
2. CMG & The Big Idea  Christopher M. George, Founder & President  Nationwide Private Mortgage Banking since 1993  2002: “All In One” and “Offset Mortgages” growing overseas  2005: Launch of the Home Ownership Accelerator® in the U.S.  2009: Established partnership with Ameriprise Bank, FSB  2009: U.S Patent awarded Bay Area company gives finance a tech-update! Logo use authorization granted to CMGFS
3. Outlook CMG Financial Services Total Mortgage Originations  2011: A 22% decline in origination is expected from Q3 to Q4  2011 -2013: expected annual volume is $1 trillion (2000 levels) Source: FNMA July 2011 Outlook, Inside Mortgage Finance April 2011
4. Emerging Anti-Mortgage Market CMG Financial Services - Barry C, President, A.F.C.  Mortgage debt is viewed as the #1 obstruction to financial security  Nearly 70% make pay-down a primary financial goal authorization granted to cmgfs.com The Home Ownership Accelerator fits into my business regardless of rates. Source: FNMA June 2011 National Housing Survey Results, “surveying the Aftermath of the Storm – Federal Reserve reported on by CNN Money 70% 48 million mortgaged households
5. Mortgage Payment Living Expenses Savings CMG Financial Services Mortgage 40-50% Source: Independent CMGFS sponsored research / not for distribution Life vs. Mortgage  Mortgage debt consumes an enormous amount of your client’s disposable income  There’s no better place to farm savings
6. Rate vs. Interest 8.04% 6.97% 6.54% 5.83% 5.84% 5.87% 6.41% 6.34% 6.03% 5.04% 4.69% $2T $6T $10T $14T Source: Federal Reserve, U.S. Census, Freddie Mac http://www.federallreserve.gov/econresdata/releases/mortoutstand/current.htm U.S. mortgage debt still exceeds $10 Trillion CMG Financial Services  Despite low rates, mortgage debt remains at astronomical levels
7. Rate 30yr Cost ea. $10 Interest 1st 4.50% $8.20 14.8 yrs 4.75% $8.80 15.3 yrs 5.00% $9.30 16.3 yrs 5.25% $9.90 16.9 yrs CMG Financial Services Conventional Product Expense  80% of the market mortgages for 30 years or longer  Low rates are inhibited by lengthy terms  More than $10 Trillion still outstanding
8. Principal (Balance) Interest Start End CMG Financial Services Conventional Product Design $  The average lifespan of a mortgage in the U.S. is merely 5 years  Who’s benefiting most by your client’s money? $ Start End
9. CMG Financial Services Home Ownership Accelerator®  Savings complete control of the amortization of interest fees  Flexibility access to home equity without refinancing for 30 years  Security accelerates all financial goals to better prepare for the future I love the control & flexibility The Accelerator has given us. - Matt & Karen F.
10. Home Loan Largest Cost Smaller Loan Cost Reduction $ $ Save mortgage interest at the % rate of the loan Checking Account Largest Asset Withdrawals for Expenses Deposits pay Principal CMG Financial Services  Borrowing and banking in one account: ATM cards, checks & bill-pay Home Ownership Accelerator®
11. CMG Financial Services Comparison Household Net Income: $96,000 annually Total Expenses: $85% Mortgage: $300,000 Interest Rate: 4.5% Term: 30 Years Budgeted Payment: $1520 mo Alternative: Home Ownership Accelerator Interest Rate: 3.5% (1 mo libor + margin) Libor Assumption: Increase to historical average Budget
12. Mo 2 $300,000 $298,810 Payment Payment Mo 1 Mo 3 Payment Expense: $4560 Interest: $3362 Principal: $1198 CMG Financial Services Conventional Mortgage  Interest fees are computed on the monthly balance  The bank dictates the balance
13. $300,000 $292,688 Deposit Deposit Deposit Expenses Expenses Expenses Mo 1 Mo 2 Mo 3 Liquid Equity Interest: $2522 Principal: $7312 Saved: $840 Previous mortgage payment amount & any residual left over remain as equity CMG Financial Services  Deposits sweep into the balance (12am CST) daily  Interest fees are calculated on the average daily balance Home Ownership Accelerator®
14. Home Ownership Accelerator ® Conventional Mortgage 5 year: $110,314 equity Pay-Off: 11.1 years Interest Cost: $118,490 Interest Saved: $128,752 (52%) Cost of Funds: $3.95 ea $10 30yr eff. APR: 2.97% 5th year: $26,522 equity Pay-Off: 30 years Interest Cost: $247,221 Overpaid: $93,583 Cost of Funds: $8.20 ea $10 30yr APR: 4.5% CMG Financial Services Results
15. Accelerator Mortgage CMG Financial Services 18.9 yrs Left to Pay Paid Off 11. years Post Pay-Off Opportunity $3000 mo Investable  Eliminating mortgage debt has an immediate & lasting effect on monthly cash-flow
16.  CMG Client Liaison assigned to each account holder (Private-banking attention)  Ameriprise Bank, FSB services account: www.ameriprise.com CMG Financial Services Servicing Statements and Record Keeping  Transactional summary  Equity availability  Balance reduction  Monthly interest calculation  Online history
