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What is a subordination?

April 26, 2017subordination

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What is a subordination?

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When a borrower refinances their 1st mortgage loan a new mortgage is created and the original loan is paid off. The new mortgage company asks the junior lien holders to remain in a subordinate position so that when the new mortgage is recorded it remains in first lien position, in essence, taking the lien position place of the mortgage that was paid off by the refinance. By executing a Subordination Agreement, a junior lien holder agrees to stay in a lower lien position (for example, a second lien).