Information for Lenders and Escrow Officers
SUBORDINATION REQUESTS on Mayor's Office of Housing and Community Development (MOHCD) Units
MOHCD only accepts subordination requests originated from Approved Lending Officers. Please click here for Information for Lender Workshops/Training.
Effective July 1, 2018 - Loan Subordination/Refinance Application Fee (non-refundable) $619
The subordination application package must be submitted ELECTRONICALLY through the Database of Affordable Housing Listings, Information, and Applications (DAHLIA) system.
What is Needed for Subordination Requests:
- We only accept subordination request packages originated from Approved Lending Officers, except for LEAD grants, Rehab and released Condo Conversion loans. For brokers, the funding lender also needs to be approved. We will decline a subordination request if the lending officer is not on our Approved Lending Officers List.
- Lenders/Escrow Officers must submit all required loan documents outlined on the MOHCD Subordination Request Package. Completed packages take 7-10 business days to process. If a package is received incomplete, the file is suspended, and the requestor is notified. The requestor is given 48 hours to comply before the file is subject to cancellation.
- A non-refundable "Program Administration Fee", in either cashier or escrow check, made payable to the City and County of San Francisco. The fee must be delivered to our office by mail or in person within 48 hours of the subordination submittal. We do not accept personal checks. Click HERE for Program Service Fees.
Here are links to subordination request items in general:
- MOHCD Subordination Request Package
- Current "Approved Lending Officers" List
- "Subordination Agreement" Template for MOHCD loans, in Word format
- Frequently Asked Questions (FAQs) on Subordination Requests
- Subordination Announcement 2016-12
Please note that:
- Due to the large volume of requests we are receiving, current processing time for subordination requests is 7-10 business days. We cannot begin processing an application until we receive all required documents. The request is then processed in order by date of complete application.
- The approval criteria may vary based on program requirements and restrictions. Review the Subordination Policy Statement for the general guidelines. Review the Subordination Request Checklist for the required documents. MOHCD may request additional information before making a decision. MOHCD reserves the right to deny a subordination request.
- The lender is required to determine that there is a net tangible benefit on all applicable rate and term refinance transactions by completing the Net Tangible Benefit Worksheet. Net tangible benefit is defined as either: a) A reduction of at least 5% in the mortgage payment and recapture of closing costs within 48 months; or b) A reduction in the term of the mortgage provided the payment increase is less than 15%. The Net Tangible Benefit Worksheet shall be used as a tool by the lender for purposes of the reasonable, tangible net benefit analysis.
- No cash out transactions: a) Cash back proceeds. All refinance proceeds must be applied as a principal-reduction payment to the new 1st mortgage; and b) Buy-down/impound balances. If the payoff the 1st mortgage has a remaining interest rate buy-down balance or impound balances current in escrow, those monies must be applied to the payoff balance at close of escrow and may not be refunded to the Borrower.
- Refinancing within 12 months after purchase may be approved only on a case by case basis.
- Repayment of the City’s cash loans (e.g. BMR DALP, DALP, FRDALP, TND, PIC, MALP and Rehab) may be required on a refinance with an increase of monthly mortgage payment if: a) the current appraised value of the subject property is sufficient to support a combined 1st and City cash loan, and b) the borrower can obtain an affordable loan from a lender supporting the amount.
- Borrowers with CalHOME loans: the term of the new senior lien must be at least for the period of time remaining on the CalHome loan. It must mature concurrently or after the CalHome lien, due to Program restrictions.
- Click HERE to find answers to the most frequently asked questions (FAQs) on subordination requests.
- For details regarding specific City loan programs, please refer to their corresponding Loan Information webpage. They are listed under "Assistance for First-Time Homebuyers".
- Regarding Home Equity Line of Credit (HELOC):
MOHCD does not allow Home Equity Line of Credit (HELOC). This policy is in place to protect homeowners with MOHCD loans/liens. HELOCs typically involve variable interest rate rather than fixed rate. A variable interest rate loan financing is not allowed by MOHCD.
- Regarding "Home Equity Loan" on BMR units:
Owners of Below-Market Rate (BMR) units administered by MOHCD must contact MOHCD and receive approval, before applying for a home equity loan. The BMR homeowner must attend a Post-Purchase Counseling class from a participating HUD-approved non-profit housing counseling agency prior to applying for such a loan. MOHCD may consider home equity loan requests for the following reasons: capital improvements to the home; educational expenses of a household member; medical expenses of the owner or the owner's immediate family member; and funds required to implement a marriage dissolution agreement or domestic partnership dissolution agreement. All other MOHCD underwriting guidelines must be met, including debt-to-income and loan-to-value ratios.
