Which instrument is used to establish the priority of mortgages on a property when there are multiple loans?

Which instrument is used to establish the priority of mortgages on a property when there are multiple loans?

• A. Mortgage Subordination Agreement
• B. Deed of Trust
• C. Exculpatory Clause
• D. Agency by Estoppel

Answer: (A)

Establishing who gets paid first when multiple mortgages exist hinges on lien priority, which is normally based on recording dates but can be changed by an agreement. The instrument used to set or adjust that order is the Mortgage Subordination Agreement. It’s a contract between lenders in which one lienholder agrees to subordinate its priority to another loan, allowing the senior lien to keep or gain priority even if it’s recorded after the other. This is common when taking on a new loan or refinance and the lender wants a specific priority for repayment. The Deed of Trust simply creates the lien on the property; an Exculpatory Clause limits liability but doesn’t affect lien priority; Agency by Estoppel concerns representations by an agent and isn’t about how liens are ordered.

Establishing who gets paid first when multiple mortgages exist hinges on lien priority, which is normally based on recording dates but can be changed by an agreement. The instrument used to set or adjust that order is the Mortgage Subordination Agreement. It’s a contract between lenders in which one lienholder agrees to subordinate its priority to another loan, allowing the senior lien to keep or gain priority even if it’s recorded after the other. This is common when taking on a new loan or refinance and the lender wants a specific priority for repayment. The Deed of Trust simply creates the lien on the property; an Exculpatory Clause limits liability but doesn’t affect lien priority; Agency by Estoppel concerns representations by an agent and isn’t about how liens are ordered.