Resubordination occurs in a refinance when the borrower wishes to keep their current second mortgage and only refinance their first mortgage. Lien positions are generally determined by date, the oldest loan being in first position. Lenders will require that if the loan is the primary mortgage that it is in first position. So if a borrower wishes to refinance only the primary mortgage and keep their current second mortgage, they will need to resubordinate the second mortgage. This will put the refinanced primary mortgage back into first position. First position is also the first loan to be paid off in the event of a foreclosure, etc.

Normally, the rate and terms of the previous second mortgage will change due to the fact that it is being Resubordinated. Often, the borrower might not be able to "re-qualify" for a new second mortgage with as favorable a rate and/or terms, even after the newly adjusted rate and terms of the Resubordinated second.

In foreclosure refinances, very often it is necessary to keep your second mortgage by resubordinating it in order to meet the tighter loan to value guidelines for these loans

Subordination or resubordination can also occur with other items that may be on title to your home which may not necessarily be a second mortgage. There could be a lien on your property from a city grant you may have received in order to fix your home up with money from the city. Many times the city will subordinate or re-subordinate these liens to help you refinance your first mortgage.

IRS Liens are also liens that many times will subordinate if you do not have enough equity to pay them in full. Often they will allow you to pay down the lien with some loan proceeds and have the ramaining balance resubordinated.

 

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