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What are the resubordination requirements for refinance transactions?

Resubordination Requirements for Refinance Transactions

If subordinate financing is left in place in connection with a first mortgage refinance transaction, Fannie Mae requires execution and recordation of a resubordination agreement.

If state law permits subordinate financing to remain in the same subordinate lien position established with the prior first mortgage that is being refinanced, Fannie Mae does not require resubordination. The subordinate lien must satisfy any specified criteria of the applicable statutes.

Note: Title insurance against the fact that a former subordinate lien is not properly resubordinated to the refinance loan does not release lenders from compliance with these resubordination requirements, or from Fannie Mae’s requirement that the property is free and clear of all encumbrances and liens having priority over Fannie Mae’s loan.

For additional information, see B2-1.2-04, Subordinate Financing.

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