A homeowner who wants to refinance their first mortgage if there are two mortgages on the property usually needs to get a subordination agreement for the second existing mortgage. This is because, in the absence of such an agreement, when the first existing mortgage is repaid, the second existing mortgage would be in the `first lender` position, which would mean that the first refinancing mortgage would end in the `second deposit` position, which would not be correct for the refinancing lender. the subordinated hypothec must be subordinated as a matter of priority, due to (i) registration under the mortgage to be refinanced, (ii) a registered subset agreement or (iii) automatic subordinate under the legal provisions relating to a previous refinancing; Automatic subordination of junior mortgages occurs when the junior mortgage is subordinated to a new first mortgage in accordance with the self-subordination status, without a subordination agreement. To achieve this, you must follow the legal guidelines for your jurisdiction and discuss them with your new lender. If you have a second mortgage and decide to refinance your first mortgage, automatic post-subordinated is an option that allows you to keep your second mortgage open and active. It is important that you understand the policies that participate in such a transaction, which is why SMART has prepared the frequently asked questions to allow you to learn more. Read below for an overview of a subordinated mortgage and specific subordination policies for homeowners in Virginia and Maryland, or click on a link below to access this section. Sounds pretty clear, doesn`t it? Maybe not. Regardless of the priorities set out under Section 3-203, lenders may agree among themselves to change their place in the priority line. This is because refinancing lenders will typically develop a subordination agreement with all surviving junior lenders in order to maintain their first place in the line.
However, in some cases, junior lenders would refuse to enter into a subsecation agreement, which would cause the refinancing process to derail. But now, in accordance with paragraphs 7 to 112, subordination is automatic, as long as all the requirements set out therein are met. At the end of the day, no lender is therefore worse off than before the refinancing. On October 1, 2013, Section 7-112 of the Maryland Real Estate Section went into effect, which provides for the automatic subordination of certain pledge rights contingent on the refinancing of a priority pledge right at a lower interest rate. Much has been written about the status and its technical aspects and can be found online. Instead of simply summarizing the relatively simple requirements of the law, let`s look at some of its finer aspects, including why section 7-112 was needed….