Below are a few examples of how Home Price Protection® agreements would work in particular situations.
In 2008, Mr. Jones purchases a home for $300,000 and an EquityLock Home Price Protection® contract for $5,250. The local index at the time is 100. In 2011, Mr. Jones sells the home under one of the following potential scenarios:
Mr. Jones sells the home for $350,000 and the local index in his area is 105. Mr. Jones sells his home for a profit and the Home Price Protection® contract terminates with no value.
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 local index fell 10%; therefore a payment of 10% of the original purchase price is paid).
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 for the $300,000 home and $5,250 Home Price Protection® contract: