American Land Title Association (ALTA) Practice Exam 2025 – Your Comprehensive All-in-One Guide to Success!

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What does "subordination" mean in terms of mortgages?

The process of establishing that one loan or lien is secondary to another

Subordination in the context of mortgages refers to the process of establishing that one loan or lien is secondary to another. In a subordination agreement, a lender agrees that their claim on a property will take a lower priority than the claim of another lender. This is especially important when additional financing is needed and ensures that the first mortgage (or the primary loan) is paid off first in the event of a foreclosure or property sale. This definition highlights the hierarchical structure of liens on a property, which is crucial for determining the order of payouts in situations where the borrower defaults. Understanding subordination helps financial professionals navigate lending relationships and prioritize repayments effectively.

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The arrangement of payments in a loan agreement

The act of consolidating multiple loans into one

The legal method of transferring property titles

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