Virginia Adopts Deed of Trust Provisions Related to Lien Priority

Virginia recently enacted House Bill (HB) 1882, which addresses a couple scenarios impacting, among other things, lien priorities for recorded documents.  The changes made by HB 1882 become effective on July 1, 2021.

HB 1882 provides for instances in which a deed of trust that has been recorded and secures indebtedness or other obligations under a loan document generally will secure such loan document as amended, modified, supplemented, or restated without needing to record an amendment to such deed of trust, and will have the same priority as with the original deed, based upon particular language included in the original recorded deed to that effect.  

For purposes of the above provision, a loan document includes a note, loan agreement, credit agreement, or other document evidencing a loan or other indebtedness.  This provision allowing for such an amendment, however, does not apply to any amendment, modification, supplement, or restatement of the loan document if: (i) the deed of trust securing the loan document conveys an interest in residential real estate containing not more than one dwelling unit; or (ii) such action taken on the loan document increases the aggregate amount of the principal of the indebtedness secured by the original deed of trust, changes or substitutes certain named parties in the original deed of trust, or extends the maturity date of the indebtedness or obligation secured if that date was included in the original deed of trust, in which case the effect of the action will be governed by otherwise applicable law outside of this provision.

HB 1882 also addresses certain residential mortgage lien priority issues in connection with refinancing, generally requiring that, for a subordinate mortgage to retain the same subordinate position with respect to a refinance mortgage that the subordinate mortgage had with the prior mortgage, the interest rate of the prior mortgage must be stated on the first page of the refinance mortgage in a particular way, in addition to other existing requirements.