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Mortgage Assistance Foundation
Meeting Date: 10/10/2019  
Subject:    Subordination Policy
From: Kristin DeGrande

Currently, all Coon Rapids Home Improvement Program recipients are required to sign a non-subordination policy as part of their closing paperwork.  This means that should any of these homeowners want to refinance on their primary mortgage, they would without exception have to pay off their Coon Rapids loan.

A non-subordination policy is a tool for protecting lenders and ensuring their loans are repaid when homeowners decide to refinance on their primary mortgage.  The CRMAF/CRHIF loans currently do not allow homeowners to refinance without first paying off their Coon Rapids loan.  There are several scenarios in which allowing homeowners to subordinate their CRMAF/CRHIF loan would benefit the homeowner while still limiting risk.  CRHIF could create a subordination policy that allows homeowners to refinance if:  
1. the new mortgage is a first lien.
2. the new combined loan to value ration does not exceed 100% of the current Market Value of the property.
3. the new mortgage is not an interest only or adjustable rate mortgage.
4. the new mortgage is not a cash-out refinance.
5. the new mortgage does not move the City of Coon Rapids' lien to a lower position.
6. the loan with the City of Coon Rapids is current and in good standing.
7. the current loan with the City of Coon Rapids has not been subordinated to a different mortgage during the last 24 months.
8. all property taxes are current.

The Center for Energy and Environment (CEE), the Coon Rapids Home Improvement program administer, has provided a sample policy (attached).
Staff recommends approving a loan subordination policy for all new loans originated through the Coon Rapids Home Improvement Program.

Non-Subordination Policy
Proposed Subordination Policy

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