LOANLINER HOME EQUITY SYSTEM

LOANLINER HOME EQUITY SYSTEM MEMBER S CHOICE TM PAYMENT PROTECTION Contents General Information.................................. 1 Credit Union Benefits.................................. 1 Member Benefits..................................... 1 Coverage Descriptions................................. 2 MEMBER S CHOICE Disability Insurance................................... 2 MEMBER S CHOICE Term Life Insurance................................... 2 Joint Coverage (Disability and Term Life)................................. 2 MEMBER S CHOICE Loan Protection Insurance.............................. 2 MEMBER S CHOICE Home Mortgage Protection............................. 3 Home Mortgage Protection II.......................................... 3 Enrollment Procedures - Disability/Term Life................ 3 Open-End LOANLINER Home Equity Plan.................................. 3 Closed-End LOANLINER Second Mortgage Loan............................. 3 Monthly Premium Report............................... 4 Subsequent Election of Payment Protection.................. 4 Payment Protection Promotion Information.................. 6 Enrollment Skill Training.............................................. 6 Print Materials..................................................... 6 When Closed-End Loans are Sold on the Secondary Market.................................. 7

Payment Protection Maximum Limitations.................. 7 Open-End Home Equity Plan........................................... 7 Closed-End Second Mortgage Loans...................................... 9

Your mortgage processing involves large sums of money for both the credit union and your members. An untimely disability or death can create a hardship for the member responsible for making the monthly payments or paying off the balance. If the member can t make the required payment, the result can be the loss of their home. For your credit union, it means taking collection activity against the member - even foreclosing on the property. CUNA Mutual and your credit union can reduce the risk of this happening. You can do so by offering CUNA Mutual s MEMBER S CHOICE TM Payment Protection to your members who take out a loan on the Home Equity System. MEMBER S CHOICE term life insurance for your loan will provide payment for the remaining balance, up to the policy maximum, on the death of the insured member or joint insured. MEMBER S CHOICE disability insurance on your loan will provide monthly payments, up to the policy maximum, for the disabled insured member or joint insured. Please check your policy for specific policy limitations. Credit Union Benefits MEMBER S CHOICE Payment Protection underwritten by CUNA Mutual will: avoid costly debt-collection action reduce delinquent and charged-off loans strengthen member relations by providing protection for larger loans at a reasonable cost reimburse administrative expenses Member Benefits MEMBER S CHOICE Payment Protection coverages benefit your members in the following ways: reduce the family s financial burden during time of loss or reduced income by reducing or paying off your member s loan balance help protect the member s credit rating and collateral are convenient and affordable products; complicated enrollment documents and physical exams are eliminated; plus, premium is included with the loan payment provide joint coverage option to protect two members signing the credit application; joint life coverage is available in all states; joint disability is available in some states Payment Protection provides your members peace of mind. General Information MEMBER S CHOICE Payment Protection 1

Coverage Descriptions Here are descriptions of the insurance coverages available from the CUNA Mutual Group. MEMBER S CHOICE Disability Insurance MEMBER S CHOICE disability insurance helps your members make monthly loan payments if a covered sickness or accident disables them. Your members pay the premiums, which can be conveniently added to their monthly loan payments. Coverage is available for both open-end advances and closed-end loans. The member is eligible for coverage, up to the policy limits, based on a working requirement, the member s age, and in some policies, the member s health. MEMBER S CHOICE Term Life Insurance MEMBER S CHOICE term life insurance helps your member feel more secure about borrowing from your credit union because this coverage can reduce or pay off an outstanding loan balance in the event of his or her death. Your members pay the premiums, which can be conveniently added to their monthly loan payments. Coverage is available for both open-end advances and closed-end loans. The member is eligible for coverage, up to the policy limits, based on the member s age, and in some policies, the member s health. Rating options, such as age-banded rates, are available for term life insurance on home equity loans. Joint Coverage (Disability and Term Life) Joint coverage is available to two members who are jointly and equally responsible for repayment of the loan. With joint term life coverage, benefits will be paid if either insured member dies, although only one benefit will be paid if both die. With joint disability coverage, benefits will be paid if either insured member is disabled, although only one benefit will be paid if both are disabled. The joint coverage options is available with term life insurance in all states and with disability insurance in many states. MEMBER S CHOICE Loan Protection Insurance MEMBER S CHOICE loan protection insurance is a group term life insurance policy designed to pay off an outstanding loan balance (up to the limits of your credit union s policy) if a member dies before his or her loan is repaid. Total and permanent disability, joint coverage, and other options are available to ensure your Loan Protection policy meets the needs of your credit union and its member. Both open-end advances and closed-end loans are covered. Premium is paid by the credit union. Please contact your CUNA Mutual Representative for more information about Loan Protection. 2 LOANLINER Home Equity System

