A borrower may pledge assets to offset the required down-payment. Rather than having your borrower liquidate assets, they have the option to keep their portfolio intact with their Asset Manager. They can benefit from avoiding substantial capital gains tax, their money will continue to work for them and earn interest, and their Asset Manager will be happy to refer you future clients. With pledged assets, we will lend up to $10,000,000 at 90% with no MI.

Purchase Example 1:
o $1,200,000 purchase price
o 70% = $840,000 (our max LTV) - $360,000 down payment of 30%
o 90% = $1,080,000 - $120,000 down payment of 10%
o 20% or $240,000 is the difference - this is the pledged amount of assets needed
o Loan Amount = $1,080,000 - 90% (no Mortgage Insurance)
o Down Payment = $120,000 - 10%
o Pledged Amount = $240,000 - 20%
Assets are pledged to Lender to offset $240,000 of down payment

Purchase Example 2:
o $5,000,000 purchase price
o 40% Down Payment = $2,000,000 (required by Lender Matrix)
o 10% Down Payment = $500,000 (borrower's desired down payment)
o 30% pr $1,500,000 is the difference - this is the pledged amount of assets needed as collateral
o Loan Amount = $4,500,000 - 90% (no Mortgage Insurance)
o Down Payment = $500,000 - 10%
o Pledged Amount = $1,500,000 - 30%
Refinance Example: Pledged Assets may be used for refinances as well...the concept is the same. The pledged amount is equal to the difference between the required LTV according to our lending matrix and the borrower's desired LTV, but no more than 90%.
o $3,000,000 Appraised Value
o $3,100,000 Liens - house is upside-down $100,000
o $2,700,000 Max loan amount - 90% of appraised value
o $1,800,000 is the amount Lender would normally lend - 60% of the appraised value on a refi of this size
o Loan Amount = $2,700,000 - 90% of appraised value (no mortgage insurance)
o Borrower Pays Down = $400,000 which is the liens less the new loan amount ($3,100,000 - $2,700,000)
o Pledged Amount = $900,000 which is the loan amount less our normally required LTV (2,700,000 - $1,800,000)
o If cash-equivalent assets are pledged (checking, savings, money-market, CD, etc.) then $900,000 is pledged to Lender to offset the $900,000 of LTV
o If investment assets are pledged (stocks, bonds, mutual funds, etc.) then $1,800,000 is pledged to Lender to offset the $900,000 of LTV

Advantages:
o Avoid capital gains tax - HUGE advantage - if the borrower liquidates stocks, bonds, mutual funds, etc., there is a big capital gains tax that can be avoided
o Assets continue to grow because they are still in an income bearing account earning interest or dividends, and the account continues to benefit from investment growth. Also, the borrower may sweep profits as long as the portfolio value remains intact.
o Complete flexibility to trade the assets...the borrower can continue to buy and sell stocks within the asset portfolio....
o Assets may remain at borrower's own financial institution (Lender would be added as a creditor/beneficiary) or they may be deposited into Lender.
o Pledge may be released at any time without penalty...there is no minimum holding period.
o Any person may pledge assets on behalf of borrower - no gift letter required.
o Available on all products, occupancy types, property types, Interest Only, etc., and may be used in conjunction with Asset Depletion.
o 10% down with no Mortgage Insurance and loan amounts up to $5,000,000 or more....
o No charge to lock - $250 admin fee is the only cost of this program.

Eligible Assets: A list of eligible and not eligible assets can be found on the Pledged Asset Program .pdf attachment on page 5. Eligible assets must be held in an account based in the U.S. (Foreign Nationals & Resident Aliens).

o Non-Volatile Assets - pledge is 1:1
checking, savings, money-market, CDs, etc.
$1,500,000 pledge requires $1,500,000 worth of stable assets as collateral.
o Volatile Assets - pledge is 2:1
stocks, bonds, mutual funds, etc.
$1,500,000 pledge requires $3,000,000 worth of volatile assets as collateral.
RELEASE OF THE PLEDGE. The pledge can be released at any time...it is completely flexible. The loan can be paid down thus releasing a part or all of the pledge without triggering a pre-payment penalty at any time. If the property has increased in value rendering a Pledged Assets no longer relevant, usually an underwriter will require a minimum of 36 months to have passed. Keep in mind that a release is at Lender's sole discretion...the borrower must be current on loan payments with no delinquencies in the last 12 months.

PROCESS. The process of completing a Pledged Asset loan is not difficult but will take some extra work. Procedurally, a new account is created at the institution where the assets are located and the assets are then moved into this account. Lender is added as a creditor/beneficiary of that account which enables us to monitor its value. A Pledge Agreement and Control Agreement must be executed...you should expect the borrower will have his wealth counselor and/or attorney review these agreements. Accordingly, you should expect a Pledged Asset loan transaction to take a little longer than usual because there are additional parties involved.

Please let me know if you have any questions....