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Subordinate Financing

The purpose of this job aid is to provide additional information on data fields required in the new Loan Delivery application for loans with subordinated financing.

For detailed instructions on how to perform other tasks, see the Loan Delivery User Guide, eLearning tutorials, or other job aids. If you do not have access to Loan Delivery and require it, please contact your Technology Manager administrator.

Related Loan and Supporting Data

When building your loan delivery XML file for loans that contain subordinate financing, a data container must be sent with a LoanRoleType of "Related Loan". The table in the First Lien with Subordinate Financing Job Aid provides a quick reference to the Loan Delivery fields applicable to subordinate financing, found in the ULDD “Related Loan” container.

Definitions

  • Closed-end Loan - A loan where all the proceeds are disbursed to the borrower at closing. The principal portion of the borrower’s monthly payment pays down the UPB until it is paid in full. Subordinate financing is classified as either closed-end or open-end.

  • Concurrent Closing - A subordinate lien being closed at the same time as the first lien being delivered to Fannie Mae.

  • First Lien - A lien against the property that secures the mortgage(s), which is in first position. A first mortgage has priority over all other liens of claims on a property in the event of a default.

  • Home Equity Line of Credit (HELOC) - An open-end line of credit secured against the property. A maximum line of credit is established at closing, but funds are drawn by the borrower as needed. Similar to a credit card, the principal portion of the borrower’s monthly HELOC payment increases the available balance for future draws.

  • Related Loan - Any loan secured against the subject property other than the loan being delivered. Used in the ULDD XML import file to allow similar data to be delivered for different liens/loans.

  • Resubordinated Lien - Refers to a subordinate lien in a refinance transaction that is not being paid off with refinance proceeds; instead, the lien will retain its subordinate position. The subordinate lien lender provides a written agreement to resubordinate the lien to a position below the new first lien created by the refinance.

  • Subordinate Lien/Financing - A lien that is not in first position (e.g., a second, third, or fourth lien), sometimes referred to in the industry as “secondary financing,” even when the lien is in third or fourth position.