Subordination Policy Sample Business Form

City of Cleveland Frank G. Jackson, Mayor Department of Community Development Division of Administrative Services 601 Lakeside, Room 320 Cleveland, Ohio 44114-1070 www.cleveland-oh.gov SUBORDINATION POLICY (WAIVER OF PRIORITY OF MORTGAGE) A FINANCING INFORMATION PAMPHLET AND A CONFIRMATION FORM ARE INCLUDED WITH THE SUBORDINATION POLICY. THE CITY OF CLEVELAND REQUIRES THAT THIS PAMPHLET AND CONFIRMATION FORM BE GIVEN TO THE APPLICANT FOR REVIEW AND SIGNATURE.  The City of Cleveland will consider the subordination of its secured mortgage in the following instances:  “Streamline” refinance (refinance of senior mortgage only)  Home improvement All subordination requests, satisfying the above standards, must also meet the following criteria:  If the City loan is a payment loan, repayments must be current.  The total loan to value ratio (including the City’s mortgage) may not exceed 90%. The City of Cleveland will not consider the subordination of its secured mortgage in the following instances:  If the City of Cleveland loan is in first (or senior) mortgage position.  If the proposed subordination request involves an “equity line of credit”.  If the proposed subordination request involves the consolidation of “personal” debt.  If the proposed subordination request involves “cash out” to the homeowner.  If fees and costs are considered “excessive” and included as part of the new loan.   Subordination Policy Sample Business Form.doc.doc Rev 072505Page 1 of 8 The following information and documents are required when requesting a subordination: 1. A cover letter stating the purpose of the subordination request.  If refinancing a senior mortgage, please submit a “payoff verification” from the holder of the senior mortgage. This information must be on their letterhead. If the purpose of the subordination request is for home improvements, please submit a signed contract with specifications detailing the work to be done. The subordination will not be considered without the requested documentation.  2. Copy of a current certified appraisal. 3. Copy of a current title search from a title company (on their letterhead). 4. Copy of a Financial Disclosure Statement and a Preliminary Settlement Statement. The statement should include the terms of the new loan (name of lender, loan amount, rate, term, monthly payment amount, escrow amount, and details on the distribution of proceeds). 5. The subject property must be owner-occupied. Please documentation in the form of a telephone bill and a utility bill. provide 6. Please provide proof of income and the property owner’s financial ability to handle the new debt. PLEASE SUBMIT ALL DOCUMENTS AT ONE TIME FOR OUR REVIEW; NOT DOING SO WILL DELAY THE REVIEW PROCESS AND REQUIRE AN ADDITIONAL REVIEW FEE. ADDITIONAL INFORMATION: 1. Turnaround time for a response is approximately ten (10) working days from the date of receipt of all requested documentation. 2. The City may contact the homeowner to discuss the terms of the subordination request. Subordination Policy Sample Business Form.doc.doc Rev 072505Page 2 of 8 3. The City places a restrictive clause on the “waiver document” limiting the dollar amount of the new loan to the extent of the principal amount being borrowed by the property owner. 4. If the loan is for home improvements, the City may do the following:  Perform a site visit to review the proposed improvements.  Perform a final inspection of the improvements.  Instruct the escrow agent to withhold the disbursement of funds until the final inspection has been made and approved by the City. 5. There is a non-refundable fee (currently $50) for the review of subordination packages. Checks should be made payable to the City of Cleveland and forwarded with the subordination package. A package will be reviewed after receipt of the fee. 6. If the subordination request is approved, the commitment is valid for a period of thirty (30) days. The “waiver of priority of mortgage” must be “filed” within that time period. 7. You may fax documents to the attention of the Accounting Section at (216) 420-7981. Subordination Policy Sample Business Form.doc.doc Rev 072505Page 3 of 8 FINANCING INFORMATION Does it matter where I get my loan? You bet it does… City of Cleveland Department of Community Development Frank G. Jackson, Mayor Subordination Policy Sample Business Form.doc.doc Rev 072505Page 4 of 8 Compare the differences in:  Interest Rates  Fees  Terms For example: a $12,000 HOME IMPROVEMENT LOAN Lender A Interest Rate Fees Term Total Financed 8% $1,200 30 Years $13,200 Lender B 13% $5,000 30 Years $17,000 Monthly Payment Total Payment Total Interest and Fees $96.86 $34,868 $21,668 $188.05 $67,699 $50,699 Difference in Monthly Payment Difference in Total Payments Difference in Total Costs (Int. and Fees) $91.19 $32,831 $29,031 What should you know? An interest rate can be the same for the entire loan (fixed) or change (variable). The lower the interest rate, the lower the monthly payment will be. Fees and other costs vary from lender to lender. Be wary of balloon repayment terms where the majority of your monthly repayment will be applied to interest. Subordination Policy Sample Business Form.doc.doc Rev 072505Page 5 of 8 Ask about: Is the interest rate fixed or variable? What is the APR (Annual Percentage Rate)? What are the options for the length of the loan? What is the monthly payment? What is the total cost of the loan? Is there a pre-payment penalty? Can any fees be waived or reduced? Are any fees refundable? Are there any discounts for which you may qualify? Including “other” debts in refinancing. Often times, a refinancing package will offer you an option to convert short term, medium interest, unsecured debt (credit card debt) into long term, lower interest, secured debt. That debt will now be paid with interest over the life of the refinancing. Be aware that once this debt is included in a refinancing package, you may be paying much more for that formerly unsecured debt over the life of the loan. That debt may also be secured by the equity in your home. How do you select a lender? There are different types of lenders. These include commercial banks, savings and loans, mortgage brokers, and finance companies. Each institution could have unique terms and conditions. You could pay a different amount for the same loan depending on the lender. It pays to shop. Are all loans the same? There are different types of loans available. These include home equity (lump sum or line of credit), home improvement, and signature loans. All have advantages and disadvantages. Make sure you understand the differences. Are there any special loans offered in Cleveland? There are special programs for home improvements offered in the City of Cleveland. For more information, contact lending institutions, non-profit organizations in your neighborhood, or the City of Cleveland’s Division of Neighborhood Services. How can you get assistance? Consumer credit counseling agencies as well as neighborhood organizations offer programs to help you understand the loan approval process. Subordination Policy Sample Business Form.doc.doc Page 6 of 8 The following lenders have agreements with the City of Cleveland to provide products and services to Cleveland residents. They can assist you in obtaining a loan or in answering questions for you about the loan process. Visit the branch closest to you or call: Lender First Merit Bank Charter One Bank National City Bank Bank One Huntington Bank Fifth Third Bank U.S. Bank Key Bank 1(800) 800-5626 (216) 447-4424 (216) 274-5569 (216) 707-2020 1(800)Key2YOU Phone (216) 694-5625 (216) 781-3467 Also contact the City of Cleveland, Division of Neighborhood Services at (216) 664-2045 for information about City programs and services. City of Cleveland Frank G. Jackson, Mayor Department of Community Development Daryl P. Rush, Director Subordination Policy Sample Business Form.doc.doc Page 7 of 8 FINANCING INFORMATION CONFIRMATION FORM I/We __________________________________________________________________ have been provided a copy of the “Financing Information” pamphlet. I/We understand the subject of the pamphlet, and wish to continue with the application for the subordination of my/our loan with the City of Cleveland. _____________________________________________ Name _____________________________________________ Name ________________ Date ________________ Date RETURN THIS SIGNED FORM WITH THE SUBORDINATION PACKAGE Subordination Policy Sample Business Form.doc.doc Page 8 of 8