product resource
private banking
Pledged Asset
Feature on First
Mortgage Loans
summary
how it works
Home purchases typically require
a cash down payment. To raise
the money, home buyers often must
liquidate a portion of their securities
portfolio, potentially incurring
adverse tax consequences and
disrupting their long-term portfolio
strategy.* The Pledged Asset feature
allows you to increase the size
of the loan on your home or the
home of a specified family member,
up to 100% of the value of the real
estate, by pledging the additional
assets in the form of a securities
account in lieu of the normal down
payment. This feature can be part
of a strategic approach to borrowing
that keeps both your assets and
liabilities structured to meet your
long-term objectives.
1
Discover
The Home Loan will be secured by both the home and the Pledge Account.
A Pledged Asset Mortgage involves pledging securities as collateral for a
home loan in lieu of making a cash down payment. By using the Pledged Asset
Mortgage feature, you are subjecting the investment in a home to the
fluctuations of the securities market.
2
Establish
Establish a new or existing Pledge Account with eligible Morgan Stanley
Smith Barney securities by the time of loan funding. The Pledge Amount
varies based upon your effective Loan-to-Value determined during the application
process of a first mortgage loan.
3
Maintain
The value of the securities held in the Pledge Account must be maintained at
110% of the Pledge Amount. If the value of the securities in the Pledge Account
falls below the agreed-upon Floor Amount, the owner of the Pledge Account
must deposit into the Pledge Account acceptable securities or other collateral
within seven business days to stay in compliance with the terms of the home
loan. You can continue to trade the securities in the Pledge Account.
*Morgan Stanley Smith Barney LLC and its Financial Advisors do not provide tax or legal advice.
Clients should consult their personal tax advisor for tax-related matters and their attorney for
legal matters.
product resource / private banking
A First Mortgage—Without Cash Down Payment
T he Pledged Asset feature allows you
to own the home you want without
compromising your investments, so your
assets keep right on working for you. In
essence, first mortgage loans with the
Pledged Asset Feature offer up to 100%
financing at competitive rates.
sponsor a family member. If you
want to help a family member by giving
them the down payment on a home,
you can become their sponsor using the
Pledged Asset Feature. In a sponsorship,
you pledge your securities for an eligible
family member’s mortgage loan. You
may become a sponsor to a parent,
Accounts and securities
that can be used in a
Pledge Account
grandparent, sibling, aunt, uncle, niece
or nephew. Eligible securities remain
in the sponsor’s name and the home
mortgage is in the family member’s name
so there is no need to comingle assets
or liabilities. The sponsor maintains
ownership of the investment in the
pledge account.
release of securities. The
securities you pledge may not be held
as collateral for the life of the mortgage.
You may submit a written request for
early release of the pledged securities
if three conditions are met:
The loan has been in place for at least
••
one year, and
••No late mortgage payments in the last
12 months, and
new appraisal indicates that
the current home value is within the
Loan-to-Value guidelines and/or you
pay down the mortgage balance to the
required level.
If you would like to submit a new
application, you may contact a Mortgage
Advisor at: 1-800-473-5584.
If you have questions regarding
Pledge Requirements or an application
in process you may contact your Loan
Officer at: 1-800-473-5584, Option #3.
••A
The table below shows the types of accounts and securities that are eligible to fund your
Pledge Account. Eligible pledged securities must be held at Morgan Stanley Smith Barney by
the time of funding. There is no requirement for private mortgage insurance. Table effective
as of February 1, 2011. Subject to change.
eligible securities
ineligible securities
eligible accounts
ineligible accounts
Valued Greater than $10/share
Valued Less than $10 /share
AAA Accounts
Smith Barney FMA Accounts
Cash
CDs (any type)
Managed Accounts
IRA/SEPs/401k/Roth IRAs
Money Market
Foreign Equities
Fund Solution Accounts
Annuities
Mutual Funds (except Prime)
Stock Options
Custom Portfolio Accounts
Custodial Accounts
Stocks
Calls (covered or naked)
Revocable Trust Accounts
All Other Trust Accounts
Municipal Bonds
Managed Futures
PLA, Express Credit or Margin Accounts
U.S. Treasury Bonds
Municipal Auction Rate Securities
Business Accounts
Structured Products
Transfer on Death Accounts
Restricted Stock
MS Equity Funds
Home Loans are made by Morgan Stanley Private Bank, National Association
or other affiliated lenders, not Morgan Stanley Smith Barney LLC. The loans
referenced herein are made by Morgan Stanley Private Bank, National Association.
These products may not be available in all states and are limited to U.S.
citizens and permanent resident aliens only. Residential loans are not available
in Guam, Puerto Rico and the Virgin Islands. Other restrictions may apply.
Morgan Stanley Private Bank, National Association. underwriting guidelines
will apply. Loans are subject to credit application and loan approval. Rates,
terms and programs are subject to change without notice.
Morgan Stanley Smith Barney LLC. 2000 Westchester Avenue, Purchase,
NY 10577. Tel: 800-869-3326. Nationwide Mortgage Licensing System
Unique Identifier No. 171760. Arizona Mortgage Broker License No. 0910887. California Department of Corporations Finance Lenders Law License No.
603H431. Georgia Residential Mortgage Licensee No. 23976. Kansas Licensed
Mortgage Company No. MC.0025024. Massachusetts Mortgage Broker License
No. MB5439. Montana Mortgage Broker License No. 171760. Licensed by the
New Hampshire Banking Department. Licensed by the New Jersey Department
of Banking and Insurance. Registered Mortgage Broker—NYS Banking
morgan stanley smith barney | 2011
Department. Rhode Island Licensed Loan Broker. Mortgage brokers may not
make loans. Home Loans are made by Morgan Stanley Private Bank, National
Association or other affiliated lenders, not Morgan Stanley Smith Barney LLC.
If the value of the pledged securities in your account drops below the agreedupon level stated in your loan documents, you will be required to deposit
additional securities or other collateral (such as cash) to stay in compliance
with the terms of the mortgage. If you do not, your pledged securities may be
sold to satisfy such obligation, and you will not be entitled to choose which
assets will be sold. Thus, in deciding whether the Pledged-Assets Mortgage
feature is right for you, you should consider the degree to which you are
comfortable subjecting your investment in a home to the fluctuations of the
securities market.
Funds drawn are not to be used to purchase, trade or
carry marketable securities
Pledged Asset mortgage feature available on nonconforming loans only and is not available in Washington,
DC or West Virginia.
© 2011 Morgan Stanley Smith Barney LLC. Member SIPC.
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