Suntrust Subordination – Fill Out and Use This PDF

Overview

Summary

•The Subordination of SunTrust Second Mortgage Loans document provides guidelines for the subordination of eligible existing SunTrust Bank and SunTrust Mortgage, Inc. second mortgage liens (i.e., Combo, EZ Two, Equity Lines and Equity Loans).

Reference: Subordinations of secondary financing in connection with the DU Refi Plus™ and the Freddie Mac Relief Refinance MortgageSM loan program must follow the subordination guidelines outlined in Section 1.21: Subordination of SunTrust Second Mortgage Loans of the Broker Seller Guide.

•If the existing second is a SunTrust Combo or EZ Two second mortgage, SunTrust Mortgage, Inc. (i.e., SunTrust underwriter or contract MI underwriter on the behalf of SunTrust) must approve the subordination request at the same time the new first mortgage is approved.

•If the existing second is a SunTrust Bank or SunTrust Mortgage, Inc. equity line or equity loan, the subordination request must be processed through the Orlando Consumer Lending Sales Center (CLSC).

Note:

•All subordination requests MUST be approved by SunTrust.

New First

Mortgage

Requirements

•If the new first mortgage product is a short term ARM (i.e., 3/1, 1 year, etc.), the existing SunTrust Combo and EZ Two second mortgage is NOT eligible for subordination.

•The maximum loan term of the new first mortgage is 30 years.

•The new loan must be the same or a more stable product than the current first mortgage when subordination of a Combo or EZ Two second mortgage is required. Fixed rate mortgages are only eligible to be refinanced into a new fixed rate mortgage. ARM loans must be refinanced to either a same term ARM, longer term ARM or a fixed rate mortgage.

•The new first mortgage loan should put the borrower in a more favorable financial position, by either:

•reducing the interest rate; or

•replacing an interest only or balloon reset mortgage with a fixed, fully amortizing mortgage.

•Cash-out refinances are permitted if all funds are being used to reduce the unpaid principal balance of the existing SunTrust Combo or EZ Two second lien.

New First

Mortgage Requirements, (continued)

•The new first mortgage loan may include normal and customary closing costs up to a maximum 5% of the new loan amount or $10,000, whichever is less.

•There is no maximum P&I payment increase; however, when the new P&I payment increases by more than 20% of the existing P&I or interest-only payment, the borrower’s income and employment must be documented and the maximum debt-to- income (DTI) ratio is 55%.

•When calculating the payment increase for existing loans with adjusting payments, the current payment must have been made for at least seven (7) consecutive months; otherwise, the lowest P&I payment or interest-only payment made during the most recent 12 months must be used.

General

Service Levels

•Existing SunTrust equity line/equity loans that are not being paid off with the proceeds of the new first mortgage are eligible for subordination in accordance with the guidelines outlined in this topic.

Note: In all cases where an existing SunTrust equity line/equity loan is not being paid off with proceeds of the new first mortgage, The equity line/loan MUST remain in second or third lien position. A Subordination Agreement must be executed.

•The existing SunTrust equity line/equity loan is eligible for subordination behind a new SunTrust first mortgage or a “non-SunTrust” first mortgage. SunTrust Bank equity lines/equity loans are identified by a seventeen (17) digit loan number. SunTrust Bank Access 3 lines of credit contain sixteen (16) digits.

•The new first mortgage product must be eligible for subordinate financing.

•Additionally, the new LTV/TLTV/HTLTV must meet the more restrictive of the specific new first mortgage guidelines or the guidelines outlined in this policy.

Reference: See the applicable first mortgage product description for secondary financing guidelines.

•Any loans subject to a SunTrust equity line or equity loan subordination must be submitted to SunTrust for underwriting and approval.

•The subordination request must be processed through the Orlando Consumer Lending Sales Center (CLSC).

•A subordination agreement is required to assure the equity line/loan remains in second or third lien position.

•The borrower(s) MUST receive a tangible net benefit from the refinance transaction in order for the second mortgage to be eligible for subordination.

