The Subordination Agreement Mortgage is a crucial document in U.S. real estate financing that becomes necessary when multiple loans are secured by the same property and there is a need to modify their priority order. This typically occurs during refinancing transactions, when taking out additional financing, or in loan modification scenarios. The agreement is particularly common in both commercial and residential real estate contexts where multiple lenders are involved. The document must adhere to state-specific recording requirements and federal lending regulations, making it essential to tailor the agreement to the specific jurisdiction where the property is located. A properly executed Subordination Agreement Mortgage includes detailed information about the existing liens, clear terms of subordination, and specific provisions for protecting all parties' interests while establishing new lien priorities.
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Key Requirements PROMPT example:
Subordination Agreement Mortgage
"I need a Subordination Agreement Mortgage for a commercial property in California where ABC Bank, holding a second mortgage of $2M, will subordinate their position to XYZ Credit Union's new first mortgage of $5M, with closing scheduled for March 15, 2025."
1. Parties: Identifies all parties to the agreement, including the senior lender, subordinating lender(s), and property owner(s)
2. Background: Recitals explaining the existing loans, their recording details, and the reason for subordination
3. Definitions: Defines key terms used throughout the agreement, including Senior Loan, Subordinate Loan, Property, and Security Instruments
4. Subordination: Core section establishing the subordination of the specified liens and their new priority positions
5. Representations and Warranties: Statements by all parties confirming their authority, ownership of the loans, and validity of the liens
6. Acknowledgment and Consent: Formal acknowledgment by subordinating lender of the new lien priority arrangement
7. Notice Requirements: Procedures for how parties must communicate regarding loan defaults, foreclosure actions, or other significant events
8. Term and Termination: Duration of the subordination agreement and circumstances under which it may terminate
9. Governing Law: Specifies the state law governing the agreement and jurisdiction for disputes
10. Execution: Signature blocks and notary acknowledgments for all parties
1. Partial Subordination Terms: Used when only a portion of a lien is being subordinated, detailing the specific amounts or portions subject to subordination
2. Insurance and Taxes: Include when specific arrangements regarding insurance proceeds or tax payments need to be established between the lenders
3. Modification Provisions: Added when parties want to specify conditions under which the senior loan can be modified without further consent
4. Cross-Default Provisions: Include when default on one loan should trigger rights or remedies regarding the other loan
5. Future Advance Provisions: Used when the senior loan contemplates future advances that will maintain priority
6. Remedies: Optional detailed section specifying remedies available to parties in case of breach of the subordination agreement
1. Property Description: Legal description of the property or properties subject to the subordination
2. Senior Loan Documents: List and copies of all documents constituting the senior loan
3. Subordinate Loan Documents: List and copies of all documents constituting the subordinate loan
4. Recording Information: Detailed information about the recording of existing mortgages and liens
5. Lien Priority Diagram: Visual representation of the lien priority structure before and after subordination
Authors
Relevant legal definitions
Agreement
Borrower
Business Day
Default
Effective Date
Event of Default
Existing Security Interest
First Lien
Future Advances
Governing Law
Junior Lender
Junior Loan
Junior Loan Documents
Junior Security Instrument
Lien
Loan Documents
Mortgage
Mortgaged Property
Notice
Permitted Modifications
Prior Lien
Property
Recording Office
Senior Lender
Senior Loan
Senior Loan Documents
Senior Security Instrument
Subordinated Debt
Subordinated Security Interest
Subordination
Security Instruments
Title Insurance Policy
Borrower
Business Day
Default
Effective Date
Event of Default
Existing Security Interest
First Lien
Future Advances
Governing Law
Junior Lender
Junior Loan
Junior Loan Documents
Junior Security Instrument
Lien
Loan Documents
Mortgage
Mortgaged Property
Notice
Permitted Modifications
Prior Lien
Property
Recording Office
Senior Lender
Senior Loan
Senior Loan Documents
Senior Security Instrument
Subordinated Debt
Subordinated Security Interest
Subordination
Security Instruments
Title Insurance Policy
Clauses
Parties
Recitals
Definitions
Subordination
Priority
Representations and Warranties
Consent
Notice
Default
Remedies
Assignment
Amendment
Termination
Further Assurances
Governing Law
Jurisdiction
Severability
Entire Agreement
Counterparts
Recording and Registration
Waiver
Indemnification
Force Majeure
Survival
Authority
Acknowledgment
Recitals
Definitions
Subordination
Priority
Representations and Warranties
Consent
Notice
Default
Remedies
Assignment
Amendment
Termination
Further Assurances
Governing Law
Jurisdiction
Severability
Entire Agreement
Counterparts
Recording and Registration
Waiver
Indemnification
Force Majeure
Survival
Authority
Acknowledgment
Relevant Industries
Banking & Financial Services
Real Estate
Mortgage Lending
Property Development
Construction
Commercial Real Estate
Residential Real Estate
Legal Services
Relevant Teams
Legal
Real Estate
Mortgage Operations
Credit Risk
Compliance
Loan Administration
Commercial Lending
Property Management
Title and Escrow
Document Management
Relevant Roles
Mortgage Loan Officer
Real Estate Attorney
Title Officer
Commercial Lending Officer
Real Estate Manager
Credit Risk Manager
Loan Administrator
Property Manager
Real Estate Developer
Mortgage Underwriter
Legal Counsel
Compliance Officer
Real Estate Broker
Banking Operations Manager
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