ANNAPOLIS — A new law that may make it easier for homeowners to refinance their mortgages when there is a second, or junior lien, on the loan, went into effect Oct. 1.

On May 2, Governor O’Malley signed into law The Refinance Mortgage — Priority over Junior Liens Bill. It provides assistance for homeowners attempting to refinance their first mortgages at a lower interest rate by eliminating the need to obtain the consent of a currently subordinate mortgage lender.

When a first mortgage is refinanced, the lien on the real property is released of record, and a new mortgage lien is recorded. Because lien priority is determined by recording order, the lien of the refinance mortgage becomes subordinate to any other mortgages already of record. A condition of refinancing commonly includes an agreement by a subordinate mortgagee to stay in its subordinate lien position. However, negotiation with a subordinate mortgagee can cost value time, money and opportunity.

The Act generally provides that a refinance mortgage that meets specified criteria shall have, upon recordation, the same lien priority as the first mortgage or deed of trust that the refinance mortgage replaces.

In order to qualify, the refinance mortgage:

• Must be given to secure the refinancing of the loan secured by the first mortgage or deed of trust.

• Secure residential property as well as refinance a mortgage that secured residential property as defined in the act,

• Be made by a mortgagor to refinance in full the unpaid indebtedness secured by the first mortgage;

• Cannot exceed the unpaid outstanding principal balance secured by the first mortgage or deed of trust plus an amount not exceeding $5,000 to pay closing costs.

• The principal amount secured by the subordinate lien does not exceed $150,000.

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