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.
Louisiana Subordination Agreement of Deed of Trust
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Multi-State
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US-00185
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How to fill out Subordination Agreement Of Deed Of Trust?
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FAQ
A subordination clause is a clause in an agreement that states that the current claim on any debts will take priority over any other claims formed in other agreements made in the future.
TL;DR: A subordination clause is a provision in a contract that prioritizes the repayment of liens on a title. Some lenders will use the subordination clause to ensure that they will have top priority when the borrower is making payments.
Who Benefits from a Subordination Clause? A subordination clause is meant to protect the interests of the primary lender. A primary mortgage usually covers the cost of purchasing the home; however, if there is a secondary mortgage, the clause ensures that the primary lender retains the number one priority.
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.
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.
A "subordination agreement" is a contract to prioritize one debt over another for repayment. The agreement establishes that one party's claim is superior to another party's interest. Subordination agreements happen all the time in mortgage refinancing transactions.
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.
It is an arrangement that alters the lien position. Without a subordination clause, loans take chronological priority which means that a deed of trust recorded first will be considered senior to all deeds of trusts recorded after.
A subordination agreement must be signed and acknowledged by a notary and recorded in the official records of the county to be enforceable.
The new lender prepares the subordination agreement in conjunction with the subordinating lienholder. Then the parties typically sign the agreement. But in some cases, just the subordinating lender will need to sign the paperwork.