Preferred Vessel Mortgage
BoatWiki - Definitions
Definition
A preferred vessel mortgage can be defined as an instrument that perfects a security interest in a Coast Guard documented vessel. Also known as a ship mortgage, it offers a priority standing with respect to any subsequent mortgage or contractual related encumbrances. Preferred vessel mortgages were brought about by the Ship Mortgage Act of 1920. This was enacted by congress in order to enhance maritime activities throughout the United States.
Meaning
One of the main advantages of Coast Guard documentation is the enhancement it provides to marine lenders when it comes to financing vessels. In addition to full control over any subsequent changes in the documentation status, it provides a simplified pathway of foreclosure either in a federal court or non-judicially. It also establishes a prioritized position among other security arrangements of the same nature.
Context
Most lenders will not finance a qualified boat unless the borrower agrees to have it documented. This accounts for such a large number of recreational vessels in a system that was initially designed for commercial operations. In fact there are provisions in the regulations where a single fleet mortgage can cover any number of documented vessels when owned by the same party.
Conclusion
Although preferred vessel mortgages are relatively easy to record, they must contain specific citations in order to satisfy federal regulations. There is also a matter of ensuring its priority standing. Marine lenders should accordingly consider the assistance of a maritime attorney or seasoned documentation specialist when dealing with this type of security arrangement. Additional information can be found in above WikiTags and other pages of BoatWiki.
Credits and References
4/26/2022 - Page initiated by Team BoatWiki.
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