1. Subordinations:

A. Requests for subordination of the interest of the Richfield HRA in real property shall be considered after the lender has submitted a Subordination Request Form. The completed form shall contain the following information:

1. The property address.

2. The mortgagor name.

3. A typed letter, dated and signed by the mortgagor, stating the reason for the requested subordination and the use of any equity being removed as part of the loan transaction.

4. The closing date.

5. The full name of the lending institution as it will appear on the subordination.

6. The lending institution’s state of incorporation.

7. Information regarding debt on the property:

- Amount of the loan to which HRA would be subordinating
- Amount of HRA lien
- Outstanding balance on all other remaining liens
- Maximum indebtedness under all Equity lines of credit
- Amount of any equity being removed
- Total projected indebtedness
- Ratio of all indebtedness to which the HRA lien would be subordinated, compared to the value of the property

8. The value of the property. The lender shall attach a copy of the current appraisal or other evidence of market value of the property that is acceptable to the HRA.

9. A copy of current title work (must indicate all debt against the property).

10. Estimated closing costs/settlement statement.

11. A copy of the proposed subordination agreement.

B. In general, the Richfield HRA will subordinate its mortgage interest to a refinance if all of the following conditions are met, to the extent that they are applicable:

1. Closing costs are reasonable. Generally this shall mean that the sum of all discount points, origination fees, and lender ancillary fees generally shall not exceed 3% of the new first mortgage amount.

2. If the HRA believes that the payment terms of the refinance are within the financial means of the borrower.

3. The total debt secured by the property, including the HRA lien and all superior mortgages, does not exceed 80% of the documented market value of the property.

4. Any equity being removed beyond the cost of the loan transaction will be used to improve the property. A typed letter, dated and signed by the applicant, must be submitted stating the use of any equity being removed.

5. The overall value of superior debt must not be increased by more than 50%. Exceptions may be granted by the HRA in cases where superior debts are found to be unusually low with sufficient equity protection.

6. The proposed superior mortgage must not be a Reverse Mortgage.

7. If no more than one subordination request has been approved by the HRA in the past.

8. Property taxes, if not escrowed by the superior mortgage holder, must be current.

9. In most cases, interest-only loans or loans with interest-only options will not be allowed unless the HRA determines that an acceptable reason warrants this type of loan.

The HRA may approve other subordination requests not meeting the conditions above on a case by case basis that are clearly in the best interests of the HRA, and the security of the HRA loan remains acceptable, and denial of the request will cause or contribute to a documented hardship on the part of the borrower.

C. If a borrower dies and leaves the property to his or her heirs, HRA will require repayment of the loan and will not permit heirs to live at the property without having to repay the loan.

D. Subordination requests will be processed by Community Development Department staff, who will submit the request with a recommendation for action, to the Housing & Redevelopment Manager. The Manager may request review and final decision by the HRA. Requests for subordination should be submitted 30 days prior to the date the agreement to subordinate is needed. Exceptions may be made on a case by case basis.

E. Subordination requests will be subject to a processing fee of $75.00 or as established by the HRA, which must be paid when the subordination request is submitted to the HRA. Fees are not refundable.

2. Satisfactions:

A. When a loan made by the HRA is paid in full, a document satisfying the lien will be prepared by the HRA and delivered to the borrower for recording. The borrower is responsible for the cost of recording the satisfaction.

SUBMITTING A REQUEST

If you believe your request for subordination meets the above criteria, please complete the application and send to:

Richfield HRA
ATTN: Housing Specialist
6700 Portland Ave S
Richfield, MN 55423
Fax: 612-861-8974

If you have questions regarding this policy, please call 612-861-9778.