Note: Title insurance against the fact that a former junior pledge right is not properly subordinated to the refinancing credit does not exempt lenders from meeting these resubordation requirements or Fannie Mae`s requirement that the property be free and free of all charges and pledges that prevail on Fannie Mae`s mortgage. If subordinated financing is maintained as part of an initial mortgage refinancing transaction, Fannie Mae requires the implementation and registration of a rehabilitation agreement. If state law allows subordinated financing to remain in the same subordinated deposit position as that put in place with the first previous mortgage, which is refinanced, Fannie Mae does not require resubordination. The subordinate right to pledge must meet all the specific criteria of the statutes in force. Fannie Mae buys or securitized front-line mortgages that are subordinated to subordinated financing, with the exception of co-op equity loans that are subordinated to subordinated financing. (For exceptions to this directive, see B5-7-01, High LTV Refinance Loan and Borrower Eligibility.) Subordinated pawn rights must be registered and Mae`s first mortgage right must be clearly subordinated. Lenders must disclose to Fannie Mae, the auditor and the mortgage insurer the existence of subordinated financing and the terms of repayment of subordinated funds. If a first mortgage is subject to subordinated financing, the lender must calculate the LTV, CLTV and HCLTV ratios. Note: In the authorization matrix, you`ll find maximum HCLTV ratios. If the financing provided by the real estate seller is more than 2% lower than the current standard rates for second mortgages, the subordinated financing must be considered a concession to sell and the subordinated financing amount must be deducted from the sale price.
Financing conditions may provide that the employer requires full repayment of the debt if the borrower`s employment ends (voluntarily or involuntarily) before the subordinated financing expires. If the lender finds that the HELOC has been permanently modified and the outstanding is less than the permanently modified HELOC, the lender must use the amended HELOC amount to calculate the HCLTV report for handling and delivery purposes. The lender must obtain appropriate documentation on the permanent modification of the HELOC and include this documentation in the credit file. Note: In order for the lender to accurately calculate the HCLTV report for promotional and insurance purposes for each subordinated liability, the lender must, if applicable, determine the maximum line of credit for all HELOCs and the unpaid principal balance for all subordinated financings concluded.
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