Subordination Agreement Wells Fargo: What You Need to Know
A subordination agreement is a legal document that allows a lender to give a higher priority to one debt over another. This can be beneficial for both the borrower and the lender when someone is looking to take out a mortgage or refinance their home. Wells Fargo, one of the largest banks in the United States, offers subordination agreements to its clients. In this article, we`ll discuss what a subordination agreement is, how it works, and why you might need one from Wells Fargo.
What is a Subordination Agreement?
A subordination agreement is a legal document that allows a mortgage lender to give another debt`s claim on the borrower`s property a higher priority than their own mortgage lien. In simpler terms, if you have a first mortgage and want to take out a second mortgage or home equity loan, the second lender will want to make sure that they have first dibs on the property`s equity if something goes wrong and the borrower is unable to repay both loans. This is where a subordination agreement comes in.
A subordination agreement is essentially a contract between two or more lenders that lays out the conditions under which the second lienholder would agree to give up their priority position in favor of the first lienholder. Essentially, the second lender agrees to put their claim on the property behind the first lienholder if the borrower defaults on their loans. This ensures that the first lienholder is paid in full before the second lienholder can make their claim.
How Does a Subordination Agreement Work?
When a borrower wants to take out a second mortgage or home equity loan, the second lender will want to ensure that they have a chance to recoup their investment if the borrower defaults on both loans. To do this, they`ll ask the first lender to sign a subordination agreement, which will allow the second lender to take the first lien priority on the property.
If the first lender agrees to sign the subordination agreement, they`ll essentially be agreeing to take a subordinate position to the second lienholder. This means that if the borrower defaults on both loans, the second lender will be paid in full before the first lender gets their share of the proceeds.
Why Do You Need a Subordination Agreement from Wells Fargo?
If you`re a homeowner looking to take out a second mortgage or home equity loan, you may need a subordination agreement from Wells Fargo. Here are some scenarios where you might need this type of agreement:
1. Refinancing: If you`re looking to refinance your first mortgage, the new lender will want to ensure that they have priority over any second or third liens on the property. In this case, you`ll need to get a subordination agreement from Wells Fargo if you have a second mortgage or home equity loan.
2. Home Equity Loans: If you`re looking to take out a home equity loan, you`ll need a subordination agreement from Wells Fargo if you already have a first mortgage on the property.
3. Second Mortgages: If you`re looking to take out a second mortgage on your property, you`ll need a subordination agreement from Wells Fargo if you already have a first mortgage.
In Conclusion
A subordination agreement is a legal document that allows a lender to give another debt`s claim on the borrower`s property a higher priority than their own mortgage lien. If you`re a homeowner looking to take out a second mortgage or home equity loan, you may need a subordination agreement from Wells Fargo. This ensures that all parties involved are protected and know their priority position in the event of default. Be sure to consult with a Wells Fargo representative to help you navigate the process of obtaining a subordination agreement.