Maryland Removes Potential Barrier To Refinance Transactions

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On May 2, Maryland enacted SB 199, which authorizes a mortgagor to refinance the full balance of a loan secured by a first mortgage or deed of trust without the permission of the holder of a junior lien if (i) the principal amount secured by the junior lien does not exceed $150,000, and (ii) the principal amount secured by the refinance mortgage does not exceed the unpaid outstanding principal balance of the first mortgage or deed of trust plus closing costs up to $5,000. In short, under these conditions, the bill grants, on recordation, the same lien priority to the refinance mortgage as the replaced first mortgage or deed of trust. Under current law, when a first mortgage is refinanced, the holder of an existing junior mortgage is asked to agree to subordinate so that the first loan holder preserves priority, and the second lienholder can block the homeowner’s ability to refinance the first mortgage. Even where the junior mortgage holder agrees, the process can take can take more than a month and may require the borrower to pay subordination and rate-lock fees. The bill takes effect on October 1, 2013 and applies to refinance transactions after that date.