Tim,

We have offered a PAM Mortgage (Parent Assisted Mortgage) where the parents put down 10% into a CD that is pledged.  We give them a 2 year cd rate to begin with and then roll it over into a 6 month cd.  The pledged is released when the ltv is less than 90% (via paydown of loan from original appraisal) or new appraisal paid for by the member.

KEYS: Special CD Name with restrictions on who can release the funds.

We have offered 10% down with NO PMI for many years.

Mark T Pease

Campus USA Credit Union, 850million +, 65k members

Gainesville, FL

This sounds like a great idea.  

Questions I have:

What is the Max LTV?

Minimum Credit Score?

Are you looking a charging a higher rate?

What about just any borrowers that want to pledge a CD to avoid PMI?

Have used down payments from parents and employers in the past to avoid MI.  The concept is not for me is a CD secured 'loan' vs. plegde.  Because you need the share deposit money to be given to escrow with our mortgage proceeds to close the deal.  A tracking code on Symitar makes sure the share account is 'frozen.'  Monthly payments need to be made on both the mortgage and share loan monthly.

We use both payments in the debt ratio and rely on Fannie Mae DU underwriting results for the credit decision.

Hello MarkTPease of Campus USA Credit Union,  Would you be willing to share the portion of your loan policy that addresses your offering of 10% down with NO PMI.  Please contact me at crussell@spefcu.org.  If anyone else reading this post also offers 10% down with NO PMI and you are willing to share this portion of your loan policy, please contact me via the above email address.  

We offer a Pledged Asset Mortgage on our long term portfolio mortgage loans.  Typically, the loan product is a 5/1 ARM.  The Underwriting criteria is the same whether there is an associated pledge with 5/1 ARM or not.  The applicant must demonstrate the capacity to repay as well as the willingness to repay as demonstrated by their credit history.  We treat the Pledge basically as if it is the "PMI" on the loan.  Therefore, if parents are willing to pledge 20% and the purchase price is $100,000, we will make the loan for a $100,000 which is a 100% gross LTV.  However, we will price it at an 80% net LTV. The borrower has only one payment which means all associated interest may be tax deductible.  The pledged funds must be on deposit with us in a long term CD. We will release the pledge once the actual LTV no longer exceed 80% of the property value.  In case of default, we have immediate access to the pledged funds to reduce the loan balance.  We have been offering Pledge Asset Mortgage for over 5 years.  We have not had any issues.  We have only originated a hand full of them because 100% financing was so prevelant during the pass 3 years.  Now that that market has all but dried up, I plan to re-emphasize our Pledge Asset Mortgage.