A homeowner sells his home, and the purchaser assumes the mortgage after obtaining the lender's approval. This situation is an example of what?

In this scenario, the correct term is novation, which occurs when a new party assumes the rights and obligations under a contract, effectively replacing the original party. When a homeowner sells their home and the purchaser assumes the mortgage with the lender's approval, the lender agrees to release the original borrower from their obligations. This creates a new agreement between the lender and the purchaser, making novation the appropriate term.

Novation is distinct in that it requires all parties involved to agree to the change. This contrasts with other terms such as assignment, where the original party may still retain some obligations, and subrogation, which refers to the right of a lender to step into the shoes of the borrower under certain circumstances. Subordination involves changing the priority of claims or liens and is not applicable in this situation. Therefore, novation accurately describes the scenario of the mortgage being assumed by the new homeowner after proper approval from the lender.