17. Program Allowances  700 credit  Loans to $2.5 Million  Up to 80% LTV  Purchase, Rate/Term and Cash-Out  Primary residences, 2nd hm. on exception CMG Financial Services Highlights Index, Margins & Term  1 mo. LIBOR: .18%  3.35% (1.00)  3.10% (.375)  2.85% .250  30 yr. line of credit  $4 Billion funded  Average monthly balance reduction: 1%  ZERO delinquencies since 2009  New client referred business: 4 per closed transaction margin reductions up to .45%
18. CMG Financial Services Critical Next Steps Other Resources  www.hoasimulator.com  www.cmgbanking.com  Step 1: www.homeownershipaccelerator.com get “Accelerator Certified”  Step 2: Schedule an appointment to get introduced to the Interactive Simulator
19. CMG Financial Services Thank You Expand your business with the Home Ownership Accelerator ® A smarter way to borrow. A significant opportunity to grow your business. A Home Ownership Accelerator presentation for Professionals Copyright 2011, CMG Mortgage, Inc. All rights reserved. Home Ownership Accelerator , the yellow flying house logo, and other marks are registered trademarks of CMG Financial Services, Inc. Content and concepts presented here are proprietary information which is made available for the sole purpose of training and educating CMG-approved agents, and is non- transferrable, non-distributable, and may not be copied or repurposed. Any other use outside CMG approved educational efforts is unauthorized, except with the express written permission of CMG Mortgage Inc.
20. How LIBOR Works Back in the mid-1980's, the international banking system adopted LIBOR as a much needed benchmark for short-term, interbank loans. The LIBOR rates are now globally recognized indexes used for pricing many types of consumer and corporate loans, debt instruments and debt securities across the globe. LIBOR is the average interest rate charged when banks in the London interbank money market borrow unsecured funds from each other. There are many different LIBOR rates (maturities range from overnight to 12 months) for numerous currencies, including Eurodollars. A Eurodollar is an American dollar on deposit in any bank outside the United States, and is therefore not subject to regulation by the U.S. Federal Reserve. LIBOR rates are fixed every UK business day by the international media company Thomson Reuters, in association with the British Bankers' Association (BBA), a not-for-profit trade association. Just before 11:00 a.m. GMT, the BBA polls a specific panel of highly reputable, high-volume banks which participate in the London wholesale money market. The BBA finds out the rate at which each bank on the panel could borrow Eurodollars from other banks, for specific maturities. The BBA figures out the central tendency -- the interquartile mean -- for each maturity, then publishes these rates at about 11:30 a.m. GMT. Three American banks are included in the panel surveyed by the BBA for Eurodollar fixing: Citibank, Bank of America and JP Morgan Chase. There are also 13 non-U.S. banks surveyed for Eurodollar fixing in London, bringing the total Eurodollar panel count to 16. To get the interquartile mean for each maturity, the BBA starts with the 16 rates, discards the four lowest and four highest rates, then determines the average of the remaining 8 rates. • Will we see Carter-era rates? Very doubtful. Now more countries are all competing on the global market, which is far more robust, minimizing the chance that domestic interest rates will ever reach those stratospheric levels again. • Inflation? Tight labor markets and wage growth, 9.7% unemployment, and idle factories with plenty of inventory means we're not likely to see any measurable move with the Fed Funds Target Rate or 1 month Libor rates for "an extended period of time." • How does the 1 month LIBOR move? Mortgage rates move with MBS pricing in the short term, but the market for MBS is absolutely connected to the larger debt market. The Fed only meets about 6 times annually and when they do move the target rate up they do it by 25 bps on average. The average rate of increase since the early 90's is only +1.45% per year, or +12 basis points per month. The average duration of the last 3 rising rate trends is 26 months. So looking at history, the facts are that rates move up at a gradual pace following inflationary driven monetary policy. (see graphs below) • Low Rate vs. Low Balance Reducing what you owe is a bigger hedge to interest costs. Reducing rate on an amortized loan is may reduce your monthly payment, but has a significantly less effect than focusing on lowering your balance. • Example: a 15 year fixed at 9% or a 30 year fixed at 5% both at $400,000 - the 15 year fixed would save about $43,000 in interest and 15 years. Rate has the least to do with saving time and money.
21. 1 month LIBOR vs. 30 year Fixed Rates (through Oct. 2009) 1 month LIBOR vs. Fed Funds vs. PRIME (through Mar. 2010) How LIBOR Works