Assets Are At Risk
When a mortgage-seeker signs an asset depletion loan, he is putting his assets at risk. If he defaults on his mortgage payments, a lender can take possession of the assets he used for collateral, whether they were property such as a vehicle or money tied up in investments.
High Down Payments
Lenders take a substantial risk when they approve a mortgage loan for an individual who does not have a high level of verifiable income on his tax returns. As such, asset dissipation loans typically require a large down payment. Bank of America reports that typical mortgage loans require a down-payment of between 5 and 20 percent. By contrast, Fannie Mae and Freddie Mac require a 30 percent down payment on asset-based mortgage loans.