What You Should Know About Home Equity Lines of Credit and Important Terms of FlexEquity SM

Transcription

1 What You Should Know About Home Equity Lines of Credit and Important Terms of FlexEquity SM Effective March 1, 2008

2 The Housing Financial Discrimination Act of 1977 Fair Lending Notice It is illegal to discriminate in the provision of or in the availability of financial assistance because of the consideration of: 1. trends, characteristics, or conditions in the neighborhood or geographic area surrounding a housing accommodation, unless the financial institution can demonstrate in the particular case that such consideration is required to avoid an unsafe and unsound business practice; or 2. race, color, religion, sex, marital status, national origin, or ancestry. It is illegal to consider the racial, ethnic, religious, or national origin composition of a neighborhood or geographic area surrounding a housing accommodation or whether or not such composition is undergoing change, or is expected to undergo change, in appraising a housing accommodation or in determining whether or not, or under what terms and conditions, to provide financial assistance. These provisions govern financial assistance for the purpose of the purchase, construction, rehabilitation, or refinance of one- to four-unit family residences occupied by the owner and for the purpose of the home improvement of any one- to four-unit family residence. If you have questions about your rights, or if you wish to file a complaint, contact the management of this financial institution, or: Office of the Comptroller of the Currency Customer Assistance Group 1301 McKinney Street, Suite 3450 Houston, TX (800)

3 CONSUMER HANDBOOK ON HOME EQUITY LINES OF CREDIT What You Should Know About Home Equity Lines of Credit. More and more lenders are offering home equity lines of credit. By using the equity in your home, you may qualify for a sizable amount of credit, available for use when and how you please, at an interest rate that is relatively low. Furthermore, under the tax law depending on your specific situation you may be allowed to deduct the interest because the debt is secured by your home. If you are in the market for credit, a home equity plan may be right for you, or perhaps another form of credit would be better. Before making a decision, you should weigh carefully the costs of a home equity line against the benefits. Shop for the credit terms that best meet your borrowing needs without posing undue financial risk, and remember, failure to repay the amounts you ve borrowed, plus interest, could mean the loss of your home. What is a Home Equity Line of Credit? A home equity line is a form of revolving credit for which your home serves as collateral. Because the home is likely to be a consumer s largest asset, many homeowners use their credit lines only for major items such as education, home improvements, or medical bills, and not for day-to-day expenses. With a home equity line, you will be approved for a specific amount of credit, i.e., your credit limit, which is the maximum amount you may borrow at any one time under the plan. Many lenders set the credit limit on a home equity line by taking a percentage (for example, 75%) of the home s appraised value and subtracting the balance owed on the existing mortgage. For example: Appraisal of home $100,000 Percentage x 75% Percentage of appraised value $75,000 Less mortgage debt -$40,000 Potential credit line $35,000 In determining your actual credit limit, the lender also will consider your ability to repay by looking at your income, debts and other financial obligations as well as your credit history. Many home equity plans set a fixed period during which you can borrow money, such as 10 years. At the end of this Draw Period you may be allowed to renew the credit line. 2 If your plan does not allow renewals, you will not be able to borrow additional money under this particular line of credit once the period has ended. Some plans may call for payment in full of any outstanding balance at the end of the period. Others may allow repayment over a fixed period (the Repayment Period ), for example 10 years. Once approved for a home equity line of credit, you will most likely be able to borrow up to your credit limit whenever you want. Typically, you will use special checks to draw on your line. Under some plans, borrowers can use a credit card or other means to draw on the line. There may be limitations on how you use the line. Some plans may require you to borrow a minimum amount each time you draw on the line, for example $300, and to keep a minimum amount outstanding, i.e., a minimum amount drawn on the line of credit. Some plans may also require that you take an initial advance when the line is set up. What Should You Look for When Shopping for a Plan? If you decide to apply for a home equity line of credit, look for the plan that best meets your particular needs. Read the credit agreement carefully and examine the terms and conditions of various plans, including the Annual Percentage Rate ( APR ) and the costs of establishing the plan. The APR for a home equity line is based on the interest rate alone and will not reflect the closing costs and other fees and charges, so you ll need to compare these costs, as well as the APRs, among lenders. Interest Rate Charges and Plan Features. Home equity lines of credit typically involve variable rather than fixed interest rates. The variable rate must be based on a publicly available index such as the prime rate published in some major daily newspapers, or a U.S. Treasury bill rate. The interest rate for borrowing under the home equity line changes, mirroring fluctuations in the value of the index. Most lenders cite the interest you will pay as the value of the index at a particular time, plus a margin, such as two percentage points. Because the cost of borrowing is tied directly to the value of the index, it is important to find out what index is used, how often the value of the index changes, and how high it has risen in the past, as well as the amount of the margin. Lenders sometimes offer a temporarily discounted interest rate for home equity lines a rate that is unusually low and may last for only an introductory period, such as six months. Variable rate plans secured by a home must, by law, have a ceiling (or cap) on how much the interest rate may increase 3