Notes:

•For existing SunTrust equity line/equity loans, the subordination agreement is drafted by the SunTrust Orlando CLSC group at the time the subordination request is reviewed and approved.

•The subordination agreement is executed at the closing of the new first mortgage and is recorded with the first mortgage documents.

•Subordination requests must be submitted allowing for the following service levels:

Note: Service levels are determined at the time the Orlando CLSC receives the subordination request and any required documentation.

Maximum

TLTV/HTLTV

•The credit limit for equity lines can be obtained by calling SunTrust’s Consumer Loan Servicing (CLS) Department at 1-800-368-7700.

The following table provides the maximum TLTV and the maximum combined loan amounts for equity line subordinations:

Maximum Combined Line/Loan Amount

•For lines, the maximum amount of credit available, not the current balance, must be used in calculating the TLTV/HTLTV.

•For loans, the current unpaid principal balance of the existing equity loan must be used in calculating the TLTV.

Notes:

•The maximum HTLTV may not exceed 100% IN ANY CASE.

•For rate/term refinance transactions, if the second mortgage has a TLTV > 85%, CLSC will evaluate the subordination request on a case by case basis to determine if the borrower is receiving a benefit from the rate/term refinance transaction before making a decision regarding the subordination request.

•If the new TLTV/HTLTV exceeds the new first mortgage guidelines, the loan must be conditioned for a reduction in the credit limit to meet the maximum allowable TLTV/HTLTV for the applicable first mortgage product.

Continued on next page

Qualifying

Ratio and

Payment

Guidelines

•Ratios are calculated on ALL subordination requests, regardless of the original loan program. The maximum debt to income (DTI) ratio is calculated based on the borrower’s gross monthly income and credit score, as outlined in the table below:

•For equity lines of credit, the qualifying payment is equal to one percent (1%) of the credit limit, regardless of which payment option is selected or the amount drawn at initial draw, closing, etc. For equity loans, the qualifying payment is the actual monthly payment.

•A maximum DTI of 40% is required if the borrower does not meet the credit requirements for an acceptable credit bureau file.

Appraisal Documentation

•A current appraisal/valuation must be provided on each request with review and approval by the Orlando CLSC prior to final approval of the subordination request.

•The more restrictive of the first mortgage or the following guidelines apply.

•If an appraisal is ordered, the appraisal must be used rather than other valuation methods.

•Complete (1004) appraisals are acceptable.

•Appraisers must be engaged directly by the bank or another financial services institution. Appraisals prepared for other institutions and accepted by SunTrust must conform to regulatory and SunTrust guidelines. An appraisal prepared for the borrower is NOT acceptable.

•Appraisers engaged by SunTrust must be state licensed or certified, and they must be either approved by SunTrust’s real estate services providers or be on SunTrust’s approved appraiser list if directly engaged by the bank. Final selection of an appraiser is based on the appraiser’s qualifications and experience for the particular type of real estate property being appraised.

•Appraisals (1004, etc.) must be current (less than 90 days old).

•LP Property Inspection Alternative (PIA) and DU Property Inspection Waivers (PIW) are not acceptable valuation methods.

Modifications to Existing Equity Lines and Equity Loans

•A modification to the existing equity line or a balance reduction to the existing equity loan may be required for any of the following reasons:

•the new TLTV/HTLTV exceeds the guidelines for the new first mortgage and the loan was approved with a condition for a reduction in the total amount of equity line credit available or equity loan current balance, or

•the equity line is in third lien position, or

•the new TLTV/HTLTV exceeds Orlando CLSC underwriting guidelines.

Note: When a modification of the existing equity line or a balance reduction to the existing equity loan is required, it is very important that the borrower is advised prior to closing that the terms of his/her equity line/equity loan will be changing due to one of the reasons stated above.

Requirements for the Automated Process

•The property being refinanced must meet ALL of the following conditions to be eligible for the automatic subordination process:

•The property is a 1-unit primary residence only.

•The property is an improved platted subdivision lot, townhouse or single family residence on acreage.

