The Quick Read: A family office can often replace a pledged asset line (PAL) with a large mortgage that is reviewed on bank-statement deposits instead of traditional personal-income documentation, through select wholesale programs and subject to full underwriting. The new loan pays off the PAL, releases the pledged portfolio, and swaps a demand line for term debt secured by real estate.
- Qualification runs on 12 or 24 months of deposits after an expense ratio, or on assets, not on traditional personal-income documentation.
- Loan sizes run $300,000 to $30,000,000 across two wholesale programs; everything above $4,000,000 is reviewed case by case.
- PAL draws and inter-entity transfers are not income, so statement hygiene decides the file.
- Entity borrowers face tighter paths than individuals or revocable trusts, depending on the program.
- Releasing the pledge can free portfolio assets, but the lender decides whether they count as reserves.
A PAL is Schwab’s name for a securities-backed line of credit (SBLOC): a revolving line secured by a brokerage portfolio. Many families use one to buy property without selling appreciated holdings. The exit usually comes down to risk. Lendmire, a DSCR-focused mortgage broker, places these files through a wholesale network and does not lend directly.
Why Do Family Offices Leave a PAL?
They leave because a PAL is demand credit. FINRA lists three core risks of an SBLOC: unintended tax consequences, the chance of being forced to sell holdings, and market volatility magnifying losses. The SEC and FINRA joint investor alert explains the maintenance call. If collateral value falls too far, the borrower must post more collateral or repay within a short window, typically two or three days. If they can’t, the firm can liquidate the securities.
A mortgage on real estate works differently. It is term debt, not marked to market daily. Moving the balance off the portfolio removes the collateral-call exposure. The tradeoff is real: a new loan, an appraisal, documentation, and a lien on the property.
The tradeoff flips in one case. If the PAL is small against the portfolio, the portfolio is conservatively invested, and the family is comfortable with demand credit, staying put can be reasonable. The exit makes the most sense when the line is large relative to the pledged assets, or when a market drop would force sales at a bad moment.
How Does the Takeout Work, Step by Step?
The new mortgage pays off the PAL balance, and the PAL bank releases its pledge. In practice the sequence runs like this:
1. Choose the borrower and vesting. Individual, revocable living trust, or entity. Eligibility is set program by program.
2. Pick the qualification path. Deposits, assets, or property cash flow.
3. Assemble statements and a payoff letter. The payoff letter comes from the PAL bank.
4. Order the appraisal. Super jumbo balances often draw additional valuation review.
5. Underwrite credit, reserves, and title. The lender decides how released assets are treated.
6. Pay off the PAL at closing and release the pledge.
Order matters. A market drop mid-file can trigger a maintenance call while underwriting is still open. Families with thin cushions should address that exposure before they apply, not during review.
How Does Bank Statement Qualification Work for a Family Office?
It works by totaling eligible deposits over 12 or 24 consecutive months, applying an expense ratio, and dividing by the number of months. The result is qualifying income. Across the wholesale network, the bank portfolio program uses 12 months; the portfolio non-QM program accepts 12 or 24. Statements must be consecutive. Transaction histories never substitute.
Business statements require at least 25% ownership. The expense ratio is fixed at 20% for a service business with no employees, 40% for one to five employees, and 50% for six or more employees or any product business. An accountant-provided ratio or a profit-and-loss method capped at 80% are alternatives. Transfers from the borrower’s own business into a personal account count at 100%.
Here is where family offices differ from a typical founder. The deposits are often distributions, inter-entity transfers, capital calls, and PAL draws. The underwriter has to separate true income from moved money and borrowed money. A PAL draw is loan proceeds, not income. The CFS Review analysis of CFPB supervisory highlights makes the same point from the regulatory side: a lender may rely on income, assets, or both, and it must verify what it relies on using records specific to that consumer.
| Deposit type | Typical treatment |
|---|---|
| Distributions from the borrower’s own business | Counted, after expense ratio |
| Transfers from borrower’s business to personal account | Counted at 100% |
| PAL draws | Excluded (loan proceeds) |
| Unexplained large deposits | Excluded until sourced |
| Moves between the borrower’s own accounts | Excluded |
Document every inter-account transfer and every PAL draw before the statements go in. Clean statements are the single biggest lever on this file type.
Deposits, Assets, or Assets-Only?
