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. The lender must take into account, when calculating the CLTV and HCLTV reports, all subordinated wagering rights guaranteed by the property of the subject regardless of the obligated party. This also includes business loans, as provided by the small business administration. 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. If the subordinated financing comes from the borrower`s employer, it is not obliged to require periodic payments solely on capital and interest or interest. Subordinated employer financing can be structured as follows: More information on subordinated financing comes from the Section 502 Leveraged (Blended) credit program, see B6-1-05, Eligible RD-Guaranteed Mortgages. Note: Fannie Mae accepts these subordinated financing terms if the amount of subordinated debt is minimal in relation to the borrower`s financial assets and/or credit profile. The table below describes unacceptable subordinated funding conditions. You will find information on co-op stock loans in B4-2.3-04, loan authorization for co-op equity loans.
For more information on subordinate financing of LTV high refinancing operations, see B5-7-01, High LTV Refinance Loan and Borrower Eligibility. Monthly payments for all subordinated deposit fees must cover at least the interest payable to avoid negative depreciation (with the exception of subordinated employer financing, which has deferred payments). 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.