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Subordination Agreement
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Subordination Agreement
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Posted by dk_reed07/IL on 5/4/10 7:06pm
Msg #334866

Subordination Agreement

Okay, I did a signing for Nations Direct. It was about a month ago. Today I get a call, well about four calls and an email from ND wanting me to sign a general acknowledgment. When I talked to the woman who called, she said I did not acknowledge the Subordination Agreement and needed to fax an general acknowledgment. I am not quite sure what a subordination agreement is so I searched the documents with the word subordination and cannot find a page with the title Subordination Agreement. I am not sure why I am signing an acknowledgment. Thanks Dee

Reply by Marian_in_CA on 5/4/10 7:12pm
Msg #334867

Well, don't just blindly send them an acknowledgment!!

I would ask them specifically where in the package that document was located. If you can't find it, then you stand your ground and say it was not included... but offer to go out to the signers and have it done now, at their expense.

Never, ever, ever just fax them a "general acknowledgment" without it being attached to a document. And certainly don't backdate your certificate, either.

Reply by Calnotary on 5/4/10 7:16pm
Msg #334868

One month after? If it was an edoc signing check within the original docs and see if you really "missed it"
If not, make sure you date the new subordination A. with the current date not the original's date and charge accordingly.

Reply by SheilaSJCA on 5/4/10 7:18pm
Msg #334869

A subordination agreement is used, when there is secondary financing that is not being paid off (usually a HELOC), and the secondary lender is confirming and agreeing to remain in second position, the owners also sign it. (all signatures notarized) It was possibly not included in your package, and came in after the fact.
The title company does not always have it in time to send with the loan docs, so if you are sure you did not get it, do not let them trick you into thinking you missed it. Never send a loose acknowledgement- with no document.

Reply by SheilaSJCA on 5/4/10 7:20pm
Msg #334870

ps... it would have come to you with the escrow docs n/m

Reply by Marian_in_CA on 5/4/10 7:22pm
Msg #334871

Yeah... this sounds like

they made the mistake and are now trying to get you to take the fall for it. A month later makes no sense. If you really missed it, they would have noticed right away.

Reply by Linda_H/FL on 5/4/10 7:23pm
Msg #334872

And Subordination Agreements aren't normally signed by borrowers - they're signed by other lienholders on the property -

Absolutely do not send in a blank acknowledgement - ask them to e-mail you the document you supposedly didn't get signed - I'll bet it's not for you to get signed anyway...

Reply by dk_reed07/IL on 5/4/10 7:29pm
Msg #334873

I did go back and check the documents that were emailed to me and cannot find it. I emailed "Sara" back and asked for her to send me a copy of the document I did not notarize. I have not heard from her yet.

So it would actually be titled Subordination Agreement, or does it have a different name? I am glad I thought about it before just signing and sending it back. You guys are great thanks!

Reply by SheilaSJCA on 5/4/10 7:33pm
Msg #334875

yes, it will be called that, a few pages, looks like a Mtg n/m

Reply by CaliNotary on 5/4/10 8:39pm
Msg #334883

"I am glad I thought about it before just signing and sending it back"

You shouldn't have to think about it, that should NEVER be an option.

Reply by SheilaSJCA on 5/4/10 7:30pm
Msg #334874

I have done several loan closings in the past few months that had sub agreements, and yes, they were all signed by the owners, all but one, asked for it to be notarized too. Maybe it is done differently for properties in FL.

Reply by Linda_H/FL on 5/4/10 7:35pm
Msg #334876

Actually, I haven't had any here in FL..

My statement was made based on my experience in CT...don't recall the borrowers signing the Subordination Agreements that we had - only the lienholder agreeing to remain in their current lien position.

Reply by PAW on 5/4/10 8:14pm
Msg #334881

Re: Actually, I haven't had any here in FL..

The ones that I have seen did not require the borrowers/homeowners sign. Only the lender of the subordinated loan.

Here is a typical Subordination Agreement for MODIFIED mortgages by Fannie Mae/Freddie Mac loans:

Reply by NCLisa on 5/4/10 10:19pm
Msg #334892

I've prepared subs in CA and NC

Preparing them in CA, the borrower never signed them. In NC, several of the attorneys I worked for had the sub template set up for the borrowers to sign (which I removed on the ones I prepared). It really depends on who prepares them, and if the terms stay the same. I've seen a lot more "subordination and modification agreements" lately. The borrowers sign and agree that the 2nd will be subordinated and the loan amount modified downwards.

