I have a construction mortgage loan. The bank states I need to pledge a $50,000 certificate of deposit to provide extra collateral. Can it do that?
It depends on the terms of your loan contract. The loan contract should include any requirement to provide additional collateral under specified circumstances. Review your loan agreement for the terms specific to your loan and contact your lender for an explanation.
Typically, this requirement is triggered when there is a loan-to-collateral value shortfall. The bank requires the borrower to pledge another asset to remedy the shortfall.
Last Reviewed: October 2020
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