MOHCD LOAN PAYOFF
MOHCD Loans can be paid off before the loan term ends. To request a payoff, please provide the following to MOHCD:
- A WRITTEN Payoff Request from borrower(s), or a signed consent from borrower(s). See Loan Pay-off Request Form.
- Borrowers must complete IRS Form W-9.
- A full interior and exterior appraisal dated within the past 90 days (see the appraisal requirements below) or ratified purchase agreement, if the City loan belongs to DALP, FRDALP, SFRA or City 2nd Programs. An appraisal is not required on BMR DALP loan as the payoff amount will be calculated based on the BMR unit resale restricted price determined by MOHCD at time of repayment.
- Appraisal is NOT required for City Rehab loans/liens, such as LEAD, CHRP, and CalHOME.
Please note that the BMR lien CANNOT be paid off. In addition, certain City restrictions may still apply after the City loan is paid off. For example, the "Right of First Refusal" requirement will remain on City 2nd properties after payoff. Please refer to specific MOHCD Programs for details.
For purposes of determining the appraised value, MOHCD requires a fair market appraisal to be completed to Uniform Standards of Professional Appraisal Practice standards by qualified appraisers holding a California Certified Appraisal License (AR - Certified Residential License or AG – Certified General License, issued by the Office of Real Estate Appraisers), preferably with a "MAI" member of the American Institute of Real Estate Appraisers or an "SRPA" member of the Society of Real Estate Appraisers (or any such equivalent designations), and with experience appraising similar properties in the San Francisco Area. The City has the option, at its sole expense, to select an appraiser to conduct an additional appraisal of the property. If the two appraisals are not in agreement as to the appraised value of the property, the amounts determined by the appraisals will be averaged to determine the appraised value of the property for the purpose of payoff calculation.
To find an appraiser on Appraisal Institute, please click HERE.
MOHCD LOAN RELEASE
A lien is a legal claim against property as security for payment of a loan. A release of lien will remove the property as security for repayment of a loan. As a lienholder on your property, the City and County of San Francisco (the “City”) holds a security interest in the property. The lien remains active on the property until you (as the borrower) have fully repaid the loan or completely satisfied the obligations under the loan. This release only applies to certain loan programs (such as Teacher Next Door, Police in the Community and certain City 2nd loans) that are eligible for forgiveness of the loan under the City loan documents.
What requirements must be met for my release request to be approved?
(a) The City loan must have matured for the full loan term when submitting a request for loan release, and the maturity date of loan term is calculated from the date of execution of the City Note; and (b) the owner must satisfy the occupancy and all applicable compliance requirements during the entire compliance period specified in the City loan documents.
The City loan must be paid back in full upon a sale, rental, or transfer of the property or any interest in the property (Please refer to the City loan documents for full details on “Sale/Rental/Title Transfer” provisions).
For Teacher Next Door (TND) loans, borrowers must demonstrate their continued employment of the San Francisco Unified School District (SFUSD) during the entire term; for Police in the Community (PIC) loans, borrowers must demonstrate their continued employment of the San Francisco Police Department (SFPD) during the entire term.
What documents are required from me?
- Completed Release of Lien Request Form
- Notarized copy of Owner Occupant Affidavit
- Completed IRS 4506-T Form
- Copy of City Note and Deed of Trust
- Copy of Driver’s License or California ID for all borrower(s)
- 2 consecutive Utility Bills dated within the last 60 days
- Copy of most recent Federal Income Tax Return with all schedules (only for City 2nd loans)
- Copy of borrower’s paystub dated within the last 30 days (only for TND or PIC loans)
The above list of the documents may change from time to time at the MOHCD's sole discretion. The borrowers who are eligible for the release request shall ALWAYS use the lastest version of Release of Lien Request form posted on the website. For any submission, MOHCD reserves the right to request additional documentation as deemed appropriate.
What to expect?
Requests will not be processed until all required items are received. Processing time begins upon submission of all documents required for a request. Please allow thirty (30) days for processing a complete request. Failure to submit all required supporting documents may delay or prevent the processing of your request.
Upon verification of borrower’s compliance with the terms and conditions of the loan, the City will prepare and record a reconveyance document to release the loan from the property.
If the property fails to satisfy the compliance period, the City may, at its sole discretion, by written notice to the borrower, proceed with demand of repayment of the loan.
Certain restrictions may still apply after the City loan is paid off or released. For example, the "Grant of Right of First Refusal" requirement will remain on City 2nd properties after the City loan release. Please refer to specific City Loan Programs for details.