What is the term for giving a lien an inferior status in order to prioritize a new lien?

Prepare for the Pennsylvania Title Insurance Test with interactive flashcards and multiple choice questions, each with hints and explanations. Ready yourself for the title insurance exam!

Subordination is the process of giving a lien an inferior status compared to another lien, allowing the new lien to take priority. This is often utilized in real estate transactions when a property owner wishes to refinance their mortgage or take out additional loans. By subordinating existing liens, the new lienholder gains priority over previous lenders in the event of a foreclosure or sale, ensuring that they are repaid first from the proceeds.

In the context of title insurance and real estate, understanding subordination is crucial because it impacts the order in which creditors are paid. It allows for more flexible financing arrangements, helping property owners secure additional funding while keeping existing debts intact.

Other terms listed, such as assignments, refer to the transfer of rights or benefits under a lien, rather than changing lien priority. Lis pendens relates to pending litigation and does not affect lien priority. Bankruptcy is a legal process that can impact debts but doesn’t specifically address lien priorities in the same manner as subordination.

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