Property OwnershipIntermediateNorth Carolina Exam

In NC, a 'subordination agreement' in mortgage financing allows:

AA senior lien to become junior to a new lienCorrect

BThe borrower to skip monthly payments

CThe lender to foreclose without court action

DThe buyer to assume the seller's existing mortgage

Why A senior lien to become junior to a new lien Is Correct

Answer A: A senior lien to become junior to a new lien

A subordination agreement allows a senior (first-priority) lien to voluntarily move to a junior (lower-priority) position — commonly used when refinancing to allow a new first mortgage to take priority over an existing lien.

Exam Tip: Property Ownership

Property ownership questions test the bundle of rights and different forms of ownership. Know the differences between joint tenancy, tenancy in common, and community property, including the right of survivorship.

Key Property Ownership 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.

People Also Study

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.

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.

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

Short Sale

A sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.

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