Subordination Fee

Who should pay for a mortgage subordination fee?

I am refinancing my first loan. The bank has to submit papers to my second loan bank for subordination. My first bank wants me to pay the subordination fee. The second bank tells me that the borrower (me) should not have to pay that fee. Who is responsible for the subordination fee?

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Bill's Answer
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Normally when a first mortgage is paid off the second moves into the first position unless the holder agrees to "subordinate" the second. A subordination agreement is an instrument that allows a first lien or interest to be paid off and allows another first mortgage company to come in and be the first priority lien holder.

It is very common for the borrower to pay subordination fees. The second mortgage belongs to the borrower and most likely it is the borrower requesting to keep it open. Most banks handling a refinance would rather you pay-off the second mortgage rather than subordinate.

If you are still shopping for a mortgage refinance, visit the Bills.com mortgage refinance savings center for no-cost quotes from up to four pre-screened lenders.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

2 Comments

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  • BD
    Mar, 2011
    Bonnie
    My husband and I have a first and second mortgage, the first is at 7.5% with BOA and the second is with Specialize Loan Servicing at 9.8%. We tried to refinance our home for the 'lower interest rate' and paid all fees for appraisal, application and then, since the market is slow, a subordination fee to the second lender. The process was at the Title company ready to be closed when BOA requested a THIRD appraisal, 8 months into the refinance. Because of a foreclosure that sold some 8 miles from our home, the appraisal on our home came in $25,000 lower than the other appraisals and the refinance was DENIED unless we came in with the additional cash. Can we get ANY refunds for the money that we extended during this FRAUD????
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    • BA
      Mar, 2011
      Bill
      Consult with a lawyer in your state who has experience in civil litigation or consumer law. The key questions are:
      1. Was the third appraisal reasonable under the circumstances?
      2. Was the decrease in the appraised value reasonable given that the comp used was 8 miles away? In an urban or suburban area, that really seems like an unreasonable comp. However, if you live in a more rural area, it may be perfectly reasonable
      3. Was the foreclosure sale 8 miles away one of the mortgage servicer's?

      From my perspective, the important bits of information to learn are, was the servicer really fishing for a reason to kill the deal, and did it know of the nearby foreclosure?

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