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LEGAL FORMS
BACKGROUND REPORTS
BOAT WEAR ONLINE
BOATER EXAM
VESSEL RECORD SEARCH
VESSEL TITLE SERVICES
BOAT TRANSACTION FORMS |
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Please read our terms of use before proceeding. Please submit an advisor request if your question is not listed above.
Does a preferred
vessel mortgage cover a boat trailer?
- A boat trailer is considered a vehicle rather than a
vessel. Accordingly, your security interest in a boat trailer should
be perfected on the state level even though you have a preferred
mortgage on the vessel itself.
How do I foreclose on a boat loan? -
Boat loans are typically foreclosed through actions taken within the courts or performed non-judicially under
state regulations. Such options are generally governed by the terms
of a loan contract or security agreement and the manner in which the
loan was perfected. These choices can also determine whether
deficiencies may be recovered for any shortfalls from liquidating
the boat. When using the non-judicial method, repercussions may
arise from the borrower if not performed in exact accordance with
the respective statutes. In any event, you should seek the
advice and guidance of an attorney in determining the best method of
foreclosure.
Should I require a preferred vessel mortgage?
- The issue of whether to require a preferred mortgage is a moot
point if the boat is too small to qualify for Coast Guard
documentation. As a rule of thumb, most boats under 25' in length
can not be documented. A preferred mortgage can only be recorded on
a vessel that is currently documented or in the process of acquiring
documentation. Once filed, it will rank higher in priority than
anything recorded on the state level such as a legal ownership position
or UCC recording. Many lenders require a preferred mortgage under
any circumstances if the boat is large enough to qualify for
documentation. Others have risk thresholds and may forego such requirement on smaller loans.
Should I record on the state level if I have a mortgage?
- If your preferred mortgage has been properly filed with the
U.S. Coast Guard, there is no real need to
record it on the state level. However, some lenders elect to file a
UCC financing statement as an interim measure until a mortgage has
actually been recorded or to cover any accessories. The lag time
between a mortgage filing and its actual recordation can be several
weeks depending on the documentation center's workload. Many
lenders also insist on becoming named as a legal owner on state
level registrations if such methods are available for documented
vessels.
What is a preferred vessel mortgage?
- A preferred vessel mortgage is an instrument which
perfects a lender's interest when recorded with the U.S. Coast
Guard. However, mortgages can only be filed on vessels which are
actively documented or in the process of becoming documented. Any
number of mortgages can be recorded on the same vessel and they
attain priority according to the date on which filed. A preferred
mortgage is said to have the highest rank and priority with respect
to securing contractual vessel loans.
When should I file a
UCC statement?
- A UCC recording is appropriate for perfecting an
interest in a boat, trailer, or outboard motor that is neither state
titled or Coast Guard documented. However, many lenders elect file
UCC statements in any event as an interim protection measure until
higher level recordings have been implemented. UCC filings are most
common in states that register boats, but do not issue corresponding
titles.
Where can I find marine, boat, or vessel escrow services?
- In the marine industry, you are not likely to find the
equivalent of typical real estate escrow services. Boat or vessel
escrows are for the most part
handled by yacht brokers, commercial lenders, a few documentation
companies, and the
occasional attorney who is willing to become involved in such
transactions. Other than attorneys and commercial lenders, there is very little by way of
bonding, accountability, and governmental oversight with respect to
the way marine escrows are handled. Brokers are regulated in some
states, but documentation companies are usually not subject to any such
constraints. You should accordingly conduct a great deal of
investigation before handing large sums of purchase funds over to an
independent marine escrow agent. |
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Coast Guard documentation with a preferred mortgage is
typically viewed as the optimal security for vessels exceeding twenty five
feet in length. However, this may not
always be the best answer with regard to realities of
the marketplace. Although a
preferred mortgage is generally recognized as the best method for
perfecting contractual liens, it is usually more expensive and cumbersome
to deal with than state titling. Accordingly, lenders are often confronted
with varying degrees of resistance from borrowers who are usually the ones
to bear such burden. This is especially true on smaller vessels where
documentation may not otherwise be advantageous.
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