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Hardship Subordination Guidelines

Hardship Subordination Guidelines for MFA Second Mortgage Loan Products

Guidelines apply to the following programs: HELP, HOME Rehab, HOME Payment$aver, Mortgage Booster DPA, HERO DPA, Tax Credit Loan and NSP

MFA second mortgage loan products are designed to assist first-time homebuyers with down payment and closing costs associated with purchasing or rehabilitating a home. These loan products are repaid through various methods which include: due on sale, transfer or refinance, monthly payments and compliance term forgiveness. In addition to complying to program guidelines, repayment of your second mortgage loan under the terms of your mortgage instrument allows the funds to be recycled to assist other first-time homebuyers. Because of the program requirements, MFA would not normally authorize a subordination of any MFA second mortgage loan product. However, MFA will review and approve a subordination request under the following circumstances:

A Federal HOME funded loan refinanced during the Period of Affordability (“POA”):  MFA will review and approve a subordination request on Federal HOME funded loan within the HUD defined POA.

Hardship: Need for emergency home improvements; unforeseen medical needs and/or expenses; a situation that prevents foreclosure on the borrower’s first mortgage such as loss mitigation loan modification; a hardship created through divorce or legal separation; Imminent Default, or other special circumstances that may be approved by MFA. 

A Subordination request must meet the following minimum requirements:

  • A hardship situation exists
  • No cash out
  • New interest rate must be a fixed rate
  • The closing costs do not exceed 3 percent of the loan amount
  • The refinance should benefit the borrower by allowing a current market rate first mortgage and/or lowering the current first mortgage interest rate or payment
  • Property MUST BE owner occupied
  • Borrower vesting must be identical to original documents
  • MFA hardship subordination is limited to one approval for the term of MFA second mortgage

 

MFA must receive:

  • Contact information/mailing address of person/lender submitting the package
  • Written request from the borrower explaining the purpose for the request and documentation supporting the hardship (see supporting documentation list below)
  • Copy of MFA’s existing second lien documents – note and mortgage
  • Copy of the existing first lien documents -signed note and recorded mortgage
  • Copy of payoff quote on current 1st mortgage
  • Copy of the completed loan application, TIL, Good Faith Estimate showing all anticipated costs/fees
  • All pertinent loan information on the new first mortgage MFA is subordinating including information for the lender that will be closing loan)

 

Supporting documentation required:

 

  • Imminent Default (HUD Defined) -

          A reduction in or loss of income (unemployment, reduced job hours, reduced pay, decline in self-employed business earnings)
          A change in household financial circumstances (death in family, serious or chronic illness, permanent or short-term disability of borrower)
    • Reason: To prevent foreclosure
      Documentation submitted to MFA:
      Documentation supporting the hardship

 

  • Loss Mitigation-Loan Modification
    Reason: To prevent foreclosure
    Documentation required from lender:
    • Payoff  quote on existing 1st mortgage
    • Payoff quote on 2nd mortgage if not serviced by MFA
    • Copy of note and mortgage on existing 1st lien
    • Copy of loan modification agreement
    • Copy of sub-note and mortgage, if applicable
    • 2nd mortgage with MFA must be current
       
  • Cash-out
    Reason: Emergency home improvement or medical need/expenses
    Documentation submitted to MFA:
    • Documentation supporting the expense
       
  • Divorce/legal separation
    Reason: Refinancing in order to remove co-borrower from first mortgage (where equity in home is not enough to pay off MFA loan).
    Documentation submitted to MFA:
    • Divorce decree stating need to refinance
    • Quit Claim Deed
    • Appraisal, if applicable
       
  • Relocation (home is non-owner occupied)
    Reason: Relocation due to military orders
    Documentation submitted to MFA: Copy of military orders

 

Process

Submit the required documents to MFA via fax (505) 243-3289 or contact MFA's Mortgage Servicing Department at (505) 843-6882 to request the e-mail address of the person handling the requests. Within seven to l0 business days of receipt of your package, the lender will receive an approval/denial letter or request for additional information from MFA.

If the request for subordination is approved, MFA will complete and execute a subordination agreement ONLY upon receipt of copies of the new first mortgage documents and the Final HUD 1. Please allow up to two business days for preparation of the subordination agreement.

The lender/title company is responsible for recording the original subordination agreement and forwarding recorded original along with a copy of the final HUD I to: MFA, 344 4th Street SW, Albuquerque, NM 87102.

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