At any time following home purchase, Purchase Assistance Loan (PAL) borrowers may request that the city subordinate to a refinanced senior mortgage(s). If the borrower chooses to refinance, he/she must either pay off the PAL loan or meet PAL Program requirements for subordination to a new senior mortgage(s).
Per the Purchase Assistance Loan Program Guidelines, the PAL loan will subordinate to a refinanced senior mortgage(s) if the borrower meets all of the following conditions / requirements:
The refinancing of the existing senior mortgage(s) is for the purpose of reducing monthly housing expenses
The refinancing is for no more than the amount of the balance of the senior mortgage(s) plus the cost of refinancing
No cash will be taken out of the refinance
There is sufficient equity in the property so the total loans-to-value is at the same amount after the refinance as it was when the property was purchased
If all four conditions above are applicable, the owner should contact the City's BMR administrator, HouseKeys, to start the subordination process. HouseKeys will provide the lender a letter stating the Below Market Rate (BMR) restricted value of your home and any other documentation requested. Sample subordination and program documents are available for lenders upon request to help determine if the first loan can work in conjunction with the City of Menlo Park's BMR program.
Lenders will be required to submit the following documentation to HouseKeys as part of the subordination eligibility screening:
Form 1003 completed loan application
Form 1008 or other loan underwriting form indicating amounts and terms of all financing
A preliminary title report
Property appraisal report (if not a City of Menlo Park Below Market Rate home) - if the property is a BMR home, the city will provide the appraised value of the home per the BMR deed restrictions and BMR Program Guidelines
A preliminary Form HUD 1
A $400 fee will be charged to the homeowner and due to the City of Menlo Park upon closing in order to cover a portion of the costs associated with eligibility screening and preparation of subordination documents.