When you apply for EquityChoice, we use an independent 3rd party appraiser to estimate the value of the home (referred to as Appraised Value). To account for market volatility and naturally occurring appraisal variance, the Appraised Value will be reduced by generally 5% to establish the home’s Initial Agreed Value which will be used as the starting point for calculating the future appreciation.

In order to determine the amount of appreciation you will owe at time of payment (partial prepayment or a Maturity Event), we look to the Index to calculate what we refer to as Indexed Shared Appreciation.

Specifically, to calculate the Indexed Shared Appreciation we will:

• refer to the current Index value published for your Note Date at time of payment, which is the Initial Index
• compare the Initial Index to the most recently published Index value prior to payment date. This determines the Index Change Percentage
• multiply the Index Change Percentage by the Appraised Value, the result of which when added to the Appraised Value, is the Indexed Value of your home
• subtract the Initial Agreed Value from the Indexed Value, then multiply that by your HAIS. That result is finally multiplied by the outstanding principal balance at the time of payment divided by the original principal balance to reach the Indexed Shared Appreciation amount.