“A preferred mortgage is a lien on the mortgaged vessel in the amount of the outstanding mortgage indebtedness secured by the vessel,” according to Cornell Law.
In the event of default, this mortgage enjoys a certain priority.
The Coast Guard cannot make certain changes in the documentation without the consent of the mortgagee. These include but are not limited to changing the vessel ownership, hailing port, and name.
The lender and the borrower create a preferred ship mortgage mutually. In the event of default, the mortgage can enforce a claim for the outstanding indebtedness secured by the mortgaged vessel, enforce the preferred lien in a civil action for a vessel, and other actions.
A mortgage cannot be accepted for filing unless a vessel has either a valid Certificate of Documentation or an application for initial documentation, transfer/exchange, or a replacement certificate on file with the authorities.
Click here to get started on a preferred ship mortgage form