Alabama Subordination Agreement with no Reservation by Lienholder
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How to fill out Subordination Agreement With No Reservation By Lienholder?
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FAQ
Who Executes a Subordination Agreement? The new lender prepares the subordination agreement in conjunction with the subordinating lienholder. Then, the parties typically sign the agreement.
Subordination is a way of changing the priority of claims against a debtor so that one creditor or group of creditors (the junior creditor(s)) agree that their debt will not be paid until debts owed to another creditor or group of creditors (the senior creditor(s)) have been paid.
A subordination agreement must be signed and acknowledged by a notary and recorded in the official records of the county to be enforceable.
Since it's recorded after any HELOCs or second mortgages you already have in place, the first mortgage would naturally take a lower lien position. Most lenders won't allow this, so this could cause you to lose your loan approval if the second mortgage holder won't agree to subordinate.
Lien subordination refers to the order in which claims on collateral are prioritized. This takes place most often among senior secured lenders and does not imply that one tranche of senior debt has payment preference over another.
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 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.
Subordination is the act or process by which one person or creditor's rights or claims are ranked below those of others, dealing with the distribution priority of debts between creditors.
A new creditor may wish to be the senior lender, but the existing lender must consent to give up (or subordinate) their superior claim over a security interest. The Agreement thus defines the new senior and subordinated creditors and the priority of the two claims against specific collateral.
