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To: pater tenebrarum who wrote (5948)	7/26/2000 12:55:05 PM
From: patron_anejo_por_favor	Read Replies (2) \| Respond to of 436258

Can't bring yourself to sell those valuable bubble equities to get a home down payment together? No problemo, amigo! interactive.wsj.com Here's how the loans work. Typically, the borrower is asked to pledge securities valued at between a third and 40% of the price of the house (on a $200,000 house, that's about $66,000 to $80,000), though in some cases it can be less. The lender provides 100% of the price of the home, holding the securities and the house as collateral. The home buyer makes all decisions about how the securities are invested, while the brokerage firm gets fees for trades made. Interest rates on the loans usually are about the same as with other mortgages. The upside is clear: If your stocks do well, the profits are yours and can even help pay down your mortgage. The assets in your account are liquid, meaning you can access the money more quickly in case of an emergency than if you had sunk it into the home. (But unlike a standard margin account, you usually can't borrow against the value of your stocks to buy additional securities.) There's also a tax advantage: Since your home loan is for the full amount of the house rather than the more typical 80%, you can deduct more interest on your income taxes. Even so, the downside is also clear: If the stocks drop a lot, there could be a "maintenance" call, and what would have been your equity can evaporate overnight. If matters get worse, and you can't cover the maintenance call, the lenders don't get the house so long as the mortgage payments are made. But they can freeze the investment account and move its assets into more conservative investments such as Treasury bonds. Larry Marshall in Malibu, Calif., furnishes a good example of what can happen. The owner of an executive-search firm, Mr. Marshall used Merrill Lynch's 100% loan two years ago to buy a $2 million Mediterranean villa overlooking the Pacific Ocean. At the time, he didn't want to liquidate any of his stockholdings, then valued at several million dollars. He pledged about $780,000 in stocks. Profits from the account paid for a honeymoon tour around the world on a private jet -- at $60,000 a person. But in March, the Nasdaq correction hit his account hard, forcing him to raise about $200,000 to maintain its minimum balance. He also had to raise an additional $75,000 or so for a second home he financed using the Merrill Lynch vehicle. He was forced to liquidate stocks bought on margin to free up the cash, meaning he ultimately had to sell about $1 million of stock to cover his positions. "I felt like I was being whipsawed," he says. Even so, he says he would do it again, because he likes being able "to have our money working for us" in the stock market. I couldn't make this stuff up if I tried!!!