[The Professor]

The problem centers upon the reality that this economic downturn has caused lenders to return to the "good old days" in terms of loan qualification. That process now properly includes both borrower and collateral qualification. There lies the rub for you. Your refinance, if borrower qualification were not as important as it is today would be a relatively easy task. All that would be necessary is for you to obtain a subordination agreement from the holder of the second loan. Since their position would improve with the reduction in your first loan's interest rate, my sense is you wouldn't have a problem.

But you do have a problem and what appears to be a "catch-22" situation. Where I would start is by seeking the end to the uncertainty through a modification of the first loan by extending its term. That will not trigger a change in priority of the first loan. You may need to hire a lawyer to help convince the lender that there wouldn't be a problem in this approach.

Take care,

Daniel