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Virginia Administrative Code
Title 13. Housing
Agency 10. Virginia Housing Development Authority
Chapter 40. Rules and Regulations for Single Family Mortgage Loans to Persons and Families of Low and Moderate Income
12/22/2024

13VAC10-40-220. Subordinate financing program.

A. The authority may make loans secured by second deed of trust liens (second mortgage loans) to provide down payment and closing cost assistance to eligible borrowers who are obtaining authority loans secured by first deed of trust liens (first mortgage loans). Such first mortgage loans must be financed by the authority; provided that the authority may, in its discretion, permit such first deeds of trust to be financed by other lenders, subject to such terms and conditions as the executive director shall determine to be necessary to protect the financial integrity of the subordinate financing program. Second mortgage loans shall not be available to a borrower if the authority loan is being made under a buy-down program.

B. The second mortgage loans shall not be insured by mortgage insurance; accordingly, the requirements of 13VAC10-40-120 regarding mortgage insurance shall not be applicable to the second mortgage loan.

C. The requirements of 13VAC10-40-110 regarding calculation of maximum loan amount shall not be applicable to the second mortgage loan. The principal amount of the second mortgage loan shall not exceed the amount of the down payment plus closing costs, or such lesser amount as may be set forth in specific program guidelines.

In no event shall the combined first mortgage loan and the second mortgage loan and all other liens exceed (i) the amount allowed by the guidelines of the applicable insurer, guarantor, or investor or (ii) the sum of the lesser of the sales price or appraised value plus closing costs and fees to be paid by a borrower.

Verified liquid funds may be required to be (i) contributed by the borrower toward the down payment; (ii) contributed by the borrower toward closing costs or prepaid items; or (iii) retained by the borrower as cash reserves after closing. The first mortgage loan when combined with the second mortgage loan and any other liens may not result in cash back to the borrower.

D. If the authority is not making the first mortgage loan, the authority may require that, as a condition of financing the second mortgage loan, the first mortgage loan meet the authority's requirements applicable to that first mortgage loan program. With respect to underwriting, more stringent requirements or criteria than those applicable to the first mortgage loan may be imposed on the second mortgage loan if the executive director determines such more stringent requirements or criteria are necessary to protect the financial integrity of the subordinate financing program.

E. The second mortgage loan may be assumable on the same terms and conditions as the first mortgage loan.

F. The authority may charge a higher interest rate on a first mortgage loan that is accompanied by a subordinate financing program second mortgage loan in order to protect the authority's interests and the financial integrity of the subordinate financing program.

G. The same loan decision procedures described in 13VAC10-40-170 will be used for the subordinate financing.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.17, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 15, Issue 12, eff. January 28, 1999; Volume 19, Issue 12, eff. January 24, 2003; Volume 19, Issue 25, eff. August 1, 2003; Volume 25, Issue 21, eff. June 5, 2009; Virginia Register Volume 35, Issue 14, eff. March 4, 2019.

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