When Do You Record A Subordination Agreement

The lender could require a subordination agreement to protect its interests if the borrower is considering additional privileges on the property, such as .B they were to take out a second mortgage. In addition, all creditors are superior to shareholders in the preference for claims in the event of liquidation of a company`s assets. However, loans follow a chronological order if there is no subordination clause. This implies that the first registered trust certificate is considered higher than any trust certificate registered later. Under California Civil Code Section 2953.3, any subordination agreement must include the following: The signed agreement must be confirmed by a notary and registered in the county`s official records in order to be enforceable. In 2006, HUD published mortgage Letter 2006-20, which dealt with subordinate privilege requirements under the HECM program. In that letter, HUD pointed out that an existing lien on immovable property that serves as collateral for a HECM loan may become subordinated if two conditions are met: the existing lien is subordinated and does not interfere between the first and second HECM lien; and that the HECM Borrower will not incur any unpaid or unpaid obligations in connection with the HECM Operation. .