MEMBER S CHOICE Home Mortgage Protection MEMBER S CHOICE Home Mortgage Protection (HMP) is designed to pay off your member s mortgage in event of his or her death, or make payments in the case of a covered disability. HMP is group term life and disability insurance designed for long-term (10 to 35 year), high-balance (up to $250,000) closed-end mortgage loans. Your members pay the premiums, which can be conveniently added to their monthly loan payments. Joint coverage is available. The enrollment document for this coverage is not part of the LOANLINER Home Equity Lending documents. Please contact your CUNA Mutual Representative for more enrollment information. Home Mortgage Protection II CUNA Mutual s MEMBER S CHOICE Home Mortgage Protection II offers all the benefits of standard HMP plus an attractive discount for non-tobacco users, and the credit union can choose from a 30- or 90-day waiting period on disability. Enrollment Procedures Disability/Term Life Enrolling your member in payment protection is easy because the insurance application is included in the LOANLINER Home Equity documents. Here s how to do it with the LOANLINER Home Equity documents: Open-End LOANLINER Home Equity Plan Document used: Credit Agreement and Truth in Lending Disclosure Complete the Insurance Application 1. Ask members if they want to protect their loan. Whether or not coverage is elected at the time of the advance, the member must sign the Insurance Application and check the appropriate yes or no box. 2. Member receives a copy of the Insurance Application and Insurance Certificate. If only one member is involved, provide the borrower 2 copy that includes the insurance certificate. 3. Your data processing system should be updated to indicate that payment protection was elected and the premium is to be charged each month. 4. Adjust the loan payment to cover the addition of the premium charges to the loan. 5. Monthly, you need to send the payment protection premium to CUNA Mutual. This is done with a list bill or other reporting means. Disburse the pages as indicated on the bottom of the Credit Agreement (i.e. Credit Union, Borrower 1, Borrower 2) MEMBER S CHOICE Payment Protection 3

Closed-End Home Equity Loan Document used: Note and Disclosure Statement Complete the Insurance Application 1. Ask members if they want to protect their loan. Whether or not coverage is elected at the time of the loan, the member must sign the Insurance Application and check the appropriate yes or no box. 2. Member receives a copy of the Insurance Application and Insurance Certificate. 3. Your data processing system should be updated to indicate that payment protection was elected and the premium is to be charged each month. 4. Monthly, you need to send the payment protection premium to CUNA Mutual. This is done with a list bill or other reporting means. Disburse the pages as indicated on the bottom of the Note. The copy of the insurance certificate (last page of the document) should always be given to the member. Monthly Premium Report You can report the disability and term life premiums to CUNA Mutual for home equity loans on the same report currently submitted for your consumer loan business, unless you have been issued a separate policy for home equity. Send the report, together with your appropriate premium check and computer printout or microfiche, by the fifteenth (15) of the following month, for the month in which you are reporting. Be sure to designate the month and year of the report in the space provided. Whenever questions arise concerning premium reporting procedures, please contact CUNA Mutual s Premium Services Department. Subsequent Election of Payment Protection If MEMBER S CHOICE Payment Protection was not elected by the member on the Credit Agreement (open-end) or Note (closed-end), it may be added by using the Subsequent Action document. For open-end credit and closed-end credit, the member must complete and sign the Subsequent Election for Voluntary Credit Insurance section of the Subsequent Action document to add the coverage to the entire outstanding balance. The original copy of this document goes in the credit union s file and the extra copy is given to the member. The member received a copy of the insurance certificate with the LOANLINER Credit Agreement or Note. Therefore, all disclosure requirements have been met and no other documents need to be distributed to 4 LOANLINER Home Equity System

