"Subordination Agreement Form and Variations" is a American Lawyer Media form. This is a subordination agreement with variations form.
San Diego California Subordination Agreement Form and Variations
State:
Multi-State
County:
San Diego
Control #:
US-SAV197
Format:
Word;
PDF;
Rich Text
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FAQ
An executory subordination agreement is an agreement under which the subordinating party, like the seller of land, agrees to execute a subsequent instrument subordinating his or her security interest to another security interest, like the lien of a construction loan.
A subordination agreement prioritizes collateralized debts, ranking one behind another for purposes of collecting repayment from a debtor in the event of foreclosure or bankruptcy. A second-in-line creditor collects only when and if the priority creditor has been fully paid.
Subordination agreements are usually carried out when property owners take a second mortgage on their property. As a result, the second loan becomes the junior debt, and the primary loan becomes the senior debt.
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.
Key Takeaways. A subordination agreement prioritizes collateralized debts, ranking one behind another for purposes of collecting repayment from a debtor in the event of foreclosure or bankruptcy. A second-in-line creditor collects only when and if the priority creditor has been fully paid.
Lenders almost always decline subordination requests because subordinating a mortgage means another loan or debt is repaid in full before the mortgage is repaid. Subordinating a mortgage exposes the lender to more risk in the event you default on the loan.
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.
A subordination clause serves to protect the lender in case you default. If a default happens, the lender would have the legal standing to repossess the home and cover their loan's outstanding balance first. If there are other subordinate mortgages involved, the secondary liens will take the backseat in this process.
Subordination agreement is a contract which guarantees senior debt will be paid before other ?subordinated? debt if the debtor becomes bankrupt.
Subordination agreements are prepared by your lender. The process occurs internally if you only have one lender. When your mortgage and home equity line or loan have different lenders, both financial institutions work together to draft the necessary paperwork.