Subordination of mort.
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Subordination of mort. (by NE [PA]) Sep 11, 2021 4:12 PM
       Subordination of mort. (by WMH [NC]) Sep 11, 2021 4:21 PM
       Subordination of mort. (by Ray-N-Pa [PA]) Sep 12, 2021 9:48 PM

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Subordination of mort. (by NE [PA]) Posted on: Sep 11, 2021 4:12 PM

As seen recorded in courthouse Deeds office, what is a “subordination of mortgage?

Subordination of mort. (by WMH [NC]) Posted on: Sep 11, 2021 4:21 PM

Google is your friend:

Subordination is the process of ranking home loans (mortgage, HELOC or home equity loan) by order of importance. ... Through subordination, lenders assign a “lien position” to these loans. Generally, your mortgage is assigned the first lien position while your HELOC becomes the second lien.

Why does subordination matter?

In a foreclosure, your mortgage and HELOC must be paid off with the equity in your home. Unfortunately, a home’s equity cannot always cover the full cost of both loans. Subordination addresses this problem with pre-established lien positions.

The first lien is always paid off first. (In this case, that’s your mortgage.) Equity can only be allocated to pay off the second lien once your mortgage is paid in full. If there were a third lien, it would be paid off after the second lien. And so on.

When there’s not enough equity to cover what’s owed on your second lien, the HELOC lender loses money. Subordination cannot magically pay off loans, but it does help lenders estimate risk and set appropriate interest rates.


Subordination of mort. (by Ray-N-Pa [PA]) Posted on: Sep 12, 2021 9:48 PM

It doesn't happen often in Pa anymore but about 13 years ago, you could buy a place using a first and second mortgage. These deals would be structured up as 80% first 15% second and 5% buyer funds.

Just because the mortgage says first in Pa doesn't make it a first. In the example I gave you, on closing day both the first and second go to the court house on the same day to get recorded.

In Pa the deed that is recorded first is the first mortgage. So if the second is recorded first is treated as the first position - even if it says second on it. Now in the event of a foreclosure, the party foreclosing can as the courts to change that order as it wasn't suppose to happen that way. If you fight it it, it will not happen. If you don't fight that, it might happen.

What is the context that you are learning about this? This can be a hidden gold mine. I would think a large first position could foreclose on a smaller second position in the hopes that the #2 position buys them out. But if the inverse occurs, you will get your money paid by the bank. If the first is small and the second is large......$$$

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