Asset Depletion Mortgage 2026: Fannie, Freddie, Lender Formulas

How Fannie Mae turns assets into income

Most pages on this subject are written by lenders. The agency rules are public, and they are narrower than the lender pages suggest. Fannie Mae's rule is Selling Guide section B3-3.4-06, “Employment Related Assets as Qualifying Income”, in the version dated March 4, 2026, which we read in the Guide published October 7, 2026.

Fannie Mae B3-3.4-06: what the Selling Guide requires (read October 23, 2026)

The Guide's own example is a $500,000 IRA of stocks and mutual funds. Assuming a 10% penalty, it subtracts $50,000 (and notes the penalty applies to cash withdrawn for closing too), leaving $450,000; it subtracts $100,000 for the down payment, closing costs and reserves, leaving Net Documented Assets of $350,000; and it divides by 360, giving $972.22 a month. A borrower at least 59½ owes no early-distribution tax on an IRA withdrawal (26 U.S.C. 72(t)(2)(A)(i)), so for that borrower the penalty line is zero, our reading.

Three consequences follow. First, a 15-year loan divides by 180 and produces twice the income of a 30-year loan from the same assets (our arithmetic). Second, there is no haircut for market risk: the account counts at full value less funds to close, so a $1,500,000 IRA with $200,000 set aside for closing gives $1,300,000 divided by 360, or $3,611 a month (our arithmetic). Third, the product is for people with retirement accounts, not brokerage or savings accounts, unless that money came from a qualifying lump sum.

Fannie Mae's maximum debt-to-income ratio is 50% for loans underwritten through its Desktop Underwriter system and 36% for manually underwritten loans, which can rise to 45% with the credit score and reserves in its Eligibility Matrix (B3-6-02).

There is a second Fannie Mae route for people who already take distributions. Under B3-3.4-03, a fixed retirement-account distribution that is already being received can be used as income with no minimum history, a variable one needs a 12-month average, and the lender must document that the income is expected to continue for at least three years from the application date. Eligible 401(k), IRA and Keogh balances may be combined to meet the three-year test, and the borrower must have unrestricted access without penalty. A retiree who takes required minimum distributions should compare the two routes (see our required minimum distribution guide).

Freddie Mac: 240 months now, 180 from February 3, 2027

Freddie Mac's Seller/Servicer Guide carries the rule in Section 5307.1. The edition dated August 5, 2026 contains two versions: the current “Assets as a basis for repayment of obligations” and a future “Accumulated assets as income”, effective for Settlement Dates on or after February 3, 2027, which sellers may adopt immediately. We read both in the Guide PDF current as of Bulletin 2026-10.

Freddie Mac Section 5307.1: the current and the future version (Guide as of August 5, 2026)

Freddie Mac does not apply a percentage haircut anywhere in its calculation steps; the only subtractions are the ones in the table. Two points matter to a retiree. A retirement account that is already paying out cannot be used under Freddie Mac, so a borrower taking distributions has to use the income route instead. And a borrower under 59½ cannot use an IRA at all, because Freddie Mac requires access “without being subject to a penalty or an additional early distribution tax”. The Pennymac announcement of October 6, 2026 summarises the change as a divisor “reduced from 240 to 180 months” and notes that the new product is excluded from AUS jumbo eligibility.

What the lenders publish

Non-QM lenders set their own formulas. These are the four whose pages state one in October 2026. They are the lenders' claims, not audited terms, programs change without notice, and Angel Oak's pages say they are meant for licensed mortgage professionals, so a borrower reaches them through a broker. We saved each page.

Asset depletion and asset qualifier formulas published by four lenders

Two details are easy to miss. NASB counts a retirement account only if it has current distributions, which is the opposite of Freddie Mac. And the Angel Oak Asset Qualifier is not an income formula at all: it asks for assets equal to the loan, five years of the borrower's monthly debts, closing funds and reserves. For a $700,000 loan and $1,500 of monthly debts that is $790,000 before funds to close and reserves (our arithmetic: $700,000 plus 60 times $1,500).

LendSure's two pages disagree on the divisor. Its Home Loans page lists “Qualifying Income = Qualified Assets Divided by 120” in the highlights and explains the Asset Qualifier by dividing total assets by 60, in contrast to standard programs that divide by 120; we show both and treat 60 as its published program. Ask for the current guideline in writing.

What $1,000,000 turns into

The same assets give very different incomes. The first table assumes $1,000,000 in one account type, a borrower at least 59½, and nothing subtracted for funds to close (the lenders do not all say how they subtract).

Monthly qualifying income from $1,000,000 in one asset type (our arithmetic)

Income is only half of the question. A lender also divides your monthly obligations, including the new payment with taxes and insurance, by that income. The next table asks how large an account would have to be to support $5,000 of total monthly obligations at the two debt-to-income ratios that appear in the sources (43% at Lendz, 50% at Fannie Mae's Desktop Underwriter and at Angel Oak).

Balance of one retirement account needed for $5,000 of monthly obligations (our arithmetic, before funds to close and reserves)

On a $5,000 monthly obligation at a 50% debt-to-income ratio, an IRA of $3.6 million is needed at Fannie Mae, $2.4 million at Freddie Mac today and $1.2 million at Angel Oak (our arithmetic, before funds to close). The fine print runs the other way: Fannie Mae and Freddie Mac are agency products with agency pricing, while the lenders at the bottom of the table ask for a 700 score (Angel Oak, NASB), a smaller loan limit or a larger cushion of leftover assets. None of the pages publishes a rate, so we do not compare cost.

