Month: December 2018

Subordination agreements apply to mortgage customers who have more than one mortgage on a property.

For example, if you had a mortgage on your home, then decided to get either a home equity loan or a line of credit, the new mortgage would be subordinated to the first mortgage.

In mortgage terminology, the subordination agreement would put the original mortgage in what is called first position. This means if the owner of the property defaults and the property must be sold, the lender in first position would be paid back first. The lender of the second mortgage would be paid back second, if the property sale generates enough funds.

This is why the mortgage rate on a second mortgage is often higher than the rate on the first. The second lender is taking a risk that there might not be enough funds available to pay back the loan in a default situation.

To take this a step further, if a homeowner has two mortgages and wants to refinance just the first mortgage, the homeowner would have to get a new subordination agreement signed by the original second lender before doing so.

This is to keep the second mortgage in second position. Otherwise, the once-in-second-position mortgage would move to first position, and no first mortgage lender would ever allow themselves to become subordinated under a second mortgage.

If you have additional questions about this agreement or the process for obtaining a second mortgage, contact your mortgage professional for details.

It’s a good rule of thumb to check your credit report regularly, even if you’re not currently applying for a mortgage or any other type of credit.

Why? If the report contains incorrect information, it’s better to know sooner than later, especially if you do plan to apply for credit at some point. This will give you time to correct the error before it affects a transaction.

If you discover a mistake, you can approach correcting it in one of two ways.

The first and most basic approach is to contact, in writing, the credit bureau that reported the information you believe to be incorrect. The three primary credit bureaus are Experian, Equifax, and TransUnion.

Send each of these reporting bureaus a certified letter, providing as much detail as you can, including account numbers as they appear on the credit report, all relevant dates, and why you think that the information is incorrect. There are online resources to assist with drafting this letter.

The bureaus will then go to the agency that provided the information to get details of what happened. If that agency is unable to provide documentation that the debt is legitimate, it then must come off the report.

Keep in mind that the credit bureaus are not required to remove legitimate negative data from a credit report.

The second option is to go to a credit repair agency, which will do some of this work for you. However, keep in mind that these agencies charge a fee. They may also take longer to get back to you than if you did it yourself, since they will be servicing multiple clients who each demand part of their time.

If you decide to go this route, check out whomever you want to use. As with any other type of service you are shopping for, check the company’s status with the Better Business Bureau.

Additionally, your mortgage professional may have referral partners in the credit repair business to whom they can refer you. Contact this expert for more details.