Escrow & Title
A subordination agreement in real estate lending is used to:
AIncrease the priority of a junior lien
BVoluntarily move a lien to a lower priority position to allow a new first mortgage✓ Correct
CRelease a lien entirely
DTransfer a lien to a different property
Explanation
A subordination agreement is signed by a lienholder to voluntarily reduce their lien's priority, allowing a new lender to move into first position. This is common when refinancing where a second lien exists.
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Key Terms to Know
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.
DeedA written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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