Having Your OREO and Depleting It Too

Mortgage and Lending with Guaranteed Rate, Marin County, CA NMLS: 22343

Having Your OREO and Depleting It Too


Asset-backed or asset qualifying mortgages are not endangered species around here.  Not a week goes by where we don't field an inquiry from a home buyer or homeowner seeking a mortgage but devoid of the typical income qualifying requirements; paystubs, W-2 forms and tax returns that show what they really earn in any year.  So using assets to qualify for a mortgage has become a viable alternative for those who have strong credit and who have demonstrated the ability to save and invest.  These individuals can often parlay their (liquid) net worth into qualifying power, and maybe the best part is that they do not need to sell or otherwise touch those assets.  Asset depletion, asset utilization, asset amortization or asset-backed loans --- whatever you want to call them --- are, indisputably, no longer mortgages relegated to the high-rate outer fringe of the lending industry.  


But up until this time, one of the major hindrances to qualifying for an asset-backed loan is that we have not permitted borrowers to use the equity in other real estate owned (OREO) as a way to qualify.  Yes, we count cash-equivalents, stocks, bonds, mutual and exchange-traded funds and even retirement accounts in some cases.  But equity in other real estate?  It was a non-starter.  You could literally have millions of dollars worth of property in your portfolio but we would not consider it, except on the liability side of the equation.  That's changed with our new asset qualifying program and here are the key things to know.


Asset Utilization

Utilization of financial assets will be considered as borrower income to help qualify for their monthly payments.  The assets themselves do not need to be liquidated, moved, pledged or otherwise.  We can also use asset depletion to supplement other sources of income, including employment-based income, Social Security and the like.  The key thing to know with this program is that after the down payment and closing costs have been made (in the case of a purchase) the borrower must have $450,000 in 'net' assets, and this is further governed by the requirement to have the lesser of $1MM or 1.25 times the loan amount in 'qualified assets.'  Let's examine each category and then give an example of a purchase scenario.


Net Assets

On our asset-backed mortgage here, your "net assets" are those that remain in your accounts after you've closed the transaction.  Further, whatever that number will be, we'll apply a qualifying percentage to those balances.  Non-retirement investments are counted at 85% of their total value, retirement accounts at 80% and other real estate owned (OREO) at 75% of its equity position, determined by an exterior appraisal or broker price opinion (BPO).  Remember, post-close, we need to have no less than $450K remaining via all sources.


Qualifying Assets

In order to drive asset-based income, we use our net asset total above, but must assure that it first meets or exceeds 125% of the loan amount or $1MM, total, whichever is less.  We will then take the net asset total and apply a utilization draw schedule of 120 months.  The resulting figure can be used to create or supplement qualifying income.


Digging In

Let's use the test case below to demonstrate the power of this program:

  • Purchase price:  $500,000
  • Down payment:  $100,000
  • Loan amount:  $400,000
  • Estimated closing costs:  $10,000

Qualifying assets:

  • $25,000 in checking/savings (utilized at 100% for a total of $25,000)
  • $100,000 in a money market fund (utilized at 100% for a total of $100,000)
  • $120,000 in stocks/bonds/mutual funds (utilized at 85% for a total of $102,000)
  • $200,000 in retirement accounts (utilized at 80% for a total of $160,000)
  • $600,000 in equity in OREO (utilized at 75% for a total of $450,000)

Net assets:  $837,000 (qualifying assets) - $110,000 (transaction requirements) = $727,000

In this case, $727K is greater than 1.25 times the loan amount ($500,000) and greater than $450K in post close, so we can deplete the amount.  If we divide $727K by 120 months, we derive $6058 in monthly qualifying income.  This can be added to any other income the borrower documents, or it can be used on its own, if sufficient to make debt-to-income ratio requirements.


Icing on the Cake

Asset-utilization mortgages have been in existence for a bit of time now and are gaining popularity each month.  But our use of OREO is unique and a force multiplier for these types of qualifications.  If you own real estate that has a lot of equity in it, and you need an alternative qualification method, perhaps because you're self-employed or have variable income, give us a call and let's review your profile in this new light.  The results might be sweet.