Reply by Linda_H/FL on 5/5/10 5:07am
Msg #334909

Re: I've prepared subs in CA and NC

"The borrowers sign and agree that the 2nd will be subordinated and the loan amount modified downwards"

IMO the borrowers are only agreeing to the modification portion - they have no standing to agree to subordinate the loan. It's possible it's a state-specific thing but any company requiring the borrowers to subordinate the junior liens, IMO, are wrong and have no idea what they're doing.

Reply by PAW on 5/5/10 7:28am
Msg #334915

Re: I've prepared subs in CA and NC

Not only do the borrowers have no idea what the subordination agreement does, in many cases, but the borrowers are not entitled or authorized to make a commitment on behalf of their lender. So a borrower signing a subordination agreement is, imo, a waste of paper, ink and time.

Reply by NCLisa on 5/5/10 11:00am
Msg #334938

Re: I've prepared subs in CA and NC

Many lenders and attorneys want the sub signed by the borrowers to show that the borrower understands that the 2nd is being subordinated and not paid off. I've had some very ignorant people signing docs, so it can be just another "check" to make sure the borrower realizes they will still have 2 mortgages. I personally think it is a pain to have the borrowers sign it, as it takes forever to get it back from the lender.

Again, there are some out there that understand nothing about refinancing whether a sub is involved or not. At least once a month I get a "non-borrowing spouse" thinking that if their spouse dies, they won't have to pay the mortgage to continue to live in the house since they aren't on the loan. Again, there are some pretty ignorant people in the world.

Reply by hp/MD on 5/4/10 8:01pm
Msg #334880

I just did one with subordination agreement. The borrowers signed it and I notorized it. The funny thing about it was that the borrowers did not want to signed it because they did not know what it was. After I explained it to them, they signed it in a jiffy.

Reply by Pat/IL on 5/4/10 11:04pm
Msg #334899

Denise, I think the best thing you could have done was to ask for a copy of the document you forgot to notarize - which you did. In Illinois, at least in my experience, it is a rarity for the borrowers to sign a subordination agreement. In fact, they rarely ever see it as far as I know. And I have seen a lot of subordination agreements The original agreement should always be signed, sealed and delivered to the tiotle company before the rest of the documents are signed.

They should be sending the document back to the subordinating lender for a new agreement, properly notarized.

I am going to take a guess here that the title company did some sloppy work by not examining the document when they received it. Then, they held the document for way too long before sending to record. When they did, it got rejected by the recorder's office for no notarization. Now, they fear that, since the subordinating lien is not subordinate, they might refuse to send a new agreement properly notarized. And thus, the subordinate lender is now holds the dominant lien position. They now pressure you assist in their cover up so they don't have to take that risk.

Of course, that is only a guess. But I think you did the right thing.

Reply by Notarysigner on 5/5/10 1:00am
Msg #334905

I do a lot of subordination agreements. The borrower usually receives those Docs separately, usually from who-ever is holding the 2nd. The borrowers signs them and we notarized their signature.

There is also an acknowledgment pre-printed by the holder of the 2nd that they will notarized when the Docs are returned to them. The Docs the borrower receives separately (Subordination agreement) are then returned along with the E-docs we get. They have there own separate envelope and it is included with our package we send back.

Now if you didn’t have the subordination agreement (and you shouldn’t have) with your E-Docs and the borrower never got them (via separate overnight delivery), there is nothing for you to do but go back out (extra charge) when the borrower receives them.

It happens about 25% of the time, I love it. If they get another notary to do it, it obviously will cost them more, so…let um have it!

Reply by jfs/IL on 5/5/10 5:07am
Msg #334908

Subordination Agreement Defined

A subordination agreement is a legal document used to make the claim of one party junior to (or inferior to) a claim in favor of another. It is generally used to grant first lien status to a lienholder who would otherwise be secondary to another party, with the approval of the party that would otherwise have first lien. Typically a subordination arises when there are two existing mortgages, a first mortgage and a second mortgage, and the mortgagor intends to refinance the first mortgage. If the holder of the second mortgage does not subordinate the lien of its mortgage to the new mortgage, the new lender will not refinance the first mortgage. However, the second mortgage holder does not want to release its mortgage and re-file, due to additional costs and priority problems, so it will subordinate its lien to the lien of the replacement mortgage.

