If the subordinated financing is maintained as part of an initial mortgage refinancing transaction, Fannie Mae will require the execution and registration of a follow-up agreement. Fannie Mae buys or securitizes senior mortgages that are subject to subordinate financing, with the exception of cooperative share loans, which are subject to subordinate financing. (See B5-7-01, High LTV Refinancing Loan and Borrower Eligibility, for exceptions to this directive.) Subordinated liens must be registered and clearly subordinated to Fannie Mae`s mortgage lien. Lenders must disclose to Fannie Mae, the appraiser and the mortgage insurer, the existence of subordinated financing and the terms of repayment of the subordinated financing. If an initial mortgage is subject to subordinated financing, the lender must calculate the LTV, CLTV and HCLTV ratios. If the financing by the real estate seller is more than 2% lower than the current standard rates for secondary pharmacies, the subordinate financing must be considered as a sales concession and the amount of the subordinate financing must be deducted from the sale price. Note: Title insurance against the fact that an old subordinated lien is not properly subordinated to the refinancing loan does not release lenders from compliance with these subordination requirements or Fannie Mae`s requirement that the property be free and free of all charges and privileges that prevail over Fannie Mae`s mortgage. If state law allows subordinated financing to remain in the same subordinated lien position established with the previous mortgage to be refinanced, Fannie Mae does not need a new order. The subordinate privilege must meet all the criteria set out in the applicable articles. With the exception of HELOCs, if the repayment terms provide for a variable interest rate, the monthly payment must remain constant for each 12-month period over the term of the subordinated pledged mortgage. (For HOME EQUITY lines of credit, the monthly payment doesn`t have to remain constant.) Monthly payments for all subordinated privileges must cover at least the interest due so that there is no negative depreciation (with the exception of funding from the subordinate employer, who deferred payments). Fannie Mae allows variable payments for subordinate financing when the following provisions are met: Deferred payments for a specified period before moving to fully depreciable payments, The following table shows the underwriting considerations related to subordinate financing in the context of refinancing operations. The following table describes the unacceptable subordinate funding conditions.
For information on equity loans, see B4-2.3-04, Eligibility for Equity Loans. For more information on subordinated financing of high LTV refinancing operations, see B5-7-01, High LTV Refinancing Loan and Borrower Eligibility. For more information on subordinated financing related to the Section 502 Leveraged Loans Program (Blended), see B6-1-05, Eligible RD-Backed Mortgages. Financing terms may provide that the employer requires full repayment of the debt if the borrower`s employment relationship is terminated (voluntarily or involuntarily) before the maturity date of the subordinated financing. The lender must take into account all subordinated privileges secured by the asset in question, regardless of the obligated party, when calculating the clTV and HCLTV ratios. This includes loans to businesses such as those provided by the Small Business Administration. If the subordinated financing comes from the borrower`s employer, there is no need to require regular payments of principal and interest or only interest. Employer subordinated financing can be structured in one of the following ways: Note: Fannie Mae accepts these subordinated financing terms if the amount of subordinated debt is minimal relative to the borrower`s financial assets and/or credit profile….