Oh, oh, oreo, 



Robert J. Spinosa
Vice President of Mortgage Lending

Guaranteed Rate
NMLS: 22343 
Cell/Text: 415-367-5959 


Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960

Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate's Human Resources Department.


Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood ChicagoIL 60613 - (866) 934-7283


Re-Blogged 1 time:

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  1. Barbara Todaro 04/25/2019 08:13 AM
Real Estate Sales and Marketing
California Los Angeles County Santa Monica
Active Rain Newbies
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asset amortization
asset utilization
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Show All Comments
Barbara Todaro
RE/MAX Executive Realty - Retired - Franklin, MA
Previously Affiliated with The Todaro Team

Good morning, Rob Spinosa there are many options today to qualify for a mortgage.... good credit is a must, but there are ways to satisfy the upfront money..

Apr 25, 2019 08:12 AM #1
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Good morning,  Rob - Oreos plus icing on the cake!  Knowledge is more than snack-sized information.  Thanks for these useful morsels. 

Apr 25, 2019 08:37 AM #2
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

Thank you for sharing this information.  I knew there was a reaon I love OREOs.

Apr 25, 2019 06:33 PM #3
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

hi Rob- This is when it pays to seek the advice of a professional such as yourself. 

Apr 25, 2019 07:24 PM #4
Ken & Velma | The Rohn Group, REALTORS®, GRI®
Dream Team International - Gilbert, AZ
Serving Gilbert, SE Maricopa and Pinal Counties

Great post, Rob Spinosa! Added this one to my Lender Resources folder. 

Apr 26, 2019 01:47 PM #5
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

That is wonderful news. I'm going to mention this program to some Sellers/Buyers we're working with...I think their assets would allow them to purchase a property more to their liking. They are both retired and worried their income will not allow them to purchase a home priced higher than around 400K. 

Apr 27, 2019 07:36 AM #6
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224


                                             Thank you, Rob. 

Apr 27, 2019 06:32 PM #7
Patricia Feager, MBA, CRS, GRI,MRP
Selling Homes Changing Lives

Rob Spinosa - Having liquidity is something I learned years ago and it has paid off many times in a very good way. 

Using asset alternative is a great opportunity for many deserving homeowners.

You always provide really good information. Thank you. 

Apr 28, 2019 04:13 AM #8
Dorie Dillard CRS GRI ABR
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good morning Rob Spinosa ,

I'm so glad that Kathy Streib featured your post in her "Ah-ha" moments for the week! So many deserving homeowners don't realize that using asset alternative is a great option to exercise. Good information!

Apr 29, 2019 05:13 AM #9
Sharon Tara
Sharon Tara Transformations - Portsmouth, NH
New Hampshire Home Stager

Very informative! I wasn't aware of what OREO was...other than the delicious cookie, of course. Great job!

Apr 29, 2019 08:32 AM #10
M.C. Dwyer
Century 21 Showcase REALTORs - Felton, CA
MC Dwyer-Santa Cruz Mountains Property Specialist

You got me with the title, then followed through with the substance.    It's good to learn OREO can now be counted as qualifying assets for a mortgage - thanks!

Apr 29, 2019 08:53 AM #11
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Beautifully crafted and well-explained, Rob Spinosa ... reading through the thread above, it's easy to see that your post has provided new hope to a few agents and their clients.  Exactly what we hope for when we share our knowledge and expertise here on AR ...

Well done!


Apr 29, 2019 09:30 AM #12
Graziella Bruner
NCS Premier Real Estate - Detroit, MI
Associate Broker - Serving Wayne & Oakland County

Awesome post, you had me at oreo!  Now I can't get the Oh, Oh, Oreo out of my head!

Apr 29, 2019 05:25 PM #13
Brian DeYoung
also affiliated with Howard Hanna - Ithaca, NY
The Realtor with personal investment background

Great information. Exciting even.

Thank you.

Apr 30, 2019 07:16 AM #14
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Hi Ron:

This was certainly a good post filled with great education. I learned quite a bit - thank you!


Apr 30, 2019 07:58 AM #15
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Rob Spinosa

SVP of Mortgage Lending, Marin County
Can I Get a Jumbo Loan with 10% Down?

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