- June 23, 2021
- All Virginia Issuing Offices
- UNDERWRITING - Updated Procedures for Insuring Refinances with Existing Subordinate Trusts
Section 55.1-319 of the Code of Virginia (the former section 55-58.3) provides for the "automatic" subordination (i.e., without the necessity of recording a deed of subordination) of existing junior deed of trust liens when a prior lien is refinanced. To qualify for this treatment, the refinance of the senior lien must meet rigid guidelines specified in the statute.
On September 29, 2020, Stewart issued Bulletin VA202003 outlining our requirements – see https://www.vuwriter.com/en/bulletins/2020-8/va2020003.html.
This Bulletin will revise the requirements for compliance with the statute. Please note that except as expressly set forth in this Bulletin, the procedures and requirements set forth in Bulletin VA2020003 remain in force and effect.
Section 55.1-319 previously provided that the interest rate “stated” in the refinance deed of trust cannot exceed the interest rate “set forth” in the old deed of trust. As such, the applicable interest rates had to be stated in both the old and new deeds of trust. The interest rate is often not set forth in the Deed of Trust being refinanced. If the interest rate was not specified, the refinance did not comply with the statutory requirements and we were unable to rely on automatic subordination.
Pursuant to House Bill 1882, Section 55.1-319 has been amended, effective July 1, 2021, to no longer require that the interest rate be set forth in the Deed of Trust being refinanced. However, the old interest rate must be stated in the statutory subordination verbiage set forth on the new Deed of Trust.
We have attached a revised “Automatic Subordination Checklist” with updated requirements.
You must complete the checklist and email it to underwriting counsel. No other documentation need be provided. Underwriting counsel will acknowledge receipt by return email to document approval for your file. You may then insure the refinanced Deed of Trust in reliance on 55.1-319. All senior deeds of trust must be excepted to in Schedule B-1, and junior deeds of trust should be listed in Schedule B-2 with the notation, "subordinate to the lien of the deed of trust insured hereunder by virtue of §55.1-319, Code of Virginia." You may also issue the ALTA Short Form Loan Policy with the appropriate recitations on an attached addendum.
If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.
For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.
- Bulletins Replaced:
- Related Bulletins:
- VA2020003 UNDERWRITING - Updated Procedures for Insuring Refinances with Existing Subordinate Trusts
- Underwriting Manual:
- Exceptions Manual: