This agreement allows one lien holder to subordinate its deed of trust to the lien of another lien holder. For valuable consideration, a particular deed of trust will at all times be prior and superior to the subordinate lien.
This agreement allows one lien holder to subordinate its deed of trust to the lien of another lien holder. For valuable consideration, a particular deed of trust will at all times be prior and superior to the subordinate lien.
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A contractual subordination occurs where, by agreement between a debtor and a creditor, debts owed to the creditor are to rank below other debts of the debtor.
Legal counsel drafts subordination agreements to suit the needs of the parties. It is common practice for retail lending, particularly when a mortgage is refinanced and often multiple mortgages and lenders are involved.
Get the terminology right In addition, a deed of priority usually addresses what steps each lender may take to enforce its security. Subordination deed ? this deals with the entitlement of the different creditors to receive payments .
An example is a trust document that includes a subordinate clause. This requires it to state that once the primary lien becomes active, a secondary lien becomes automatically subordinate. For instance, if a trust pays education funding as a first priority, the first lien is tuition.
The new lender prepares the subordination agreement in conjunction with the subordinating lienholder. Then the parties typically sign the agreement.
Subordination agreements are used to legally establish the order in which debts are to be repaid in the event of a foreclosure or bankruptcy. In return for the agreement, the lender with the subordinated debt will be compensated in some manner for the additional risk.
A subordination agreement must be signed and acknowledged by a notary and recorded in the official records of the county to be enforceable.