pledged asset mortgage

pledged asset mortgage

A mortgage loan program allowing a purchaser to grant a security interest in other assets rather than having to liquidate them to pay a down payment. It allows the borrower to continue receiving income and other benefits from those assets, and also avoids the possibility of the borrower having to pay income taxes on sale proceeds if the assets had to be sold to make a down payment.

Example: Fannie Mae has three pledged asset mortgage programs: (1) 30 percent of the pur- chase price in pledged assets from a family member results in 100 percent financing and no PMI insurance; (2) a 10 percent pledge by a family member, with certain borrower income and other requirements, results in the borrower needing to pay at least 3 percent of the combined purchase price and closing costs, and PMI is required; and (3) a 10 percent self-pledge by the borrower will gain 100 percent financing with PMI required.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.