4 over the life of the plan. Some variable rate plans limit how much the payment may increase and how low the interest rate may fall if interest rates drop. Some lenders allow you to convert from a variable rate to a fixed rate during the life of the plan, or to convert all or a portion of your line to a fixed term installment loan. Plans generally permit the lender to freeze or reduce the credit line under certain circumstances. For example, some variable rate plans may not allow you to draw additional funds during a period in which the interest rate reaches the cap. Costs of Establishing and Maintaining a Home Equity Line. Many of the costs of setting up a home equity line of credit are similar to those you pay when you buy a home. For example: A fee for a property appraisal, to estimate the value of your home; An application fee, which may not be refunded if you are turned down for credit; Up-front charges, such as one or more points (one point equals one percent of the credit limit); and Closing costs, including fees for attorneys, title search, and mortgage preparation and filing; property and title insurance, and taxes. In addition, you may be subject to certain fees during the plan period, such as annual membership or maintenance fees, and a transaction fee every time you draw on the credit line. You could find yourself paying hundreds of dollars to establish the plan. If you were to draw only a small amount against your credit line, those initial charges would substantially increase the cost of the funds borrowed. On the other hand, because the lender s risk is lower than for other forms of credit because your home serves as collateral, annual percentage rates for home equity lines are generally lower than rates for other types of credit. The interest you save could offset the costs of establishing and maintaining the line. Moreover, some lenders waive some or all of the closing costs. How Will You Repay Your Home Equity Plan? Before entering into a plan, consider how you will pay back the money you borrow. Some plans set minimum payments that cover a portion of the principal (the amount you borrow), plus accrued interest. But (unlike the typical installment loan) the portion that goes toward principal may not be enough to repay the principal by the end of the term. Other plans may allow payments of interest alone during the life of the plan, which means that you pay nothing toward the principal, until the plan ends. If you borrow $10,000, you will owe that amount when the plan ends. Regardless of the minimum payment required, you may choose to pay more and many lenders offer a choice of payment options. Many consumers choose to regularly pay down the principal as they do with other loans. For example, if you use your line to buy a boat, you may want to pay it off as you would a typical boat loan. Whatever your payment arrangements during the life of the plan whether you pay some, a little, or none of the principal amount of the loan when the plan ends you may have to pay the entire balance owed, all at once. You must be prepared to make this balloon payment by refinancing it with the lender, by obtaining a loan from another lender, or by some other means. If you are unable to make the balloon payment, you could lose your home. If your plan has a variable interest rate, your monthly payments may change. Assume, for example, that you borrow $10,000 under a plan that calls for interest-only payments. At a 10% interest rate, your monthly payments would be $ If the rate rises over time to 15%, your monthly payments will increase to $ Similarly, if you are making payments that cover interest plus some portion of the principal, your monthly payments may increase unless the agreement calls for keeping payments the same throughout the plan period. If you sell your home, you will probably be required to pay off your home equity line in full immediately. If you are likely to sell your home in the near future, consider whether it makes sense to pay the up-front costs of setting up a line of credit. Also keep in mind that renting your home may be prohibited under the terms of the agreement. Lines of Credit vs. Traditional Second Mortgage Loans. If you are thinking about a home equity line of credit, you might also want to consider a traditional second mortgage loan. A second mortgage provides you with a fixed amount of money repayable over a fixed period. In most cases, the payment schedule calls for equal payments that will pay off the entire loan within the loan period. You might consider a second mortgage instead of a home equity line if, for example, you need a set amount for a specific purpose, such as an addition to your home. 4 5

