55-58.3 - Priority of refinance mortgage over subordinate mortgage. - Virginia Statutes

§ 55-58.3. Priority of refinance mortgage over subordinate mortgage.

A. As used in this section:

"Refinance mortgage" means the mortgage, deed of trust or other instrumentcreating a security interest in real estate given to secure a refinancing.

"Refinancing" means the replacement of a loan secured by a prior mortgagewith a new loan secured by a mortgage, deed of trust or other instrument andthe payment in full of the debt owed under the original loan secured by theprior mortgage.

"Subordinate mortgage" means a mortgage or deed of trust securing anoriginal principal amount not exceeding $50,000, encumbering or conveying aninterest in real estate containing not more than one dwelling unit that issubordinate in priority (i) under subdivision A 1 of § 55-96 to a mortgage,deed of trust or other security interest in real estate (otherwise known asthe prior mortgage); or (ii) as a result of a previous refinancing.

B. Upon the refinancing of a prior mortgage encumbering or conveying aninterest in real estate containing not more than one dwelling unit, asubordinate mortgage shall retain the same subordinate position with respectto a refinance mortgage as the subordinate mortgage had with the priormortgage, provided that:

1. Such refinance mortgage states on the first page thereof in bold orcapitalized letters: "THIS IS A REFINANCE OF A (DEED OF TRUST, MORTGAGE OROTHER SECURITY INTEREST) RECORDED IN THE CLERK'S OFFICE, CIRCUIT COURT OF(NAME OF COUNTY OR CITY), VIRGINIA, IN DEED BOOK ________, PAGE ________, INTHE ORIGINAL PRINCIPAL AMOUNT OF ________, AND WITH THE OUTSTANDING PRINCIPALBALANCE WHICH IS ________.";

2. The principal amount secured by such refinance mortgage does not exceedthe outstanding principal balance secured by the prior mortgage plus $5,000;and

3. The interest rate is stated in the refinance mortgage at the time it isrecorded and does not exceed the interest rate set forth in the priormortgage.

C. The priorities among two or more subordinate mortgages shall be governedby subdivision A 1 of § 55-96.

D. The provisions of subsection B shall not apply to a subordinate mortgagesecuring a promissory note payable to any county, city or town or any agency,authority or political subdivision of the Commonwealth if such subordinatemortgage is financed pursuant to an affordable dwelling unit ordinanceadopted pursuant to § 15.2-2304 or § 15.2-2305, or pursuant to any programauthorized by federal or state law or local ordinance or resolution, for (i)low- and moderate-income persons or households or (ii) improvements toresidential potable water supplies and sanitary sewage disposal systems madeto address an existing or potential public health hazard, and which mortgage,if recorded on or after July 1, 2003, states on the first page thereof inbold or capitalized letters: "THIS (DEED OF TRUST, MORTGAGE OR OTHERSECURITY INTEREST) SHALL NOT, WITHOUT THE CONSENT OF THE SECURED PARTYHEREUNDER, BE SUBORDINATED UPON THE REFINANCING OF ANY PRIOR MORTGAGE."

(2000, c. 971; 2002, c. 172; 2003, c. 381.)