Escrow & TitleIntermediateDelaware Exam

What is 'equitable subrogation' in Delaware mortgage law?

AA borrower's right to be substituted into the lender's position after payoff

BThe doctrine allowing a lender who pays off a prior lien to be subrogated to that lien's priority positionCorrect

CSimply the narrow contractual right of a title insurer to step into a lender's exact position only after fully paying a claim

DA process for substituting one mortgage for another without changing terms

Why The doctrine allowing a lender who pays off a prior lien to be subrogated to that lien's priority position Is Correct

Answer B: The doctrine allowing a lender who pays off a prior lien to be subrogated to that lien's priority position

Equitable subrogation protects refinancing lenders who inadvertently lose priority when they pay off a prior mortgage and an intervening junior lien (unknown at the time of refinancing) takes priority. Delaware courts apply equitable subrogation to place the refinancing lender in the position of the paid-off lender, preventing the junior lienholder from receiving an unearned windfall.

Exam Tip: Escrow & Title

Escrow questions test the neutral third-party role and the sequence of closing events. Remember that the escrow agent acts as a dual agent for both buyer and seller and cannot advocate for either side.

Key Escrow & Title Terms in This Question

Lien

A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.

Title Insurance

Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.

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Key Terms to Know

Title Insurance

Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.

Lien

A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.

Private Mortgage Insurance (PMI)

Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.

Easement

A non-possessory right to use another person's land for a specific purpose.

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