5 In deciding which type of loan best suits your needs, consider the costs under the two alternatives. Look at both the APR and other charges. Do not, however, simply compare the APRs, because the APRs on the two types of loans are figured differently: The APR for a traditional second mortgage takes into account the interest rate charged plus points and other finance charges. The APR for a home equity line of credit is based on the periodic interest rate alone. It does not include points or other charges. Disclosures from Lenders. The federal Truth in Lending Act requires lenders to disclose the important terms and costs of their home equity plans, including the APR, miscellaneous charges, the payment terms, and information about any variable rate feature and in general, neither the lender nor anyone else may charge a fee until after you have received this information. You usually get these disclosures when you receive an application form, and you will get additional disclosures before the plan is opened. If any term other than a variable rate feature changes before the plan is opened, the lender must return all fees if you decide not to enter into the plan because of the change. When you open a home equity line, the transaction puts your home at risk. If the home involved is your principal dwelling, the Truth in Lending Act gives you three days from the day the account was opened to cancel the credit line. This right allows you to change your mind for any reason. You simply inform the lender in writing within the three-day period. The lender must then cancel its security interest in your home, if any, and return all fees, including any application and appraisal fees, paid to open the account. GLOSSARY Annual Membership or Maintenance Fee. An annual charge for having the line of credit available. This is charged regardless of whether or not the line is used. Annual Percentage Rate (APR). The cost of credit on a yearly basis expressed as a percentage. Application Fee. Fees that are paid upon application. May include charges for property appraisal and a credit report. Balloon Payment. A lump-sum payment that may be required when the plan ends. Cap. A limit on how much the variable interest rate may increase during the life of the plan. 6 Closing Costs. Fees paid at closing, including attorneys fees, fees for preparing and filing a mortgage or deed of trust, fees for title search, taxes, and insurance. Credit Limit. The maximum amount that may be borrowed under the home equity plan. Equity. The difference between the fair market value (appraised value) of the home and the outstanding mortgage balance. Index. Published rate that serves as a base for the interest rate charged on a home equity line and also as the base for changes used by the lender. Interest Rate. The periodic charge, expressed as a percentage, for use of credit. Margin. The number of percentage points the lender adds to the index rate to determine the annual percentage rate. Minimum Payment. The minimum amount that you must pay (usually monthly) on your account. Under some plans, the minimum payment may cover interest only and under others it may include both principal and interest. Points. One point is equal to one percent of the amount of the credit line. Points must usually be paid at closing and are in addition to monthly interest. Security Interest. An interest that a lender takes in the borrower s property to ensure repayment of a debt. Transaction Fee. A fee charged each time you draw on your credit line. Variable Rate. An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly. Where to Go for Help. The following Federal agency is responsible for enforcing the federal Truth in Lending Act, the law that governs credit term disclosure for home equity lines of credit. Any questions concerning compliance with the Act by a National Bank should be directed to: Office of the Comptroller of the Currency Customer Assistance Group 1301 McKinney Street, Suite 3450 Houston, TX (800)

6 CHECKLIST Ask your lender to help fill out this checklist: Basic Features Plan A Plan B Fixed Annual Percentage Rate... Variable Annual Percentage Rate... Index Used and Current Value... Amount of Margin... Frequency of Rate Adjustments... Amount/Length of Discount (if any).. Interest Rate Cap and Floor... Length of Plan Draw Period... Repayment Period... Initial Fees Appraisal Fee... Application Fee... Up-front Charges, Including Points... Closing Costs... Repayment Terms During the Draw Period Interest and Principal Payments... Interest Only Payments... Fully Amortizing Payments... When the Draw Period Ends Balloon Payment?... Renewal Available?... Refinancing of Balance by Lender?... IMPORTANT TERMS OF FLEXEQUITY SM This disclosure contains important information about FlexEquity (the Account ). Please read carefully and retain a copy for your records. 1. Availability of Terms for FlexEquity All of the terms described below are subject to change. If these terms change (other than the Annual Percentage Rate) and you decide, as a result, not to enter into an agreement with us, you are entitled to a refund of any fees you paid to us, or anyone else, in connection with your application. 2. Security Interest We will take a deed of trust on your home. You could lose your home if you do not meet the obligations in your agreement with us. 3. Possible Actions We Can Take (a) Termination We can terminate your Account, require you to pay us the entire outstanding balance in one payment, or we can take other lesser action, such as starting the Repayment Period early and charge you certain fees if: (i) you engage in fraud or material misrepresentation in connection with the Account; (ii) you do not meet the repayment terms of the Account; (iii) your action or inaction adversely affects your home, or our rights in your home. (b) Suspension We can temporarily suspend credit privileges for your Account, refuse to make additional extensions of credit, or reduce your credit limit if: (i) the value of your home declines significantly below the appraised value of the appraisal obtained when the Account was opened; (ii) we reasonably believe you will not be able to meet the repayment requirements for the Account due to a material change in your financial circumstances; (iii) you are in default of a material obligation in the FlexEquity Agreement; (iv) government action (a) prevents us from imposing the Annual Percentage Rate provided for in the FlexEquity Agreement, or (b) impairs our security interest in your home such that the value of our interest in your home is less than 120 percent of the credit limit; (v) a regulatory agency has notified us that continued advances would constitute an unsafe and unsound practice; or (vi) the maximum Annual Percentage Rate is reached. 8 9

