A California deed of trust includes a subordination clause. The property owner wants to refinance the first deed of trust. How does the subordination clause affect the second deed of trust holder?
Correct Answer
A) The subordination clause requires the second deed of trust holder to maintain junior position even when the first is refinanced
A subordination clause in a deed of trust requires the holder to maintain a junior lien position relative to a specified senior lien. When the first deed of trust is refinanced, the subordination clause means the second deed of trust holder agrees to remain in junior position behind the new first deed of trust.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
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