What the law says

Regulation Z requires a lender to make a reasonable, good-faith determination of ability to repay and lists the factors it must consider; the first is “The consumer's current or reasonably expected income or assets, other than the value of the dwelling” that secures the loan (12 CFR 1026.43(c)(2)(i)). The lender must verify the assets it relies on with third-party records (1026.43(c)(4)), and the examples include “Financial institution records” (1026.43(c)(4)(iv)). So the idea of qualifying on assets is not a loophole: it is written into the rule. What the rule does not say is how to convert a balance into a monthly figure; that is a choice by Fannie Mae, Freddie Mac or the lender, which is why the divisors above differ by a factor of six. For a related alternative that uses deposits instead of assets, see our bank statement loans page, and for the wider product family our non-QM loans page.

The tax cost of taking the money out instead

The other way to buy with retirement money is to withdraw it. A traditional IRA withdrawal is ordinary income. The table uses the 2026 tax tables and standard deductions in Rev. Proc. 2025-32 ($32,200 for a joint return and $16,100 unmarried, plus $1,650 for each spouse aged 65 or older and $2,050 if unmarried), and the $6,000 deduction for each person aged 65 or older that 26 U.S.C. 151(d)(5)(C) allows for tax years before 2029, reduced by 6% of modified adjusted gross income above $150,000 on a joint return and $75,000 otherwise. It assumes no other income, so the withdrawal is the whole of adjusted gross income. It leaves out state income tax, Medicare income-related premium surcharges, the effect on Social Security taxation and the growth the money would have earned. A borrower under 59½ would also owe the 10% additional tax of 26 U.S.C. 72(t)(1).

Federal income tax on a traditional IRA withdrawal in 2026, no other income (our arithmetic)

The 6.5% is an assumption to size the comparison, not a rate quoted by any lender on this page. Because the tax comes out of the withdrawal, netting $500,000 takes more than $500,000: about $654,021 for the couple and $713,082 for the unmarried filer (our arithmetic). Borrowing does not remove the tax if the loan is later repaid from the same IRA; it spreads the withdrawals over the years of the loan, which can keep each year in a lower bracket (our reading). It also adds interest and closing costs. For the Roth side of that trade-off see our Roth conversion guide.

Which route fits which reader

• Retirement money only, owner-occupied home, 20% or more down: the agency routes are the ones with published, uniform rules. At Fannie Mae the loan-to-value cap is 70%, or 80% if the asset owner is at least 62; at Freddie Mac it is 80% now and, from February 3, 2027, whatever the program allows.
• Savings or a brokerage account, no IRA: Fannie Mae's employment-related-assets rule generally excludes them. Freddie Mac accepts them for a borrower 62 or older today and, from February 3, 2027, after 12 months of ownership. Lenders count them at 70% to 100%.
• Under 59½: Freddie Mac does not accept an IRA at all, Fannie Mae subtracts the penalty, and Lendz counts retirement accounts at 60%.
• Already taking required minimum distributions: Freddie Mac says the asset must not be a current source of income, and NASB wants current distributions. Fannie Mae's other route (B3-3.4-03) uses the distribution itself with a three-year continuance test.
• A rental, not a home: Fannie Mae's rule, Freddie Mac's current version and both Angel Oak programs are limited to a primary residence or second home (NASB's page does not say). Freddie Mac's 2027 text lists no occupancy limit and Pennymac's summary says all occupancy types are eligible, so ask whether an investment property can use it; otherwise a rental is a different loan, see DSCR loan requirements and the best DSCR lender comparison.

What a reader can do with this

1. Ask for the divisor and the percentages in writing before you apply. The same $1,000,000 retirement balance gives $2,778 a month at Fannie Mae on a 30-year loan and $11,667 at LendSure's 60-month program, so the program matters more than the rate.
2. Check your age against the rule. The 62 and 59½ thresholds change which accounts count and whether a penalty is subtracted.
3. Subtract first. Every formula takes out funds for the down payment, closing costs and reserves before dividing, so a $1,500,000 balance with $200,000 earmarked is a $1,300,000 balance for Fannie Mae and Freddie Mac.
4. Price the withdrawal before you rule it out. The table above shows federal tax of 20.3% on a $500,000 withdrawal for a couple both 65 or older; add your state and Medicare effects.
5. Time a Freddie Mac loan. Settlement on or after February 3, 2027 gets the 180-month divisor; before that, a seller may already use it, so ask whether yours does.
6. Read the sibling products. If your income is from a business, a bank statement loan may fit better; our review of LendSure covers that lender's filings and complaints.

FAQ

Sources, read and saved on October 23, 2026: Fannie Mae Selling Guide B3-3.4-06, B3-3.4-03, B3-4.3-03 and B3-6-02 (Guide published October 7, 2026); Freddie Mac Single-Family Seller/Servicer Guide, Section 5307.1, current as of Bulletin 2026-10 (August 5, 2026), and Pennymac Delegated Announcement 26-120 (October 6, 2026); the websites of NASB (Internet Archive copy of June 17, 2026, because the live page could not be reached), Angel Oak Mortgage Solutions (two pages), LendSure Home Loans and its blog (May 13, 2026) and Lendz Financial (September 15, 2026), which are those lenders' claims and not audited terms; 12 CFR 1026.43 (eCFR, version of October 20, 2026); IRS Rev. Proc. 2025-32; and 26 U.S.C. 72 and 151. Tax figures are our arithmetic from those documents for a taxpayer with no other income and exclude state tax and Medicare surcharges. This is analysis of public documents, not investment, legal, tax or lending advice.