•The prior mortgage and subordinate deeds of trust encumbers the subject property only (i.e., no additional properties are allowed).

•The subordinate deed of trust secures an ORIGINAL PRINCIPAL AMOUNT of $150,000 or less.

•The refinance mortgage cannot secure more than the current balance plus $5,000. Cash-out refinances are ineligible for this automatic procedure.

•The new first mortgage interest rate cannot exceed the interest rate on the Note of the prior mortgage, and the refinance deed of trust must state the interest rate.

•The refinance deed of trust includes the following language inserted (with all blanks completed) on the first page in bold or capitalized letters in order to automatically subordinate the existing second deed of trust:

Title Insurance Requirements

•The SunTrust Mortgage Wholesale Branch MUST contact the Title Company prior to closing when the new first lien is an ARM, to ensure this is acceptable to the title company.

•The Title Binder (Commitment for Title Insurance) should appear with the following information:

SCHEDULE B – PART I

Binder should have the refinance deed of trust reflect the following language:

FIRST Deed of Trust from ______________ securing your loan IN THE AMOUNT OF $_________ PAYABLE TO __________

SECOND Deed of Trust from ____________ securing your loan IN THE AMOUNT OF $_________ PAYABLE TO ___________

SCHEDULE B – PART II

(subordinate matter) Binder should have the subordinate deed of trust reflect the following language:

Deed of Trust from John and Mary Homeowner to _________, Trustee(s), dated

_______, recorded in the Clerk’s Office, Circuit Court, ________ County/City, VIRGINIA in Deed Book _____, page _____ to secure $________, payable to __________; and subordinated to the insured deed of trust by Virginia Code

§ 55-58.3.

____ IF THIS LINE IS CHECKED, THERE IS AN OUTSTANDING SUBORDINATE

DEED OF TRUST IN AN AMOUNT NOT EXCEEDING $150,000 SECURED BY THE PROPERTY DESCRIBED IN THIS DEED OF TRUST, WHICH CONTAINS NOT MORE THAN ONE DWELLING UNIT.”

NOTE: THE ABOVE IS A SUBORDINATE MATTER AND WILL APPEAR AS AN EXCEPTION, ITEM 1, SCHEDULE B – Part II ON THE FINAL TITLE POLICY.

•The subordinate deed of trust will appear as an exception on Schedule B – Part II of the final title policy.

Requirements for the Automated Process

•The property being refinanced must meet ALL of the following conditions to be eligible for the automatic subordination process:

•The first lien on the subject property cannot be a loan subject to Texas Constitution, Article XVI, Section 50(a)(6) [Texas Cash-Out].

•The existing mortgage and subordinate deeds of trust encumber only the subject property (i.e., no additional real or personal property other than the homestead).

•The second lien being subordinated may be an existing SunTrust Combo Second Mortgage, or any acceptable pre-existing second mortgage.

Note: Subordinate deeds of trust that meet the criteria of Texas Constitution Article XIV, Section 50(a)(6) Equity Lines of Credit (HELOC) are eligible for re-subordination with a non-50(a)(6) first mortgage, therefore also are eligible for the Texas automatic subordination.

Reference: See the guidelines of the first mortgage loan program for further details regarding the subordination of HELOC secondary financing.

•The refinance deed of trust must include all of the following:

•The following renewal and extension language must be attached as a rider to the Deed of Trust or included within the deed of trust (with the box checked).

Renewal and Extension of Liens Against Homestead Property.

The Note is in renewal and extension, but not in extinguishment, of the indebtedness described on the attached Renewal and Extension Exhibit which is incorporated by reference. Lender is expressly subrogated to all rights, liens, and remedies securing the original holder of a note evidencing Borrower’s indebtedness and the original liens securing the indebtedness are renewed and extended to the date of maturity of the Note in renewal and extension of the indebtedness.

•Assignment of lien from the first lien holder to the refinancing lender (SunTrust Mortgage, Inc); and

•The title company has issued a first lien policy for the entire amount of the loan (including closing costs).

Continued on next page