A subordinate lien is any mortgage or solar lien which is recorded in second position on a property that is subsequent to the first mortgage. Anytime a borrower is choosing to refinance their first mortgage, and if they have a second mortgage, such as a HELOC or a solar lien, then a subordination agreement will be required.
Despite its technical-sounding name, a subordination agreement has one simple function. It assigns your new mortgage to the first lien position by granting permission from the second lien holder, making it possible to refinance the existing mortgage.
The subordination agreement is typically provided by the second lien holders and solar vendors. As a courtesy to our borrowers, Bluefire Mortgage Group completes subordination agreements on behalf of the borrower so they do not need to deal with the additional paperwork that inevitably arises from these documents.
Current Challenges
Under normal circumstances, a subordination request typically takes approximately 3-4 weeks to complete. Due to COVID-19, the current turn times are taking anywhere from 6-10 weeks to get a subordination agreement completed. This is mostly due to delays that the second lien holders are facing as most of their staff are working from home and as a result most of their departments are not operating at full capacity.
Current Solution
At Bluefire Mortgage Group, we have a dedicated team that handles and processes subordination agreements on behalf of our clients. We communicate with our clients constantly and provide our borrowers with key milestone updates every Tuesday though the refinance process.
We want our clients to understand that because of these difficult times, be prepared for delays in the refinance process while the subordination agreement is being completed. Subordination agreements only apply to borrowers who have an open second lien. For example, if a borrower has solar, but it is owned free and clear, then there is no need for a subordination.
The same principle applies for HELOC mortgages, where if a borrower has no outstanding balance on their HELOC, then they can elect to close the HELOC and terminate the loan, which would eliminate the need for a subordination agreement entirely.
The downside is that the borrower would not have access to their HELOC anymore, and would need to re-apply for a new HELOC once their refinance is completed.
If you have any questions regarding a mortgage subordination for your specific scenario please reach out to our office at (760) 930-0569.
