If you`re a homeowner looking to refinance your mortgage, you may have encountered the term « subordination agreement. » Specifically, you may have come across the Fannie Mae subordination agreement form.
But what exactly is a subordination agreement, and how does it differ from a standard refinance?
In short, a subordination agreement is a legal document that allows a lender to maintain their priority claim on a property`s title while allowing the borrower to refinance their mortgage. This is important because when a borrower refinances their mortgage, the new lender may take priority over existing liens or claims on the property, which could potentially lead to legal disputes or complications.
What does the Fannie Mae subordination agreement form entail?
The Fannie Mae subordination agreement form is a standardized document that outlines the terms of the subordination agreement between the borrower, the original lender, and the new lender. The form covers important details such as the loan amounts, interest rates, and repayment terms for both the original and new loans.
Additionally, the form specifies which liens or claims will be subordinated and the conditions under which the original lender agrees to subordinate their lien. For example, the original lender may require that the borrower maintain a certain credit score or make timely payments on the new loan.
The Fannie Mae subordination agreement form is used specifically for loans that are backed by Fannie Mae, a government-sponsored enterprise that purchases and securitizes mortgages. This means that if your mortgage is backed by Fannie Mae, you will likely need to use the Fannie Mae subordination agreement form when refinancing.
Why is a subordination agreement important?
In addition to preventing legal disputes or complications, a subordination agreement can also make it easier for borrowers to refinance their mortgages. Without a subordination agreement, borrowers may be unable to refinance if their property has existing liens or claims that cannot be subordinated.
Furthermore, a subordination agreement can help borrowers secure lower interest rates or better loan terms by allowing them to refinance with a new lender.
If you`re a homeowner looking to refinance your mortgage, it`s important to understand the role of a subordination agreement and how it can impact your refinancing process. Consult with a qualified loan officer or attorney to ensure that you are using the appropriate form and that you fully understand the terms of the subordination agreement.
