A luxury mortgage lender recently pointed out to me alternatives to the large down payments being requested by lenders on luxury home loans. As mortgage market conditions have affected mortgage backed securities and other credit instruments and derivatives the ability of most financial institutions to make super jumbo mortgages has been severely impacted. Lender have responded by drastically increaseing the level of down payment required as well as requiring full documentation of the borrowers’ income.
As a result there are now an increasing number of what are known as pledged asset mortgage programs. Rather than having to liquidate assets in order to make a down payment on a property, pledged asset mortgages offer the alternative of pledging assets as collateral. The assets might be stocks, bonds, mutual fund, certificates of deposit, etc. The mortgage company holds the pledged assets, but the borrower maintains control of the assets and may continue to trade them, if desired. New income from the assets may be removed or used by the borrower.