7 Upon your request, we will provide you with more specific information about when we can take these actions. 4. Type of Account FlexEquity is a commitment by us to make available credit for an amount not to exceed the credit limit assigned when the Account is established. The Account consists of two periods of time; a 120-month period during which, subject to the terms of the FlexEquity Agreement, credit advances may be obtained (referred to as the Draw Period ), followed by a 240-month period, or such shorter period as you select, during which time credit advances can no longer be obtained and any amounts remaining outstanding at the end of the Draw Period must be repaid in substantially equal payments (referred to as the Repayment Period ). During the Draw Period, the outstanding balance of your Account will be subject to a Finance Charge at a variable interest rate (the Variable Rate Plan ). You may, however, subject to applicable provisions of the FlexEquity Agreement, transfer all or a portion of the outstanding balance of the Account from the Variable Rate Plan to up to four (4) fixed-interest-rate, fixed-term, fully amortizing loans (referred to as the Fixed Rate Option Plan(s) ). During the Draw Period, by repaying amounts advanced on the Account, those repaid amounts become available to you again under the Variable Rate Plan unless: (a) an Event of Default has occurred; (b) we exercise our rights to cancel the FlexEquity Program, or your Account; or (c) you exercise your rights to cancel your Account. 5. Minimum-Payment Requirements (a) Draw Period Minimum Payments During the Draw Period, payments must be made each month there is a balance on your account. The Minimum Monthly Payment is the amount of the Finance Charge assessed on the Account during the statement cycle, plus past due amounts, if any, or $100, whichever is greater. Different calculations apply for any balance which has been transferred to up to four (4) Fixed Rate Option Plans. Paying only the Minimum Monthly Payment during the Draw Period in most cases will not reduce the principal that is outstanding on the Account. (b) Repayment Period Minimum Payments During the Repayment Period no further credit advances can be obtained. Payments must be made each month when due. The unpaid principal balance of your Account will be amortized to a monthly payment in an amount sufficient to repay such unpaid principal balance, including unpaid charges and fees, if any (as of the Draw Period Expiration Date) plus interest, in substantially equal payments within the Repayment Period assuming your payments will be made as scheduled. 6. Minimum-Payment Example Assume you took a single $10,000 advance at the beginning of the Draw Period and you took no other credit advances on your Account. Also assume you paid only the Minimum Monthly Payment (of the interest due for the statement cycle or $100, whichever was more) during the entire Draw Period. There would be no reductions made in the outstanding principal balance of your Account for payments made during the Draw Period, except for any principal reductions included in $100 minimum payments that exceeded the amount of the interest due in the billing cycle. It would take a total of 360 payments to repay the $10,000. During the period from that initial $10,000 advance until the Maturity Date for the Account (30 years later), your payments would be as follows: For the Draw Period, if the ANNUAL PERCENTAGE RATE was 5.61% (the APR for a FlexEquity Account with a loan-to-value of 80% or less as of March 1, 2008) and assuming the APR remained the same throughout the entire 10 years of the Draw Period and for the Repayment Period if the ANNUAL PERCENTAGE RATE was 5.73% (the APR as of March 1, 2008) and assuming the APR remained the same throughout the entire Repayment Period, which for this example we used 20 years, you would make 120 payments of $ followed by 240 payments of $ Fees and Charges To open and maintain a FlexEquity Account, you must pay the following fees: Accounts over $500,000: If you request an Account in an amount exceeding $500,000, you must pay certain fees to third parties to open the Account. These fees generally total between $350 $1200 or more. Upon your request, we will provide you an itemization of the fees you will have to pay to third parties. 8. Property Insurance We require that the property securing the FlexEquity Account be insured. Ask us about our insurance requirements

