asset depletion
Asset depletion / asset utilization income is permitted across agency and non-QM programs as a standalone or supplemental qualifying income source, with monthly income derived by dividing net eligible assets by a program-specific divisor (ranging from 60 to 360 months depending on lender). Gift funds, business funds, and non-occupant co-borrowers are universally restricted.
Agency Guideline Requirements
Fannie Mae — Employment-Related Assets as Qualifying Income
Fannie Mae permits asset depletion under its employment-related assets framework with the following conditions:
- Max LTV: 70%; or 80% if the borrower (and all co-owners of the asset) is at least 62 years old at time of closing
- Loan Purpose: Purchase and limited cash-out refinance only
- Occupancy: Principal residence and second home only
- No minimum income history required
Ineligible Assets: Stock options, non-vested restricted stock, lawsuits, lottery winnings, sale of real estate, inheritance, divorce proceeds, virtual currency, and checking/savings accounts (unless sourced directly from an eligible employment-related asset such as a severance or lump-sum retirement distribution)
Income Calculation: Net Documented Assets (total eligible assets minus any early distribution penalty, minus funds used for down payment, closing costs, and reserves) / loan amortization term in months
Example from the guideline:
- IRA of $500,000 less 10% penalty = $450,000
- Minus $100,000 closing costs = $350,000 Net Documented Assets
- $350,000 / 360 months = $972.22/month qualifying income
Freddie Mac — Stable Monthly Asset Qualification
Freddie Mac uses a standardized 3-step formula:
- Step 1: Determine total eligible documented assets
- Step 2: Subtract down payment, closing costs, gift/borrowed funds, and any pledged amounts
- Step 3: Divide net eligible assets by 240 to derive monthly qualifying amount
Retirement Asset Eligibility:
- Must be in an IRS-recognized retirement account (401(k), IRA)
- Borrower must be the sole owner
- Must not currently be used as a source of income
- As of the Note Date, borrower must have full access without penalty or additional early distribution tax
- Cryptocurrency is expressly excluded from the net eligible asset calculation
Lender-Specific Guidelines
Mega Capital — Asset Depletion (Simple MVP Program)
Program eligibility:
- Asset depletion is allowed as qualifying income on its own OR combined with other income sources
- When any asset depletion (AD) is used, the file must be registered on an Asset Depletion program and must follow the 12-Month Bank Statement program eligibility matrix
- If AD is not the majority of qualifying income, reserves are required
Minimum Asset Threshold — borrower must meet ONE of four options:
- $1,000,000
- 150% of the loan amount
- $400,000, provided the borrower has 60 months of total liabilities net of funds to close
- $200,000 if AD income represents 25% or less of total qualifying income
Income Calculation: Qualifying Assets / 60
Restrictions:
- Non-occupant co-borrower not allowed
- Maximum 50% DTI
- Gift funds not allowed
- Maximum 80% LTV
- Cash-out maximum is $500,000 (no limit on delayed financing)
Asset Seasoning: Minimum 3 months; 3 months of account statements required
Eligible Assets and Haircuts:
- 100% — Checking, savings, money market, savings bonds, CDs
- 80% — Stocks, mutual funds, bond funds
- 80% less an additional 10% deduction — Retirement assets subject to early withdrawal penalty (IRA, 401k, self-employed retirement accounts)
- Cash surrender value of life insurance, annuities
- Crypto-based mutual funds or ETFs from providers like Fidelity or Schwab
- Bitcoin and Ethereum held in a Coinbase account at 25% of current value
Ineligible Assets:
- Business funds
- Non-vested RSUs
- Real estate equity
- Stocks in non-publicly traded companies
- Public Sector retirement income plans
- Assets producing income already counted in qualification
- Assets not held in a U.S.-based financial institution
Documentation: Nothing required for Asset Depletion income (no VVOE, no tax transcripts)
JMAC Lending — Asset Utilization (Newport Non-Conforming)
- Income Calculation: Monthly Income = Net Qualified Assets / 60 months
- Eligible Assets: Stocks, bonds, mutual funds, vested retirement accounts, bank accounts
- Assets used for down payment, closing costs, or reserves must be excluded before calculating income
- Proof of 3-month seasoning required on all assets
- Large deposit defined as a single deposit exceeding 50% of qualifying gross monthly income for asset utilization; must be sourced
- Gift funds are not permitted when Asset Utilization is the sole income source
JMAC Lending — Asset Utilization (ZUMA Prime Non-Conforming)
May be used as the sole source of income or to supplement other income.