Three paths exist, and the right one depends on where the family’s strength sits.
| Path | How it qualifies | Best fit |
|---|---|---|
| Bank statements | Deposits after expense ratio | Strong cash flow, muddy traditional personal-income documentation |
| Asset allowance | Liquid assets ÷ 36, 60 or 84 months | Large liquid portfolio, modest deposits |
| Assets-only | No DTI; liquid assets cover loan plus costs | Very liquid borrower |
Asset allowance divides liquid assets by 36 months when debt-to-income before the asset income is at or below 60%, by 60 months when it is above 60%, and by 84 months for standalone use or any loan above $3,500,000. The 60% test only picks the divisor. The final ratio with asset income counted must still fit the 50% ceiling. It applies to primary and second homes only, at 80% maximum.
Assets-only needs U.S. liquid assets equal to the loan amount plus closing costs plus sixty months of any net loss on other residential property. Retirement accounts count at 70% (80% at 59.5 and older). Business funds, gifts, trusts other than a revocable living trust, unvested stock, and cryptocurrency never count.
Here’s the catch for a PAL exit. Pledged holdings generally cannot do two jobs. Assets still pledged to the line may not count toward liquidity, so the payoff and release can change which path works. Lendmire’s piece Super Jumbo Bank Statement vs DSCR for a Family Office Rental Purchase covers the property cash-flow alternative in more detail.
How Much Leverage Is Realistic at This Size?
Leverage steps down as the balance climbs, and it varies by occupancy. Every figure below is a ceiling through select wholesale programs, subject to underwriting.
On a primary residence purchase, the portfolio program runs 90% to $1,000,000, 85% to $2,000,000, 80% to $3,000,000, and 75% to $4,000,000 at the top credit tier. From $4,000,000 the bank portfolio program takes over, with purchase at 65% to $5,000,000, 60% to $10,000,000, and 55% to $30,000,000, all on review case by case.
On an investment property (business-purpose), a purchase tops out at 85% to $1,000,000 and 80% from $1,000,000 to $2,500,000. It then drops to 75% from $2,500,000 to $3,000,000. Between $3,000,000 and $4,000,000 the bank portfolio program shows 60% on a purchase. From $4,000,000 to $5,000,000 the portfolio program’s super-jumbo overlays show 65% on a purchase, on review case by case. Then 55% from $5,000,000 to $10,000,000, and 50% from $10,000,000 to $30,000,000. Second homes carry their own ladder, so read each figure from the occupancy’s own column.
Two cautions. The credit score in each band is what that leverage needs, not a floor. Floors are 660 on the portfolio program, 680 on the bank program, and 700 above the super-jumbo line. And never read a brochure’s headline leverage as what a large file will receive.
What Do Underwriters Review?
- Credit. Floors above, with debt-to-income up to 50%.
- Reserves. 3 months to $500,000, 6 months to $1,500,000, and 9 months above. Each additional financed property adds 2 months, to a 12-month maximum. First-time investors need 12.
- Cash-out. Proceeds are unlimited at or below 60% LTV. Above 60%, the portfolio program caps cash in hand at $1,500,000. The bank program publishes no cap. Cash-out proceeds cannot satisfy reserves on files above the super-jumbo line.
- Interest-only. Available to 85% LTV with a 700 floor on the portfolio program (40-year term, 10-year interest-only period). The bank program allows interest-only at 60%, on five- and seven-year fixed-period adjustables.
- Super-jumbo overlays. Above $3,500,000 on a primary residence and $3,000,000 on a second home or investment property: 700 credit floor, 0x30x24 housing history, 48-month seasoning after any credit event, U.S. citizens and permanent residents only, no non-occupant co-borrowers, no rural property, ten acres maximum. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Above $4,000,000, every file is reviewed case by case before submission. That applies to any figure at that size here.
Who Is the Borrower?
Family offices hold property through LLCs, trusts, and layered structures. A CPA-firm guide to family office structures notes that LLCs can have trusts or other entities as members, and that irrevocable trusts and family LLCs are common in multi-tier setups.
Mortgage underwriting is more comfortable with an individual or a revocable living trust. Nolo observes that banks want recourse to personal assets, so a loan can be easier in your own name, and expect a personal guaranty in many structures. Entity-owned investment property typically runs through investor channels, with the owners’ credit, reserves, and use reviewed, subject to program terms. Lendmire’s guide to trust and family office documents on super jumbo bank statement loans walks through the paperwork.
