When a first lender is no more. The tables are turned...

Real Estate Agent with RE/MAX Sun & Sea

I have a short sale that has been in negotiations for almost a year. As we get close to the approval with the second lender (line of credit), the attorney negotiating the short sale has the title work pulled and realizes that actually the owner had refinanced the 1st mortgage on the property in 2005.

When the refinancing was done the existing 2nd lender (line of credit) never signed a Subordination Agreement for the benefit of the new first mortgage lender, and as a result, the second (line of credit) was now in first position and was entitled to full payment, not the measly handout from the first lender... Apparently the new mortgage lender never sent the Subordination document to the line of credit... Talk about a major SNAFU.

New twist: now we have to convince the "no longer first" lender to take substantially less or risk being wiped out if the line of credit lender decides to foreclose...

Lesson learned: make sure the first lender is really in first position if you are dealing with a re-fi short sale...

Posted by

Ben Giordano, MBA, MILHM, CDPE, REOS, Realtor

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Comments (1)

Marcie Sandalow
Marcie Sandalow, Compass 301.758.4894 - Bethesda, MD
Bethesda Chevy Chase DC real estate

Wow- something I might not normally have been on the lookout for...  thanks for the post.

Feb 04, 2010 10:27 AM