8 9. Minimum Draw Requirement The minimum credit advance that you can request is $ Tax Deductibility You should consult a tax advisor regarding the deductibility of interest and charges for FlexEquity. 11. Variable-Rate Feature FlexEquity has variable-rate features, and the Annual Percentage Rate (corresponding to the daily periodic rate) and the Minimum Monthly Payment can change as a result. The Annual Percentage Rate includes only interest and no other costs. (a) Draw Period Rate Changes and Index During the Draw Period, the Annual Percentage Rate for the Variable Rate Plan can change each month using a formula set forth in the FlexEquity Agreement based upon changes in an Index. During the Draw Period, the Index is the weekly average for the one-month negotiable Certificate of Deposit in the secondary market, published by the Federal Reserve Board of Governors in Federal Reserve Statistical Release H.15. We use the Index most recently published and in effect as of the Sunday immediately preceding your statement date. The Annual Percentage Rate is adjusted on the first day of each statement cycle based on the then current Index plus a margin value established at the time your Account is opened. (b) Repayment Period Interest Rate and Index The Annual Percentage Rate can also change on the first day of the Repayment Period (from the Annual Percentage Rate in effect on the last day of the Draw Period), using an Index based on a formula in your FlexEquity Agreement. The Index used to determine the Annual Percentage Rate for the Repayment Period is the monthly average yield on United States Treasury Securities, adjusted to a constant maturity of five (5) years, published by the Federal Reserve Board of Governors in Federal Reserve Statistical Release H.15. We use the Index most recently published and in effect as of the Sunday immediately preceding the Draw Period Expiration Date. The Annual Percentage Rate for the Repayment Period will be determined by taking the then current Repayment Period Index and adding a margin value established at the time you opened your Account. The result of this addition is the Annual Percentage Rate which will be your fixed interest rate for the entire Repayment Period. Ask us for the current Index values margin, and Annual Percentage Rate. After you open a FlexEquity Account, rate information will be provided on a periodic statement for each Plan for which you have a balance. 12. Maximum Rates The maximum ANNUAL PERCENTAGE RATE that can apply to your Account is 7% above the Initial Interest Rate established when your Account is opened. The interest throughout the entire life of your Account (Draw Period, Repayment Period, or any Fixed Rate Option period) cannot increase above the Maximum Rate. Apart from the Maximum Rate cap, there is no limit on the amount by which the rate can change during any one period. 13. Maximum Rate and Payment Examples Assume the ANNUAL PERCENTAGE RATE equaled the Maximum Rate of 12.61%, based upon 7%, plus an Initial Interest Rate of 5.61% (the APR for a FlexEquity Account with a loan-to-value of 80% or less as of March 1, 2008) and you had an outstanding balance of $10,000. Your Minimum Monthly Payment during the Draw Period would be $ The Maximum Rate could be reached during the first month of the Draw Period. Assuming the same Maximum Rate and an outstanding balance of $10,000, your Minimum Monthly Payment during the Repayment Period would be 240 payments of $ (principal and interest). The Maximum Rate could be reached during the first month of the Repayment Period. 14. Historical Example We offer options which exceed 80% loan-to-value for the FlexEquity Account. These options are priced based on our risk, using an increased spread when property used as collateral for the FlexEquity Account has a loan-tovalue above 80% based on a property appraisal and total loans against the property. The following table is based on our FlexEquity account, with a maximum 80% loan-to-value. The following table shows how the Annual Percentage Rate and the monthly payments for a single $10,000 credit advance would have changed based on changes in the indices over the past 15 years. For the Draw Period, the Index values used in the table are for the Certificate of Deposit Index (described in 11(a) as of March 1 of 12 13

