Record a Preferred Vessel Mortgage
Learn how to record a preferred vessel mortgage with guidelines and resources.
A preferred vessel mortgage protects a marine lender’s collateral interest on any vessel that qualifies for U.S. Coast Guard documentation. This is one of the main reasons many recreational boats become documented. The following explains how to prepare and record a mortgage that meets National Vessel Documentation Center (NVDC) requirements.
Determining the Documentation Status
Preferred vessel mortgages can only be recorded against a vessel that already has a valid certificate of documentation or is in the process of becoming documented. If unsure of the current status, you can order a copy of the latest Certificate of Documentation (COD) from the National Vessel Documentation Center (NVDC). If an application is in progress, it can be verified by visiting the documentation center's website where you will find a "Work Packet Inquiry" link at the bottom of the home page. This will show any work in progress. Although a mortgage can be filed in conjunction with an application for documentation that's in progress, it's preferred status will not become effective until the COD has been issued.
Checking for Existing Recordings
Multiple mortgages can be recorded against a single vessel, but priority is established according to the order in which they are received by the NVDC. If you are unsure of the vessel’s existing encumbrances, you should order an Abstract of Title and examine it carefully. When a prior mortgage exists, a subordination agreement may be recorded if the senior mortgagee consents to give up priority. It is also important to look for any Notices of Claim of Lien that remain outstanding. These will not prevent the recording of a new mortgage, but they may affect the mortgagee’s equity if they qualify as maritime liens.
Completing the Mortgage Form
The NVDC does not supply or recommend any particular mortgage form and does not concern itself with the legal terms or conditions of the document. However, the mortgage must clearly identify the mortgagor, the mortgagee, the vessel, and the mortgage amount. It must also be properly executed, notarized, and accompanied by any supporting agreements, such as promissory notes or security instruments referenced in the document. Sample mortgage forms are available from various sources, but they should always be reviewed by a qualified maritime attorney before use to ensure they comply with your specific circumstances.
Optional Application for Filing
If you are uncertain whether a completed mortgage meets the recording requirements, you may include an Optional Application for Filing, which can be found in the NVDC’s list of forms and references. When this form is submitted, the mortgage is recorded without further review by the documentation center. Although the filing still obtains preferred status, the NVDC does not verify the legal adequacy or enforceability of the mortgage itself.
Submitting Through The eStorefront
Preferred vessel mortgages must now be submitted through an NVDC eStorefront account. Submissions sent by email or regular mail are no longer accepted. Detailed guidelines and instructions for setting up an eStorefront account can be found on the NVDC website. Priority among recorded mortgages is based on the date and time the documentation center receives them, even if the actual recording is delayed due to workload or processing time.
Monitoring the progress.
Processing times for preferred mortgage filings can vary considerably, ranging from several weeks to a few months depending on NVDC backlog. You can check the current status of your paperwork by using the “Paperwork Status Inquiry” link at the bottom of the NVDC home page, or confirm receipt and progress through the “Work Packet Inquiry” link. A date and time stamp is placed on all recordable instruments as soon as they are received, which establishes their rank and priority on the vessel’s abstract of title. If you receive a filing deficiency notice, your submission returns to the end of the processing queue until all issues are corrected. Failure to respond within the required time frame can result in cancellation of the filing and forfeiture of fees.
Conclusion.
Recording a preferred vessel mortgage is a straightforward process that provides important rights of priority to lenders and lienholders. However, recording does not guarantee that the terms of the mortgage will be enforceable if they are later challenged. Any such concerns should be discussed with a qualified maritime attorney. The information presented here is subject to change without notice and may contain errors or omissions. For the most accurate and current information, contact the National Vessel Documentation Center directly.
References and Referrals
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