WHAT IS A PREFERRED MORTGAGE?
A preferred mortgage is a mortgage which is given status as a maritime lien. As such, it enjoys a certain priority in the event of default. In addition, the Coast Guard is prohibited from making certain changes in documentation including, but not limited to, change of vessel ownership, name, and hailing port without consent of the mortgagee. For this reason many financial institutions require vessels which are eligible for documentation to be documented and to have preferred mortgages recorded against them.
A preferred mortgage is a mortgage which is given status as a maritime lien. As such it enjoys a certain priority in the event of default. In addition, the Coast Guard is prohibited from making certain changes in documentation including, but not limited to, change of vessel ownership, name, and hailing port without consent of the mortgagee. For this reason many financial institutions require vessels which are eligible for documentation to be documented and to have preferred mortgages recorded against them.
Since 1920, the Coast Guard has offered the availability of preferred mortgages on documented vessels to assist in vessel financing. A preferred mortgage has the status of a maritime lien, and, as such, it has the benefit of certain priority in the event of default. The Coast Guard cannot make certain changes in the documentation of a vessel covered by a preferred mortgage. It cannot, for example, change the ownership, the vessel name or hailing port without the consent of the mortgagee. Many financiers require documentation on eligible vessels for these protections.
