Subordinating 2nd mortgage

Hi I have 2 mortgages. Is it possible to subordinate the second mortgage and refi just the first one? 1st mortgage is about 78% of the home value and 2nd is about 7-8% of the home value? I was bit surprised when one of the broker told me that i can only refinance upto 80% of the value and i cannot keep the 2nd mortgage. Now the option is either close the second or pay PMI by combining both. Is it true that i cannot subordinate? There is another broker who was telling me that i could subordinate. I do not understand which is true. I have my 2nd mortgage with citi. When I checked with them, they said they have no problem with that. But I haven't checked about the max loan to value. But this broker seems to be telling me that the lenders for refinancing had changed the rules and nothing to do with my 2nd mortgage lender. If my 2nd mortgage lender doesn't have issues would it still be a problem in refinancing just my first mortgage?

thanks

There are some 2nd mortgage companies that won't subordinate 2nd mortgages but the majority do. If you're just refinancing for a better interest rate you should be fine (should being the key word). Sounds like your broker is either lazy or ignorant. Either way that's not good for you.

I would take a look in our directory (link top right corner) and find a lender that's a member of this site.  They are some of the best out there and have instant access to hundreds of loan officers around the country if they have questions.

Thanks for reading the forums.

Citi mortgage will subordinate up to a maximum combined LTV of 100%. Above that # is case by case but the usual answer is no. The conventional mortgage guideline for max CLTV is 95% so you should be fine.

For anyone else who may have the same question, here is what I know about other lenders:

Wachovia: They will not subordinate anything at this time regardless. This may change in the near future as they integrate with Wells Fargo.

Bank of America: They will subordinate to a new first mortgage but the first mortgage cannot exceed the existing principal balance. All closing costs and pre-paid items must be paid out of pocket by the borrower. (this is one of the most ridiculous policies I've heard of)

Wells Fargo: Great to deal with but it will take 4-6 weeks to process. Rule of thumb is 100% CLTV but will exceed that # with no ceiling if the subordination makes good sense. You will have to document and present your case to get the exception.

General rule for HELOCs: Most HELOCs can be subordinated to a new first. However, it is likely that the line limit will be reduced to 80% of the appraised value (90% on a case by case). If the current line balance  exceeds 80% then the line will be reduced to the current amount owed. Subsequent principal payments could cause further reduction of the line limit.

National City: General rule is 100% cltv. Exceptions on a case by case basis but you must present a strong case. The subordination requests are initiated online.

Beneficial (HSBC): 100cltv max. They will review the GFE and request you to lower fees if they deem them excessive.

Saxon: No max CLTV as long as there is a good benefit to the borrower.

I'll post more as I remember them.

Bob - 5 stars! Great post!

Bob,

You get 5 stars from me as well. 

To the Original Poster, your current broker may be trying to make their job much easier, but that may not be in your best interest.  Subordinations are common and with Citi, should be an option for you on the assumption that you are not paying off other debt or taking cash out.

I thought that Nat. City would NOT subordinate, have you tried with them lately?  They came out with that policy in early '08.

Nat City did a sub for me last month

Thank you very much for the inputs. It is very helpful. I will try to get in touch with you guys soon. much thanks

Bob, you da man...

on Citi, I've heard of numerous headaches with getting them to subordinate...

Very informative.

Something to add,

National city is doing them. I received one last week. Their turn time is still at just 1 week. at first they wanted the borrower to reduce the line to keep the CLTV at 95% we decided in our case to drop our loan amount 2k . They did say it is a case to case basis though. But to be approved the new first has to be rate and term which I'm sure is the case with all lenders.

Also, Chase is doing them. However their turn time is at like 32 days right now. So keep this in mind while locking.

I have been waiting for 3 weeks for Citi to approve a sub...

I'm finding right now that every time I ask I get a different answer.  2nd mortgage holders from huge national banks to local credit unions are all realizing if they don't subordinate to rate & term 2nds the risk of default is increasing. Regardless of who  you have and any past experiences I would call them over and over to ask. We as a company have run into that with 2 companies, National City & Chase. Both told us no, period. 2 weeks later said yes. 

I'm also finding turn times to vary depending on the person you talk to and how you treat them. Moral of the story is nothing is consistent in this market.

The only constant is that if you're subordinating a Home Equity Line of Credit they will decrease your line (if you have any open credit) to the balance and effectively close it.  We're getting that 90% of the time across the board. And makes some sense because it's shoring up potential loses.

I just got a new inquiry, the existing HELOC is with CITI, do you think they will subordinate to a cash out 1st, with a total CLTV of < 80%?

Brian, Citi will do that. You will likely have to include income docs and maybe even the credit report in the subordination request.

I have a sub going now w/ Citi submitted 2/2 and registered on their end 2/10.  After 6 calls and over 40 minutes of cumulative hold time we were told today they're working on subs received 2/1.  This is consistent w/ others I've talked that told me to expect 5-6 weeks.  Others in our office going through BofA have gotten them in 3-4 weeks. 

I'm attaching the requirement sheets from BofA and Citi.  If anyone has the form from other lenders maybe you can attach.

Good luck.

okay, I guess I'm not attaching them.  How do you attach to a reply?  I'm missing something here...

Cool, thanks Bob.  I figured they would want all of that stuff.

BTW, I just got one done with Wells.  We overnighted all of the requirements on Jan. 9th, didn't get the executed subord. in until Feb. 20th!  Six Long Weeks.  Cost me .25 ext. fee on a $417K.  Fun.

wow I have one going with Wells now - they told me 10 business days... I might as well extend the lock now!

Gary Paetzold:

wow I have one going with Wells now - they told me 10 business days... I might as well extend the lock now!

They meant 10 weeks maybe...

I hear that... maybe next time I will lock for 180....

Not sure if it matters, but I was dealing with the OR office, perhaps their other centers are more caught up?  But, I would plan on extending the lock, regardless of what they tell you.  It took them 5 bus. days just to "log in" my overnighted package!