J. Paul Reiger, Jr. of First American Title Insurance Company and John P. Machen of the Baltimore City Law Department contributed the following summary of SB199 passed during the 2013 session of the Maryland General Assembly:
This bill provides a means by which a mortgage or deed of trust (collectively, “mortgage”) having a junior lien position, will remain subordinate upon refinance of the senior mortgage on residential property. Specifically, a mortgage on residential property which refinances, in full, a first mortgage at an interest rate lower than the first mortgage will, upon recording, have the same lien priority as the first mortgage being refinanced provided that: (1) the principal amount secured by the junior mortgage does not exceed $150,000; (2) the principal amount secured by the refinance mortgage does not exceed the unpaid outstanding principal balance secured by the first mortgage plus an amount to pay closing costs not exceeding $5,000 and (3) the refinance mortgage contains the following statement in bold or capitalized letters:
“This is a refinance of a deed of trust/mortgage/other security instrument recorded among the Land Records of …………… County/City, Maryland in liber no. ……. folio ……., in the original principal amount of …………., and with the unpaid outstanding principal balance of ………….. . The interest rate provided for in the evidence of indebtedness secured by this refinance mortgage is lower than the applicable interest rate provided for in the evidence of indebtedness secured by the deed of trust/mortgage/other security instrument being refinanced.”
The bill does not alter priorities between or among junior liens and has no subordinating effect on junior judgments and contract liens. Residential real property is defined as “real property improved by four or fewer single family dwelling units that are designed principally and are intended for human habitation.”
The bill also provides that it may not be construed to preempt or abrogate the operation or effect of, or ability of a court to apply the principles of, equitable subrogation or equitable subordination.
This bill shall only apply prospectively to a refinance mortgage recorded or having an effective date on or after October 1, 2013. Real Property Article 7-112 [or 113]