CDBG Loan Subordination Policy
Housing Loan Subordination Policy
Statement of Purpose: The Housing Rehabilitation and First Time Homeowner Programs assist
households improve their home’s quality and safety and preserve affordable housing stock. The City, at its
discretion, may allows participants to subordinate City of Northampton mortgages to other mortgages when
the primary program goals are still achieved.
Required Conditions for Subordination Approval
1. The City remains in its current mortgage position (generally second position behind the first mortgage)
and is not subordinate to an increased number of mortgages.
2. The purpose of the mortgage refinance is to:
A. Reduce the term or interest rate of a mortgage below the original loan
B. Consolidate debt for a lower total monthly principal and fixed interest payments
C. Make capital improvements to the property.
3. Refinancing that results in equity payout to the owner will not be considered without a loan or partial
loan repayment to the City equal that payout.
4. The owner is currently up to date on all City taxes and fees.
5. Loan (all mortgages combined) to value (based on assessment or appriasl) rations of greater than 95%
will generally not be eligible for loan subordination unless the subordination improves the City’s position
Subordination Request and Procedure
Subordination requests must be made in writing no less than three weeks before the closing and contain:
1. A written request from the resident describing the purpose of the refinancing.
2. Written description and estimates of the property improvements planned, if applicable. If approved, the
City will require a copy of the contract with the building contractor.
3. The outside lender provides written verification of:
A. Copies of documentation that they are using to appraise or assess the current property value.
B. Name, address and contact person for the new mortgage lender.
C. The current loan amount, interest rate, monthly payment, the new loan amount to be refinanced,
interest rate, and monthly payment.
D. Details on any payouts to be made as part of the refinance.
E. Documentation from lender on the position of the City’s mortgage before and after refinancing.
4. Statement from the Assessor’s office that the property owner has no delinquent City taxes or fees.
5. If the request is approved, the City will issue a Subordination Agreement signed by the Mayor.
Policy Approved by:
Wayne Feiden, FAICP Director of Planning and Sustainability
Questions may be referred to:
Keith Benoit, Housing and Community Development Planner
413-587-1288, kbenoit@northamptonma.gov
(Note: this version makes minor clarifications to the city’s previous subdination policy adopted almot two decades ago.)