Contact Information

Vanguard Mortgage Corporation

765 High Street, Suite 5 Sedgwick Professional Building Bath, Maine 04530

*Phone: 207-442-0909
*Toll Free: 877-442-0909
*Fax: 207-442-0901

Mortgages and Private Roads

Private roads are quite common in Maine, often being created at the time a residential subdivision comes into being, or having come about through common use over the years. While private roads may be commonplace in Maine, the mortgage industry involved in the “secondary market” (the majority of lenders) often times may have less familiarity with them. This precisely is how the rules that pertain to private roads and mortgages are developed.

Mortgages which are eligible for sale into the secondary market must “conform” to the guidelines of the purchasing institution (for example, Fannie Mae, Freddie Mac, etc.). This is the basis for defining a “conforming loan.” If the loan is to be placed in a lender’s portfolio, and not sold, at the option of the lender some guidelines may be waived. Even many portfolio lenders, however, hold open the option of selling the loan, and therefore are sure to make it conform to secondary market rules.

For a mortgage loan to conform to these underwriting standards, and where the property is located on a private way, certain rules pertaining to ingress and egress apply to the property being financed. In general, if the property is on a community-owned or privately owned and maintained street, there is the requirement that “an adequate, legally enforceable agreement for maintenance of the street” should exist.

The reason for this requirement in the opinion of the purchasing institutions is that a street that does not meet city or state standards frequently requires extensive maintenance, and property values may decline if it is not regularly maintained. Investors want assurance that their loans will not be subject to this fate.

Accordingly, private roads typically require that a “private road maintenance agreement” be in place to protect the investor and, indirectly, the consumer. Real estate buyers in Maine may wish to ascertain the existence of maintenance agreements when purchasing properties on private ways so as to avoid financing obstacles late in the transaction.