Subordination Information for Lenders
To request the subordination of an existing First Time Homebuyer loan or Rehabilitation loan, please provide the required documentation. Please note that there is a non-refundable subordination fee that will be charged for every subordination agreement processed.
Conditions of Subordination:
A. Subordination of the City of National City’s loan in favor of a new loan in the amount of the current balance of the original senior loan plus reasonable costs of refinancing is acceptable as long as the purpose of the refinance is to lessen the borrower’s monthly financial obligations (debt service) for housing costs, to reduce both the term and interest rate of a loan when the new total payment (principal, interest, taxes, insurance, and homeowner’s association fees) does not exceed 35% of the borrowers total gross monthly income, or when a senior lien becomes due and payable.
B. No subordination will be approved which provides cash or equity being taken from the property (unless the cash is being used to pay reasonable closing costs or to remediate code violations at the property).
C. The City of National City’s loan must be recorded in the same position as when it was originally recorded.
D. City staff will review the new loan application and underwriter’s summary, estimated buyer’s settlement charges and title report to verify compliance with these criteria prior to execution of a subordination document by City.
E. City staff will submit their review and recommendation to the National City Housing Authority Director for final approval or denial of the subordination request.
F. Staff will prepare an annual report to the City Council, City Manager, and Director of Finance that provides information on the new mortgage principal balance, rate, and term that the City assistance loan subordinated to.
Procedure & Required Documentation:
The new lender will forward a request to the National City Housing Authority that will include the following:
- A written request from the lender for a rate and term refinance with the borrower’s authorization to release information form.
- A letter signed by the borrower explaining the purpose of the refinance.
- Copy of all pages of the loan application (1003) signed by the borrower.
- Copy of the Preliminary Title Report.
- Certified copy of the escrow instructions referencing the new lender, showing vesting, and the new loan amount. If no escrow is involved in the transaction, a statement from the new lender is required listing the new loan amount, exact vesting for borrower, and name of the lender exactly as it will appear on the loan documents.
- Copy of the Estimated HUD-1 Settlement Statement
- Pay-off statement from the existing first trust deed lien holder.
- Copy of the lender’s Underwriting Transmittal Summary (1008), clearly showing the loan has been approved, the loan amount, interest rate, term of the loan, and the principal and interest payments. The new first trust deed loan must be a fixed rate loan, fully amortized over the life of the loan.
Housing Authority Fee Schedule
Subordination Requests — $344
(Fee Scheduled approved May 21, 2019)
A non-refundable subordination fee will be charged for every subordination agreement processed. The lender must include a check made payable to the City of National City for $344.00 per the subordination agreement executed by the City. The fee may be subject to change from time to time. Payment of the fee must be included with the submission of the subordination package.
Upon receipt of a complete package, staff will present the request for subordination to Director of Housing and Economic Development for consideration. If approved, the lender will be notified of any contingencies. The City will draft the subordination agreement(s) based on the information provided by the lender or escrow company.
The process takes 7-10 business days to complete—excluding Fridays and holidays. Please be advised that we do not offer expedited services and require that the lender or escrow submit requests at least 30 days prior to closing.
Please be advised that incomplete files will be returned unprocessed and are subject to additional fees upon resubmittal. Missing information and/or missing documents constitute an incomplete file and will be returned unprocessed. Please be sure to submit a “complete” package to avoid resubmittal processing fees.