That is an interesting statute (the following is the substantive part):

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

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

2. The principal amount secured by such refinance mortgage does not exceed the 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 is recorded and does not exceed the interest rate set forth in the prior mortgage.

Virginia seems to have codified some sort of equitable subordination rule (it appears to be from 2000, and amended in 2002 and 2003).  I would not be in favor of such a law in Ohio and I hope our legislature never adopts it.  I believe that the second mortgage holder should always have the option of whether or not they want to consent to such refinance.  Although, it does provide limits on the new balance and interest rate... I suppose that provides some protection. 

I wonder, though... usually the mortgage does not state the interest rate, so how can anyone actually determine the priority from the public records.  I guess you just have to assume that if this language is in the new mortgage the interest rate is equal to or less than the original mortgage.

Thank you for sharing.

Best,
Robert A. Franco
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