A subordination agreement is a legal document used to make the claim of one party junior to (or inferior to) a claim in favor of another.
It is generally used to grant first lien status to a lienholder who would otherwise be secondary to another party, with the approval of the party that would otherwise have first lien.
Typically a subordination arises when there are two existing mortgages, a first mortgage and a second mortgage, and the mortgagor intends to refinance the first mortgage.
However, the second mortgage holder does not want to release its mortgage and re-file, due to additional costs and priority problems, so it will subordinate its lien to the lien of the replacement mortgage.
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