Most lenders are tighening up on their guidelines when subordinating an existing 2nd mortgage. Here is what our industry is experiencing.
The inside scoop from my girl at WAMU. She had a few very irate customers come in to see her yesterday due to automatic decreases of their current client's equity lines. Mostly when the subordination is requested but soon just because they feel like it. So if a client that has an equity line at 250k with no balance ...they could get a letter in the mail reducing the line based on the current market/neighborhood activity with relation to value. Due to the fact that when the subordination is requested if the appraisal is low or they feel like they are having a bad day... they will automatically regardless of whether they decline or approve the subordination they will send a letter to your client letting them know they have reduced the line of credit automatically! Also the subordination process is long and most of the time declined. So beware and inform your clients that they may in the end not have the line of credit they currently have regardless if they proceed with the refinance. Or do what I am doing!
What I am doing for a client right now is getting her HELOC pre-approved thru WAMU retail which takes only a couple of days. Then she is ok with obtaining the new loan and closing the line she has. As long as she knows one will be available after the fact. The key is to keep your LTV to 80% and max the heloc at $149500. Anything above that will go to underwriting and will be scrutinized. Mostly needing assets but income may or may not be needed.
Also, they have a weird qualifying feature, such as my line was approved for 149500 with an approved rate of 6.25% but they used 9% as a qualifying figure (int only) so my ratios were pushed to 60%. They usually cap at 50% but this was an exceptional borrower so they approved him. The inside rep didn't even know why they did this...so even their own employees don' understand!
To sum it up subordinating right now is close to impossible so treat it like a whole new submission!
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