A subordination agreement is a legal document that establishes that one debt is ranked behind another in priority for the recovery of a debtor`s repayment. Debt priority can become extremely important when a debtor is in arrears with payments or goes bankrupt. A subordination agreement recognizes that one party`s claim or interest is greater than that of another party if the borrower`s assets must be liquidated to repay the debt. Subordination agreements can be used in different circumstances, including complex corporate debt structures. Subordination agreements are the most common in the mortgage industry. If a person borrows a second mortgage, that second mortgage has less priority than the first mortgage, but these priorities can be disrupted by refinancing the original loan. The Mortgagor essentially repays it and gets a new loan when a first mortgage is refinanced, which now puts the most recent new loan in second place. The second existing loan increases to become the first loan. The lender of the first mortgage refinancing now requires the second lender to sign a subordination agreement in order to reposition it as a priority when repaying the debt.
The priority interests of each creditor are modified by mutual agreement by what they would otherwise have become. The signed agreement must be confirmed by a notary and registered in the official county registers in order to be enforceable. Individuals and companies turn to credit institutions when they have to borrow funds. The lender is compensated if he receives interest on the amount borrowed, unless the borrower is in arrears in his payments. The lender could require a subordination agreement to protect its interests if the borrower takes out additional pledge rights over the property, for example. B if he borrowed a second mortgage. *These conjunctions must be followed by the subjunctive found only in subsidiary sentences.**These conjunctions require the subjunctive plus does not expletive. A subsidiary sentence cannot be isolated because its meaning is incomplete without the main sentence. . .