Reply by dk_reed07/IL on 5/5/10 11:13am
Msg #334944

Re: Subordination Agreement Defined

Okay, I found the document. I guess with it just saying signatures need acknowledgment with no space to acknowledge, I just skipped over it.

My new question...Since this is Nations Direct and they require the whole package faxed back, shouldn't they have caught that before telling me to drop the documents, therefore, they should pay for shipping this acknowledgment overnight? Or am I still responsible for paying for shipping?

What would everyone do?

Reply by jnew on 5/5/10 11:17am
Msg #334946

Re: Subordination Agreement Defined

Looks like you are on the hook to the signing service for disregarding the instruction. The SS may get a bit of flack from the title company for blowing their quality check. But they will make you pay for the error.

Reply by dk_reed07/IL on 5/5/10 11:28am
Msg #334949

Re: Subordination Agreement Defined

I am not really new, but I have never had a sub agreement in a package before. Are we just supposed to know if it says "all signatures must be acknowledged" that we automatically sign? I guess attach an acknowledgment because there wasn't enough space to sign. Is that just general knowledge, that I didn't know about? I obviously know it now, but I would think it would be in notary instructions. Maybe I am just trying to justify my mistake, but I really didn't know what the document was and that meant I needed to attach an acknowledgment.

I guess I am just wondering if this is just a "duh" comment I see so often or if other notaries do not know to do it either.

Reply by PAW on 5/5/10 11:52am
Msg #334956

Re: Subordination Agreement Defined

That is part of the expertise that you may be able to bring to the table. There are many signing agents who, never having encountered this situation, probably wouldn't know it either. However, if the document spelled it out, that is, stated "all signatures must be acknowledged" that would be a clue to the notary that the person or persons signing the document would need to have their signatures notarized. The sample that I linked to in a previous post has the following at the bottom of the page:
_______________________[Space Below This Line For Acknowledgment]______________________

Reply by Marian_in_CA on 5/5/10 12:37pm
Msg #334962

Even still.....

Don't just blindly send them an acknowledgment. Although others may disagree with on this... I'd make sure that you either go back to the borrowers and re-sign, or have them send you the original.

If this were something I did... I'd have to do go back to the borrowers because that document would not have been entered in my journal. If it were my mistake, I'd gladly eat the time and cost... but it would involve another trip out to the borrower.

Reply by Linda_H/FL on 5/5/10 12:42pm
Msg #334964

Re: Subordination Agreement Defined

You found the doc and now agree it was your oversight....own it, correct it and learn from it. It's on your dime - get it done immediately if not sooner and, IMO, it should be returned the same courier status (or better) as the original package was returned....on your dime. No one else should be out of pocket as a result of your omission except you.

Good Luck.

Reply by jnew on 5/5/10 11:11am
Msg #334940

I recently did a second signing in which the borrower signed a subordination agreement and a modification of the subordinated mortgage. Strictly speaking, the borrower has no authority to subordinate the mortgage since the mortgagee (lender) really decides to relinquish their first lien position. I think that the point is well taken that the borrower per se need not sign. A possible exception is that the original mortgage could contain language that the lien of the mortgage can not be subordinated without the approval of the mortgagor. In this case, the borrower on the subordinated mortgage would have to sign to fulfill the requirement in the mortgage.

Any modification of the subordinated mortgage must require the signature of the borrower and the lender since it changes the terms of the original mortgage.

Many times the signing may have a copy of the subordination in the package, not to be signed, but rather as informational to the borrowers.

I would advise you to determine which documents in your package require notarization and keep a permanent record of the documents you notarized for each closing. If something like this pops up you can check it against your records. If something goes wrong at the title company or signing service, they will be quick to blame the notary for any omissions and you need to have proof to back up your argument. If you send a signed acknowledgment with no reference to the signing, you are giving the title company or signing service the right to apply your notary as they wish. Not good.

Reply by Linda_H/FL on 5/5/10 11:28am
Msg #334948

"If you send a signed acknowledgment with no reference to the signing, you are giving the title company or signing service the right to apply your notary as they wish. Not good"

And also probably illegal in most if not all states.

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