- Minimum Eligible Assets: Lower of $1,000,000 or 150% of the loan balance (threshold is waived when used as supplemental income)
- Income Calculation: (Total Assets Eligible for Depletion - down payment - out-of-pocket closing costs - required reserves) / 84
DTI Limits:
- First time homebuyer (FTHB): 45% max
- Less than 12-month housing history: 43% max
Restrictions:
- Gift funds not eligible
- Non-occupant co-borrowers not allowed with any qualification type in combination with Asset Utilization
Asset Seasoning: 90 days; verified with most recent 3 months statements, quarterly statement, or VOD
Eligible Assets and Haircuts:
- 100% — Checking, savings, money market, U.S. Treasuries with maturity under 1 year
- 100% — Cash surrender value of life insurance (less any loans)
- 70% — Stocks, bonds, mutual funds
- 70% — Retirement assets if borrower is at or above retirement age (59½)
- 60% — Retirement assets if borrower is below retirement age
- Trust assets: apply same percentages; trustee statement or trust agreement required
- Net proceeds from sale of real estate: final settlement statement + proof of deposit required
Ineligible Assets:
- Privately traded or restricted/non-vested stocks
- Assets producing income already in the calculation
- Assets held in a business name
- Assets in irrevocable trusts where borrower is not the beneficiary
- Assets in charitable giving trusts or donor advised funds
Greenbox — Asset Utilization (Standalone and Supplemental)
Standalone Program:
- Income Calculation: (Total Assets Eligible for Depletion - down payment - closing costs - reserves) / 60
- Minimum eligible asset threshold: lower of $1,000,000 or 150% of loan balance
Supplemental Program:
- Income Calculation: (Total Assets Eligible for Depletion - down payment - closing costs - reserves) / 84
- Minimum eligible asset threshold is waived when used supplementally
Eligible Asset Haircuts:
- Specific discounting applies based on liquidity and market volatility (see Greenbox Underwriting Guide Section 7.9.5)
Cryptocurrency: Bitcoin and Ethereum are explicitly not eligible for asset utilization/depletion programs at Greenbox, though they may be used for down payment and closing costs if liquidated
Newfi Lending — Asset Depletion (Sequoia NQM)
- Asset Seasoning: Minimum 3 months; 3 months of statements required
- Gift Funds: Not allowed on Asset Depletion or Asset Utilization programs
- VVOE: Nothing required for Asset Depletion / Asset Utilization
- Tax Transcripts: Not required for asset depletion income
Ineligible Assets:
- Business funds (personal funds inside an entity created solely for liability purposes are ineligible)
- Non-vested RSUs
- Real estate equity
- Stocks in non-publicly traded companies
- Public Sector retirement income plans
- Assets not held in a U.S.-based financial institution
AmWest — Asset Qualifier Program
AmWest uses a unique formula applying a 3% rate of return on remaining qualified assets, then amortizing over a fixed 60-month period:
Income Calculation:
- Exclude assets used for down payment, closing costs, debt payoffs, and reserves
- Apply a 3% rate of return on remaining qualified assets
- Amortize over 60 months regardless of borrower age or loan term
Minimum Asset Requirement: Greater of $300,000 post-closing asset value OR total loan amount + cash required to close + reserves
Asset Seasoning: Most recent 3 months of statements; levels expected to be consistent and sustained — increases or decreases greater than 15% over the 3-month period must be explained
Eligible Assets:
- Checking and savings accounts (all account holders must be borrowers for AOCI; joint accounts with non-borrowers acceptable for funds-to-close and reserves)
- Publicly traded instruments (stocks, bonds, ETFs, mutual funds) at 100% of documented value
- Fully vested retirement accounts / annuities: 100% of documented value (age 59½ or older); 70% of documented value (under age 59½)
Ineligible Assets:
- Retirement accounts from which borrower is already receiving distributions
- Stock options, privately held stock, non-vested RSUs
- Foreign funds, deferred compensation
- Non-regulated financial companies
- Non-liquid assets (automobiles, artwork, collectibles)
- Health Savings Accounts
- Cash-out proceeds
- Assets in irrevocable trusts, custodial or escrow accounts
- Accounts pledged as collateral on another loan
- Below investment grade corporate and municipal bonds
- Cash value/surrender value of life insurance
- Business funds, gift funds, inherited assets, lottery winnings
- Non-liquidated cryptocurrency
Note: Manual underwriting only
Side-by-Side Calculation Summary
| Lender / Agency | Divisor | Minimum Assets | Seasoning | Max DTI | Max LTV |
|---|---|---|---|---|---|
| Fannie Mae | Loan term in months (e.g., 360) | Loan-specific | Per Allowable Age of Docs | Per DU | 70% / 80% (age 62+) |
| Freddie Mac | 240 | Loan-specific | Per doc requirements | Per LPA | Per program |
| Mega Capital | 60 | $200K–$1MM (4 tiers) | 3 months | 50% | 80% |
| JMAC Newport | 60 | Loan-specific | 3 months | Per matrix | Per matrix |
| JMAC ZUMA (standalone) | 84 | Lower of $1MM or 150% LNA | 90 days | 45% FTHB / 43% <12-mo housing | Per matrix |
| Greenbox (standalone) | 60 | Lower of $1MM or 150% LNA | Per program | Per matrix | Per matrix |
| Greenbox (supplemental) | 84 | Waived | Per program | Per matrix | Per matrix |
| Newfi Lending | 60 (implied by AD program) | Per matrix | 3 months | 50% standard | 80% standard |
| AmWest | 60 + 3% rate of return | $300K post-close or total loan + costs | 3 months (consistent) | Per matrix | Per matrix |
Key Universal Rules Across Programs
- Gift funds are universally prohibited on any asset depletion or asset utilization program across all lenders reviewed.
- Tax transcripts are not required for asset depletion income at Mega Capital, Newfi Lending, or JMAC programs.
- VVOE is not required for Asset Depletion / Asset Utilization income — no employment verification is needed.
- Cryptocurrency treatment varies significantly: Mega Capital and Newfi allow Bitcoin/Ethereum via Coinbase at 25% of value for AD purposes; Greenbox explicitly prohibits crypto for asset utilization/depletion; AmWest prohibits non-liquidated crypto.
- Non-occupant co-borrowers are prohibited on asset depletion programs at Mega Capital and JMAC ZUMA.
- Business funds are ineligible across all programs reviewed.