the member for payment protection. Separate insurance certificates are provided with the Subsequent Action document for members who may have misplaced their copy. Note: If payment protection is added subsequently, the monthly payment should be increased to include the premium. Depending on the length of time since the member originally borrowed the money and if the coverage includes health questions, a Statement of Insurability may be required before coverage can be effective. A Statement of Insurability will be required if more than 30 days has passed since the disbursement of the loan or an advance and the coverage does not include health questions. If the member adds payment protection within 30 days or if the coverage includes health questions, only the Subsequent Action document needs to be completed. Process the Statement of Insurability using the following guidelines: 1. If the member checks No to all questions on the Statement of Insurability, the credit union should process the payment protection coverage. 2. If the member checks Yes to any of the questions on the Statement of Insurability, the credit union should not give the member payment protection coverage since they are not eligible. 3. A copy of the Subsequent Action document and the Statement of Insurability should be kept in the member s file. In the event of a claim, a copy of the Statement of Insurability, if it was required, will need to be submitted with the claim document to the Claims Department. If a member who answered a question with a Yes would like to continue to pursue payment protection, then the member must have an Attending Physician Statement completed. Forward the Attending Physician Statement and the Statement of Insurability to the Underwriting Department for review. The Subsequent Action document can also be used to waive or cancel coverage. If the member wishes to cancel the payment protection coverage on a LOANLINER account, the Credit Insurance Waiver section of the Subsequent Action document must be completed. If there is an unusual situation regarding the election or waiver of insurance, a letter of explanation should be sent to the Premium Services Department. Include with the letter the original LOANLINER Credit Agreement or Note, insurance certificate, loan application, Subsequent Action document (if applicable) and statements of the loan in question from the beginning to present. MEMBER S CHOICE Payment Protection 5

Payment Protection Promotion Information CUNA Mutual is prepared to provide your credit union with the correct tools for successful payment protection promotion to your members. We are ready to provide product knowledge and enrollment skill training to all employees who have the opportunity to offer payment protection. We have designed promotional print material for you to use which can help members understand the value of payment protection and let them know that you have it available. Enrollment Skill Training Trained, certified CUNA Mutual staff is ready to help your loan officers develop effective communication skills and payment protection enrollment procedures. We have a training program to help loan officers understand the basics of the payment protection coverage you offer. To build on this knowledge, our enrollment skill training programs can increase every loan officer s communication skills to effectively promote the payment protection and other credit union services. Remember to JUST ASK your members about payment protection because it s the MEMBER S CHOICE. Use the following steps when presenting payment protection to each member. 1. Describe the coverage. 2. Explain eligibility. 3. Quote the loan payment including payment protection. 4. Ask the member if he/she is eligible and would like payment protection. Keep in mind these additional tips: Determine needs - ask questions and summarize member s needs. Present features and benefits - focus on member s needs, describe benefits in terms of what this means to you is... Closing - ask for the member s commitment. Respond to member concerns - listen, ask questions, summarize objections, and respond with features and benefits. Print Materials To help your members recognize the value of payment protection; CUNA Mutual has many promotional materials you will find helpful, including posters, brochures, and statement stuffers. Place them in the lobby, at teller stations, on loan officers desks, or in member mailings to present how payment protection will benefit your members. 6 LOANLINER Home Equity System

