What is a 'subordination clause' in a mortgage or deed of trust?

Subordination clause: A provision in a mortgage/deed of trust where the lienholder agrees to SUBORDINATE (lower) their lien priority so that a LATER loan can take a HIGHER (or first) priority position.

Lien priority: Generally, liens have priority based on recording date ('first in time, first in right') — earlier-recorded liens are paid first in a foreclosure.

Subordination changes this: The earlier lender agrees to step back.

Example: A landowner has a loan on the land; they want a construction loan to build; the construction lender wants FIRST priority; the original land lender agrees (via subordination) to let the construction loan take first position; the original loan becomes subordinate (second).

Why: Enables development financing; the subordinating lender accepts more risk.

Also seen: In refinancing (a second mortgage holder subordinates to a new refinanced first mortgage).

Related: 'Subordinate financing' = junior liens (second mortgages); the subordination clause's effect on lien priority is important finance/title knowledge for brokers — it allows reordering of lien priority, commonly to enable construction or refinance loans; tested on the national broker exam.