100 percent Mortgage Risks

It is important that you fully understand the risks involved with 100 percent mortgages. These include:

• Even after you obtain your mortgage loan, you may be required to deposit more cash or securities if the value of the securities you pledged falls below the minimum required by your firm. A decline in the value of the securities you use as collateral for a 100 percent mortgage may require you to provide additional cash or securities to your firm to avoid the forced sale of those securities. Ask yourself: If I didn't have the cash in the first place for a down payment, where will I find the cash if my securities lose their value?
• Your firm can force the sale of pledged securities to meet a collateral call. If the value of pledged securities falls below the minimum amount set by your firm, the firm can sell the securities you pledged. The cash received from the sale of securities then remains in the account until:
• • The mortgage is repaid or refinanced;
  • You instruct the firm to use the funds to pay down the mortgage;
  • The equity in your home reaches a certain level, allowing the collateral account to be closed; or
  • The cash is applied to the outstanding mortgage balance upon default, if necessary.
• Your firm can sell your securities without contacting you. While most firms will attempt to notify their customers of collateral calls, they are not required to do so. Even if you're contacted and provided with a specific date to meet a collateral call, your firm may decide to sell some or all of your securities before that date without any further notice to you. For example, your firm may take this action because the market value of your securities has continued to decline.
• You are not entitled to choose which securities are sold. There is no provision that gives you the right to control liquidation decisions. Your firm may decide to sell any of the securities that are held as collateral for your mortgage.
• You are not entitled to an extension of time on a collateral call. While an extension of time to meet a collateral call may be available to you under certain conditions, you do not have a right to the extension.
• If you default on your mortgage (stop making your monthly payments), you could lose both your home and the securities you pledge. Some states allow your firm to immediately sell your securities if you default on your mortgage. Other states only allow your securities to be liquidated after your house is sold for a loss at a public sale.