9 each year). For the Repayment Period, your fixed interest rate will be established by use of the United States Treasury Securities Index (described in 11(b)) as of March 1 of the year noted in the following table. Once your fixed interest rate is established it remains fixed throughout the Repayment Period and no further changes in this Index will affect your interest rate or payments. The following table assumes that no additional credit advances were taken, that only the minimum payments were made (interest-only during the Draw Period), and that the rate remained constant during each year. It does not necessarily indicate how the indices or payments will change in the future. Draw** Period Repayment Period**** Year Index Margin* Annual Minimum % (% Points) Percentage Monthly Rate Payment*** ($) * This is a margin we have used recently. ** During the Draw Period, the Annual Percentage Rate & Minimum Monthly Payment are based on the Certificate of Deposit Index (see 11(a), above). The interest rate during the Draw Period is a variable rate. *** This example reflects a Minimum Monthly Payment of the interest accrued for the billing period or $100, whichever is greater. **** During the Repayment Period and for up to four (4) Fixed Rate Option Plan balances, the interest rate is a fixed rate for the entire period. The fixed interest rate will be established by use of the United States Treasury Securities Index (described in 11(b) above). Once your fixed interest rate is established, further changes in this Index will have no effect on your interest rate or payments. 15. Fixed Rate Option Plan (a) Exercise of Option During the Draw Period, you have the option to transfer all or a portion of the outstanding principal balance from the Variable Rate Plan of your Account to up to four (4) Fixed Rate Option Plans. This option can only be exercised once in every 365-day period. 14 (b) Fixed Rate Option Minimum Payments Payments must be made each month, when due, on any outstanding Fixed Rate Option Plans. Your Fixed Rate Option Plan balances will be amortized to a monthly payment in an amount sufficient to repay up to the balance transferred in substantially equal payments of principal and interest over a period of 240 months, or such shorter period as you select from the initial Fixed Rate Option Transfer Dates. If you subsequently transfer balances to the Fixed Rate Option Plan, you may choose to have the sum of the new balance transferred plus the balance then outstanding under the Fixed Rate Option Plan reamortized to a new monthly payment in an amount sufficient to repay such new balance in substantially equal payments of principal and interest over 240 months, or such shorter period as you select, beginning on each subsequent Fixed Rate Option Transfer Date, or you may choose to have the balance transferred to a new Fixed Rate Option Plan (up to four (4) Fixed Rate Option Plans) and the new balance amortized to a monthly payment in an amount sufficient to repay such balance in substantially equal payments of principal and interest over 240 months or such shorter period as you select. (c) Minimum Payment Example If you made a single $10,000 balance transfer to a Fixed Rate Option Plan, and made no other balance transfers during the term of your Account, and you paid only the Minimum Monthly Payment (scheduled principal and interest), it would take a total of 240 payments to repay the $10,000 (assuming you selected a 240-month term for your Fixed Rate Option Plan). If the ANNUAL PERCENTAGE RATE was 5.73% (the APR as of March 1, 2008), and assuming the Annual Percentage Rate remained the same throughout the entire 20 years, you would make 240 payments of $ (d) Variable Rate Feature The Annual Percentage Rate and the Minimum Monthly Payment can change each time you exercise your option to convert to up to four (4) Fixed Rate Option Plans. (e) Determination of Rate The Annual Percentage Rate for the Fixed Rate Option Plan can change on each balance transfer 15

10 date (each time you exercise your option to transfer to a Fixed Rate Option Plan). Using an Index, changes will be based on a formula set forth in your FlexEquity Agreement. If the interest rate changes, there will also be a corresponding change in the Annual Percentage Rate and your monthly payment. Once the interest rate for the Fixed Rate Option Plan is established, it remains the same until: (i) you combine any outstanding Fixed Rate Option Plan balance into a new Fixed Rate Option Plan; (ii) your balance is re-amortized at the end of the Draw Period; or (iii) your Fixed Rate Option Plan balance is paid in full, whichever occurs first. The Index used to determine the rate for the Fixed Rate Option Plan is the monthly average yield on United States Treasury Securities, adjusted to a constant maturity of 5 years, published by the Federal Reserve Board of Governors in Federal Reserve Statistical Release H.15. We use the Index most recently published and in effect as of the Sunday immediately preceding the related balance transfer date. On each balance transfer date we take the then current rate for the Fixed Rate Option Plan Index and add a margin value established at the time you opened your Account. The result of this calculation gives us the interest rate for your Fixed Rate Option Plan. any of your existing Fixed Rate Option Plans. Any Variable Rate Plan balance outstanding as of the Draw Period Expiration Date must be transferred to a Fixed Rate Option Plan balance and amortized to a monthly payment consisiting of principal and interest in amounts sufficient to repay the balance over the Repayment Period (240 months or such shorter period as you select). Ask us for the current Index values, margin, and Annual Percentage Rate applicable to the Fixed Rate Option Plan. After you open a FlexEquity Account, rate information will be provided on the periodic statements that we send to you. (f) Maximum Rate and Payment Example If the ANNUAL PERCENTAGE RATE during the Fixed Rate Option Plan equaled the 12.61% maximum (based upon 7%, plus an Initial Interest Rate of 5.61%, the APR as of March 1, 2008) and you had an outstanding balance of $10,000, your Minimum Monthly Payment would be 240 payments of $ This Annual Percentage Rate could be reached during the first month of the Fixed Rate Option Plan. (g) Amortization Options at End of Draw Period Upon the Draw Period Expiration Date, you have options for re-amortizing any Fixed Rate Option Plan balances outstanding at that time, or you may continue to make your payments as scheduled under 16 17

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