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Aug 6th, 2022
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How to Clean city in the Subordination Agreement

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hi everyone welcome back to ask the instructor presented by campus mortgage todays question is what is a subordination agreement and when is it required great question as a senior underwriter here are my thoughts a subordination agreement is a legal document that is required to prioritize one mortgage lien over another for example if a borrower currently only has a home equity line of credit on their home but would like to refinance their home to help consolidate debt a subordination agreement would be required if the borrowers would like to keep their current home equity line of credit open the subordination agreement will place the new mortgage in a first lean position and the home equity line of credit in a second lean position this concludes our one minute video as always dont forget to download our course catalog at campusmortgage.org

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A subordination clause is a clause in an agreement which 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.
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.
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.
The party that primarily benefits from a subordination clause in real estate is the lender. However, if you decide to pursue a second mortgage, then the subordination clause prioritizes the first lenders repayment and contract rights. The most common application of subordination clauses is when refinancing a property.
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.
A subordination clause is a lease provision whereby the tenant subordinates its possessory interest in the leased premises to a third-party lender, usually a bank (the rights of the tenant are thus subject to the rights of the lender).
Example of a Subordination Agreement The business files for bankruptcy and its assets are liquidated at market value$900,000. The senior debtholders will be paid in full, and the remaining $230,000 will be distributed among the subordinated debtholders, typically for 50 cents on the dollar.
Subordination clauses are most commonly found in mortgage refinancing agreements. Consider a homeowner with a primary mortgage and a second mortgage. If the homeowner refinances his primary mortgage, this in effect means canceling the first mortgage and reissuing a new one.

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