Providing your loan officers with effective, professional promotion pieces can help them to present the coverage plus increase their ability to enroll members in the valuable payment protection. To find out more about how CUNA Mutual can help you to easily and effectively promote payment protection with the loans you make, contact your CUNA Mutual Representative. When Closed-End Loans are Sold on the Secondary Market The payment protection policy provides that the member s coverage stops when certain events occur, including when the insured s loan is transferred to a creditor other than the credit union. Some credit unions will sell closed-end second mortgage loans to the secondary market or other creditors. If the loan is sold, the payment protection coverage is terminated. IT IS THE RESPONSIBILITY OF YOUR CREDIT UNION TO NOTIFY THE MEMBER(S) THAT THE PAYMENT PROTECTION COVERAGE HAS STOPPED. However, if the credit union retains full servicing of the loans sold, they may continue the payment protection coverage on those loans. Payment Protection Maximum Limitations The following are guidelines when offering the MEMBER S CHOICE Payment Protection with home equity transactions. There are differences when you are documenting the transaction with an open-end line of credit account or on a closed-end second mortgage loan. When calculating the monthly premium, there may be times when the loan will exceed your policy maximums for the term and loan dollar amount. When this happens, you still may be able to issue partial coverage. CUNA Mutual will help you disclose and compute the appropriate premium amount. Contact CUNA Mutual s Premium Services Department at 1-800-356-2644, extension 2000. Open-End Home Equity Plan Level Rate Disability and Term Life Insurance Term Maximum: You can issue coverage regardless of the implied loan term. Partial coverage is given for disability if the implied loan term is greater than the policy maximum with coverage per disability set to the maximum. MEMBER S CHOICE Payment Protection 7

Monthly Benefit Maximum (disability only): Loan Amount Maximum: Age Maximum: You can issue coverage regardless of the monthly payment. Partial coverage is given if the monthly payment is greater than the policy maximum with the monthly benefit set to the maximum. You can issue coverage regardless of the loan amount. Partial coverage is given if the loan amount is greater than the policy maximum with coverage set to the maximum until the balance is less than the maximum. You can issue coverage on every member that is under the policy maximum. Coverage stops at the end of the month in which the member reaches the maximum age. For joint coverage, when the older member reaches the maximum age, the younger will automatically continue with single coverage. Monthly Renewable Disability Insurance Term Maximum: You can issue coverage regardless of the implied loan term. Partial coverage is given if the implied loan term is greater than the policy maximum with coverage per disability set to the maximum. Monthly Benefit Maximum: Loan Amount Maximum: Age Maximum: You can issue coverage regardless of the monthly payment. Partial coverage is given if the monthly payment is greater than the policy maximum with the monthly benefit set to the maximum. Not applicable. You can issue coverage on every member that is under the policy maximum. Coverage stops at the end of the month in which the member reaches the maximum age. For joint coverage, when the older member reaches the maximum age, the younger will automatically continue with single coverage. 8 LOANLINER Home Equity System

Closed-End Second Mortgage Loans Level Rate Disability and Term Life Insurance Term Maximum: Monthly Benefit Maximum (disability only): Loan Amount Maximum: Age Maximum: You can issue coverage when the loan term is equal to or less than the policy maximum. No coverage (full or partial) is given if the loan term exceeds the policy maximum. You can issue coverage regardless of the monthly payment. Partial coverage is given if the monthly payment is greater than the policy maximum with the monthly benefit set to the maximum. You can issue coverage regardless of the loan amount. Partial coverage is given if the loan amount is greater than the policy maximum with coverage set to the maximum until the balance is less than the maximum. You can issue coverage on every member that is under the policy maximum. Coverage stops at the end of the month in which the member reaches the maximum age. For joint coverage, when the older member reaches the maximum age, the younger will automatically continue with single coverage. Monthly Renewable Disability Insurance Term Maximum: You can issue coverage regardless of the implied loan term. Partial coverage is given if the implied loan term is greater than the policy maximum with coverage per disability set to the maximum. Monthly Benefit Maximum: Loan Amount Maximum: Age Maximum: You can issue coverage regardless of the monthly payment. Partial coverage is given if the monthly payment is greater than the policy maximum with the monthly benefit set to the maximum. Not applicable. You can issue coverage on every member that is under the policy maximum. Coverage stops at the end of the month in which the member reaches the maximum age. For joint coverage, when the older member reaches the maximum age, the younger will automatically continue with single coverage. MEMBER S CHOICE Payment Protection 9

As you can see, there are many possibilities to either fully insure a member s loan or to partially insure the loan. To receive help to fully understand the capabilities of the payment protection you offer, contact your CUNA Mutual representative or the Division Office at 1-800-333-2644. 10 LOANLINER Home Equity System