Residential Loan Subordination Policy

Applies to

All departments

History

Council approval: July 30, 2016, Council Action 2016A-0581

Last revised: November 7, 2022, Resolution 2022R-271

Policy

Processing/Review Fee
1. The City will charge a reasonable fee for processing and review of each occasion where subordination is requested. If a subordination request is resubmitted because of a change in the loan amount, an additional charge may be imposed.
2. The Servicer of a City loan will also charge a reasonable fee for processing a subordination request. The Servicer may charge an additional fee for each additional
3. The Director of CPED shall approve updates and post the subordination fee schedule on the CPED website.
Conditions for Subordination
Subject to conditions identified below, subordination may be granted to permit the mortgagor to benefit from a refinance involving an interest rate reduction, reduced monthly payment, or a shortened term of their primary mortgage loan. This refinance may include any and all debt that is superior to City loans in lien status, and, subject to the conditions outlined below, may also allow the mortgagor to obtain cash from their equity in the home.
1. The City will subordinate on refinances that do not involve cash out and result in interest rate reduction, reduced monthly payment, or a shortened term of the borrower's primary mortgage.
2. If the combined loan-to-value ratio exceeds 80%, the City will subordinate to a cash out refinance provided loan proceeds are being used solely to address eligible health and safety improvements on the Eligible health and safety improvements include: electrical, plumbing, heating, wall and ceiling repairs, painting, flooring, carpentry, gypsum board, soffit, gutters, fascia, siding, windows, doors, insulation, retaining walls, foundation and cement work, roofing, drainage, grading, environmental hazard remediation (i.e. radon, asbestos, and mold remediation), building code violations, and accessibility improvements. Proposed work is subject to City review. Scope of work with contractor bids substantiating health and safety improvements and cost must be submitted with the application.
3. If combined loan-to-value ratio is less than 80% and:
  1. The loan proceeds are being used for home improvement or repair, the City may subordinate provided there are no existing defaults on City loan contracts. Proposed work is subject to City review. Scope of work with contractor bids substantia_ting home improvement or repair and cost must be submitted with the
  2. The loan proceeds are not being used for home improvement or repair, the City may subordinate if the City loan is contractually forgivable.
4. Reverse Mortgages: The City will not subordinate to reverse mortgages when City loans are payable obligations. The City may subordinate when City loans are forgivable.
5. The City's residential loan subordination policy is applicable only to liens superior to City
6. The mortgagor must be in compliance with the terms of any/all existing City loan
7. CPED reserves the right to deny any subordination request it deems not in its best
Required Documentation
Lender or its representative shall submit the following documentation for loan subordination requests.
1. Required Subordination Fee
2. Loan Subordination Lender Data Sheet
3. Loan Subordination Request Checklist
4. Loan Subordination Disclosure
5. Proof of the present value of home (current appraisal, or if Streamline Refinance, a copy of the current County Assessor Tax Value Statement)
6. Copy of Loan Estimate
7. Copy of Title Insurance Commitment
8. Payoff Statement(s) on existing loans being repaid
9. If the refinance involves home improvement or repair, a scope of work summary with contractor bids substantiating costs

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Finance & Property Services

Phone

612-673-3000

Address

City Hall

350 S. Fifth St., Room M380

Minneapolis, MN 55415

Residential Loan Subordination Policy

Overview

Applies to

History

Policy

Request accessible format

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Finance & Property Services

Residential Loan Subordination Policy

Overview

Applies to

History

Policy

Request accessible format

Contact us

Finance & Property Services

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