Refinance Mortgage – Priority over Junior Liens Bill
Signed into Law by Governor Martin O'Malley on May 2, 2013
Effective as to certain refinance mortgages recorded or having
an effective date
from October 1, 2013
The Refinance Mortgage Priority over Junior Liens
Bill provides important assistance for homeowners attempting
to refinance their first mortgages at a lower interest rate
by eliminating the need to obtain the consent of a currently
subordinate mortgage lender.
Background: When a first mortgage is refinanced, the
lien on the real property is released of record, and a new
mortgage lien is recorded. Because lien priority is determined
by recording order, the lien of the refinance mortgage becomes
subordinate to any other mortgages already of record. A condition
of refinancing commonly includes an agreement by a subordinate
mortgagee to stay in its subordinate lien position. However,
negotiation with a subordinate mortgagee can cost value time,
money and opportunity.
The new law: The Act generally provides that a refinance
mortgage that meets specified criteria shall have, upon recordation,
the same lien priority as the first mortgage or deed of trust
that the refinance mortgage replaces.
In order to qualify, the refinance mortgage:
- Must be given to secure the refinancing of the loan secured
by the first mortgage or deed of trust;
- Secure residential property as well as refinance a mortgage
that secured residential property as defined in the Act,
- Be made by a mortgagor to refinance in full the unpaid indebtedness
secured by the first mortgage;
- Cannot exceed the unpaid outstanding principal balance secured
by the first mortgage or deed of trust plus an amount not
exceeding $5,000 to pay closing costs; and
- The principal amount secured by the subordinate lien does
not exceed $150,000.
The above information is intended only as a brief
summary of the Act (PDF document, download
Adobe Acrobat for free).