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Where there are multiple layers of financing in a real estate project, there is (or should be) an “intercreditor agreement” that attempts to sort out the potential conflicts between a senior lender — typically, the lender with a mortgage on the real estate — and the junior lender, who may have a second priority mortgage on the property but more typically is a mezzanine lender with a lien on the borrower’s stock. These agreements are attempts to pre-negotiate the dance steps, if both parties are trying to enforce against a defaulting borrower, to help bring about an orderly workout. The hope is to keep them from stepping on each other’s feet, when there’s panic on the dance floor later.

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