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Law Educator, Esq.
Law Educator, Esq., Lawyer
Category: Real Estate Law
Satisfied Customers: 117368
Experience:  Licensed attorney practicing landlord-tenant, land use and other real estate law and litigation.
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I have an SBA loan on my business. The balance is half of the

Customer Question

I have an SBA loan on my business. The balance is half of the original loan amount. The lender has a lien on my primary residence against the business loan. My business is worth a minimum of $500k, my home represents $400k of equity. They also have a lien on my mother's condo which represents $160k of equity. The outstanding balance on the SBA loan is $752k - down from the original $1.364m. I have tried several times to re-fi my home and a property loan on my business. This same lender is in a " third junior position" on my property loan. I can't re-fi either because this lender tells me "this is a matter of releasing collateral and exposing the Bank to risk. We are willing to entertain a subordination to a new loan provided the terms and amounts are acceptable. I cannot expose the Bank to risk by recommending a release of collateral. The SBA program requires the pledging of any assets that are of value and you agreed to these terms and conditions when you signed the loan documents." What course of action can I take - if any - to get a re-fi down on my home?
Submitted: 2 years ago.
Category: Real Estate Law
Expert:  Law Educator, Esq. replied 2 years ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
So the issue is the SBA loan is in 3rd position right now and when you refinance, that means actually that the old mortgage that is currently first would lose standing and actually the SBA lender would have to agree to subordinate to keep the mortgage in first place. Is that the issue you are facing?
Customer: replied 2 years ago.
They're in 3rd position on my business property, but in 2nd position on my home (home mortgage lender is in 1st position). But, yes, that is the situation I am facing. What is frustrating is that they're still showing a lien on the business in the original amount of $1.364m, but the current balance is approx. $758k. They keep talking like the business equity means nothing to them ("we can't run a Harley dealership") yet the business was the reason for the original loan. They're fixated on my home for some reason. All I want to do is move my home mortgage from an adjustable to a fixed!
Expert:  Law Educator, Esq. replied 2 years ago.
Thank you for your reply.
So, you would have to convince SBA to subordinate to the new mortgage agreement on the refinance, because if they will not agree to remain in 2nd position or third position, then the lender will not agree to refinance because they do not want to lose their place in line to recover. Right now your mortgage company is first, the SBA is subordinate to the mortgage company, if the mortgage company refinances and issues a new loan, they go to second and SBA jumps to first and they will not do that.
So you have to negotiate this with SBA to accept a subordination agreement that they will remain second for the refinance and that is really your only option I am afraid unless you can find one lender to pay off all of the loans, the home and SBA to get a better rate and payment, which I'm sure is not easy.