Liquidity Requirements
Asset and liquidity requirements for borrowers.
Liquidity Requirements
Documentation and verification of borrower liquidity
Account Type
Personal Accounts
Requirements
Must be in borrower's name, accessible
Documentation
2 months of statements
Account Type
Business Accounts
Requirements
Must be in borrowing entity's name
Documentation
2 months of statements, operating agreement
Account Type
Trust Accounts
Requirements
Borrower must be trustee with access
Documentation
Trust agreement, 2 months of statements
Account Type
1031 Exchange Funds
Requirements
Must be available for project
Documentation
Exchange agreement, proof of funds
Account Type
Foreign Institution Assets
Requirements
Special requirements apply
Documentation
Additional documentation required
Account Type
Personal Accounts
Requirements
Must be in borrower's name, accessible
Documentation
2 months of statements
Account Type
Business Accounts
Requirements
Must be in borrowing entity's name
Documentation
2 months of statements, operating agreement
Account Type
Trust Accounts
Requirements
Borrower must be trustee with access
Documentation
Trust agreement, 2 months of statements
Account Type
1031 Exchange Funds
Requirements
Must be available for project
Documentation
Exchange agreement, proof of funds
Account Type
Foreign Institution Assets
Requirements
Special requirements apply
Documentation
Additional documentation required
Eligible and Ineligible Asset Types
Assets that qualify for liquidity requirements
Eligible Assets
- Cash in checking/savings accounts
- Certificates of deposit (CDs)
- Money market accounts
- Publicly traded stocks and bonds
- Mutual funds
- Retirement accounts (with limitations)
- Cash value of life insurance
- 1031 exchange funds (with documentation)
Ineligible Assets
- Cryptocurrency
- Stock options (unvested)
- Non-vested restricted stock
- Personal property (cars, jewelry, etc.)
- Business assets not in borrowing entity
- Unsecured loans or lines of credit
- Assets not in borrower's name
Practical Application: Liquidity Verification
Real-world example of liquidity documentation
Scenario
A borrower is applying for a $500,000 construction loan with a total project cost of $625,000. The borrower needs to demonstrate both the 20% equity contribution ($125,000) and additional liquidity for reserves.
Required Documentation
- 2 months of bank statements showing $125,000+ for equity
- Additional statements showing reserves for contingencies
- Verification that accounts are in borrower's name
- Source of funds documentation if large deposits exist
- Entity documentation if using business accounts
Solution
Borrower provides statements for personal checking ($50,000), savings ($100,000), and investment account ($75,000), all showing consistent balances for 2+ months. This demonstrates both the required equity and additional reserves for contingencies.