FinancingQuestion 85 of 120
A clause in a loan that allows an existing lien to move to a lower priority position behind a new loan is a:
a.Subordination clause
b.Acceleration clause
c.Defeasance clause
d.Alienation clause
Explanation
A subordination clause allows an existing lender to voluntarily agree that its lien will take a lower priority than a later loan. It is common in land development financing where a construction loan must take first position. Without subordination, lien priority normally follows recording order.
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