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Subordination refers to the process where one creditor's claim on a real estate asset is placed below another's, commonly occurring during refinancing. In a timeline format, we start at zero (the acquisition date) with senior debt applied to the property, creating a priority order based on when claims are recorded. When junior debt is added later, it becomes subordinate to the senior debt due to its chronological placement. However, if the senior debt is refinanced, a new loan can be issued after the junior debt, potentially altering the hierarchy of claims on the property. Thus, the new senior debt takes precedence over the previously established junior debt.
