Buy a home without liquidating investments for a cash down payment with the Pledged Asset Feature. It enables you to finance up to 100% of your home's value using eligible securities in your investment portfolio and your home as collateral. That means you can enjoy home ownership while continuing to hold or trade securities—so your assets keep right on working for you.

• In addition to granting Morgan Stanley Credit Corporation a mortgage on your home, you will place securities in a special pledge account as additional collateral.
• The initial value of the securities placed in the pledge account is generally 39% of the total loan amount. Example: A $400,000 loan requires securities valued at $156,000 to be placed in the pledge account. Higher amounts are required for investment properties, volatile securities, restricted stock and as may be determined by Morgan Stanley.
• The value of the securities held in the pledge account must be maintained at no less than 33% of the total loan amount. Example: A $400,000 loan requires maintaining securities valued at no less than $132,000 in the pledge account.
• Securities placed in the pledge account must maintain a value of at least $10 per share.
• You receive up to 100% financing for the purchase price or appraisal value of your home (whichever is less).

The Pledged Asset Feature Sponsorship

The Pledge Asset Feature allows clients to assist a family member to purchase or refinance a home. In a Sponsorship, the sponsor (client) pledges his/her securities as additional collateral for an immediate relative's mortgage loan. Immediate relatives include mother/father, daughter/son, sister/brother, grandmother/grandfather, aunt/uncle, and niece/nephew. Under the Sponsorship Program, the eligible securities remain in the sponsor's name and the home/mortgage is in the family member's name. In other words, there is no need to co-mingle assets or debts.

The Pledged-Asset Mortgage Feature removes the single biggest obstacle to home ownership, the requirement for a cash down payment. A client's family member can enjoy the comfort and security of home ownership while clients can maintain their current investments. And sponsors need not liquidate their investments, which could have capital gains tax implications*.

The Sponsorship feature is ideal for a young person whose earnings are sufficient to meet a monthly mortgage payment, but has not accumulated enough money for the down payment. In such cases, a family member may pledge their securities for the mortgage loan in lieu of a down payment. The sponsor's pledge obligation ends when the borrower pays down the mortgage balance to the standard Loan-to-Value guidelines, or the loan is paid off. Clients may request an early release of pledged securities (full or partial) if the account has been in place for at least one year, and the borrower has had no late payments in the last 12 months. The amount that is subject to early release, over the 130% set-up amount, is based on the current market value of the home and the principal balance of the mortgage. The client is responsible for the cost of a new appraisal.

Pledging securities as collateral for a residential loan offers the unique potential to continue building the value of securities that would otherwise be liquidated to fund a traditional down payment. However, pledging securities to finance one's home also carries unique risks.

In determining whether the Pledged Asset Feature is right for you, you should consider the following:

• If the value of the securities in your pledge account drops below the agreed-upon level stated in your loan documents, you will be required to deposit additional securities or other collateral (such as cash) within 5 days to stay in compliance with the terms of your Pledge Agreement. If you do not deposit additional collateral into your pledge account within 5 days, Morgan Stanley Credit Corporation can direct Morgan Stanley to liquidate securities in your pledge account without contacting you.
• If you fail to remain current with your mortgage payments, Morgan Stanley Credit Corporation may direct Morgan Stanley to liquidate the securities in your pledge account. You may not be entitled to choose which assets will be sold in the event such actions are necessary.
• Your original loan amount will be higher than a traditional mortgage that requires a down payment.
• The amount of cash necessary for a mortgage requiring a 20% down payment vs. the value of securities required to be pledged for a Pledged Asset Feature loan. Example: A $400,000 home purchase would require an $80,000 cash down payment. A Pledged Asset Feature loan would require an initial pledge of $156,000 in securities and maintenance of $132,000 in securities.
• Your comfort in subjecting your investment in a home to the fluctuations in the securities markets.