Business purpose also matters. The Federal Register notice on the ability-to-repay rule states that business-purpose loans fall outside that rule and that investment-purpose loans are treated as business-purpose. A property the family also uses personally is a different matter. Occupancy has to match the loan program, so confirm intended use before choosing a path.
Where the General Rule Breaks
- Tax-driven PALs. The line likely exists to avoid selling appreciated securities. Exiting by selling holdings can trigger gains, which is why many families refinance instead. Tax treatment can depend on how the funds are used and how the property is held; borrowers should keep clear records and speak with a qualified tax professional before relying on any deduction.
- Thin cushion. A call during underwriting can force sales before closing.
- Freed assets that don’t count. The lender, not the family, decides whether released holdings satisfy reserves.
- Heavy distributions, light deposits. Assets may qualify a file that statements cannot.
- Rate of leverage versus need. A family reaching for the highest leverage cell at a very large balance may find that a modest partial payoff from the portfolio gives a cleaner file.
A Practical Scenario
Picture a family office with a PAL used to buy a $6,000,000 primary residence. The principal’s traditional income documentation shows heavy pass-through deductions, but 12 months of business-to-personal transfers are clean. At that size the bank portfolio program’s purchase ceiling is 60%, on review case by case. The exit looks workable if the deposits clear the expense ratio and the payoff releases the pledge. If deposits run thin, an asset-allowance path at the 84-month divisor may carry it instead. Both depend on credit, reserves, appraisal, and underwriting.
Common Mistakes
- Depositing PAL draws into the account whose statements will be submitted.
- Moving money between entities without a paper trail.
- Assuming pledged assets will count as reserves after release.
- Ignoring the maintenance-call cushion during review.
- Applying for the highest leverage cell without checking the credit tier.
Key Terms Defined
PAL (Pledged Asset Line): Schwab’s name for a revolving credit line secured by a brokerage portfolio.
SBLOC: The generic term for a securities-backed line of credit.
Maintenance call: A demand to add collateral or repay when pledged value falls too far.
Bank statement loan: A mortgage that is reviewed on documented deposits instead of conventional personal-income paperwork, subject to lender guidelines.
Expense ratio: The share of business deposits treated as expenses before income is calculated.
Asset allowance: Income created by dividing liquid assets over a set number of months.
Vesting: The legal form in which title is held, such as an individual, trust, or LLC.
Frequently Asked Questions
Do I have to sell investments to leave a PAL?
Not necessarily. A mortgage can pay off the balance, so the portfolio stays invested. Selling holdings may trigger taxable gains, which is why many families prefer the refinance route. Whether released assets count toward reserves is a lender decision.
Can the family office entity be the borrower?
Sometimes, depending on the program. Individuals and revocable living trusts are the more common fits for bank statement files. Entity vesting usually moves a file toward investor channels, often with a personal guaranty, subject to program terms.
What happens if the market drops while the file is in review?
The PAL’s maintenance call can still hit. The SEC and FINRA alert notes the typical cure window is two or three days, after which the firm can liquidate. Keep a healthy cushion before applying.
Are PAL draws counted as income?
No. They are loan proceeds, so lenders exclude them from eligible deposits. Keep draws out of the statement accounts you submit where possible, and document any that appear.
Is a super jumbo bank statement loan a no-documentation loan?
No. It is reviewed on documented income under the applicable program, subject to lender guidelines. Consecutive statements, credit, reserves, appraisal, and entity documents are all reviewed.
Start with the complete DSCR loans guide if the property’s rental income is the stronger story, or reach the team at 828-256-2183.
For current guidelines and terms, see Lendmire’s super jumbo bank statement loan programs page.
Lendmire’s self-employed mortgages page presents both super jumbo programs, bank statement and DSCR, side by side.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. FINRA
2. SEC/FINRA Investor Alert (investor.gov)
3. CFS Review – CFPB non-QM ATR analysis
4. JMCO – Family office real estate structures
5. Nolo – Trust or LLC for investment property
6. Federal Register – ATR/QM final rule
This article is part of Lendmire’s super jumbo bank statement loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a Super Jumbo Bank Statement Second-Home Loan Works · How Much a Retirement Account Adds to a Super Jumbo Bank Statement Loan · How Much Can You Borrow With a Super Jumbo Bank Statement Loan?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.