Bold background in the Subordination Agreement

Aug 6th, 2022
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How to bold background in the Subordination Agreement

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hi everyone welcome back to ask the instructor presented by campus mortgage todays question is when is a subordination agreement required great question as a senior underwriter here are my thoughts a subordination agreement is required on a refinance when the customer has other mortgages not being paid off and closed with the new loan the lender requires to be in first lien position on the title to the property the lender for the second mortgage must approve and provide the subordination agreement the second mortgage lender will require an application to include terms of the new loan and appraisal then they will provide the subordination agreement to be filed by the escrow company handling our loan closing this concludes our one minute video as always dont forget to download our course catalog at campusmortgage.org

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Despite its technical-sounding name, the subordination agreement has one simple purpose. It assigns your new mortgage to first lien position, making it possible to refinance with a home equity loan or line of credit. Signing your agreement is a positive step forward in your refinancing journey.
Whats the purpose of a typical subordination agreement? It allows a junior mortgage to move into first lien position.
A subordination clause is a clause in an agreement that states that the current claim on any debts will take priority over any other claims formed in other agreements made in the future. Subordination is the act of yielding priority.
A subordination agreement adjusts the priority of mortgages. It moves a refinance loan up to the front of the line. A subordination agreement is a contract to prioritize one debt over another for repayment. The agreement establishes that one partys claim is superior to another partys interest.
Example of a Subordination Agreement A standard subordination agreement covers property owners that take a second mortgage against a property. One loan becomes the subordinated debt, and the other becomes (or remains) the senior debt. Senior debt has higher claim priority than junior debt.
One of the key benefits of subordination agreements is that they establish a clear hierarchy of claims on a borrowers assets. This is particularly important in situations where multiple lenders are involved. For example, imagine a borrower with multiple loans outstanding.
A subordination agreement must be signed and acknowledged by a notary and recorded in the official records of the county to be enforceable.
The creditor usually will require the debtor to sign a subordination agreement which ensures they get paid before other creditors, ensuring they are not taking on high risks.

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