Here we share five things that a lender simply cannot afford to miss when managing its lien portfolio. If they are addressed properly, a lender can confidently perfect its interest in a loan. For more on this topic, download the complete eBook.
1) Naming wrongs
Even the smallest difference can cause a mountain of problems. The debtor name that is used on a filing is arguably the very first step in lien perfection. If you don’t get that right, the rest of the process is nearly irrelevant.
It pays to keep your finger on the pulse of your portfolio. Has an entity changed its name but not informed you? Has it merged, dissolved, or lost good standing? Has someone terminated your UCC filing without your knowledge? Without searching and checking your filings or entities regularly, you might not know — and not knowing can leave you vulnerable and at risk.
3) Leveraging a UCC-3
Amendments can work for you...but can work against you as well. A UCC-3 is used for multiple purposes: amendments, assignments, continuations, and terminations. These classifications relate to changes made to an original lien filing (UCC-1). A UCC-3 is vital if a loan is for longer than five years. If an originated loan has not been paid off within five years, a lender has to continue it. That’s done with a UCC-3. If a debtor changes its name during the life of the loan, you have to amend your filing. That’s done with a UCC-3. If the collateral changes, you have to amend it. That’s done with a UCC-3. Bottom line: learn to know and love UCC-3s.
4) Not all states are the same
There 50 different ways to manage liens and you need to be aware of them all. The Uniform Commercial Code does not transfer to the processes states use to file forms and liens. There is enormous variety in the way that states manage UCCs.
5) The perpetual presence of risk
You have to maintain diligence even when things seem calm. It’s clear that filing the UCC is just the first step and that there is a fairly significant level of due diligence and maintenance that is required to manage a portfolio. But no matter what, there will be the permanent presence of risk.
Learn the complete story and find more ways to mitigate your risk by downloading our eBook, “5 Things you can’t afford to overlook when managing your lien filings”. It’s complimentary and can help you avoid the pitfalls of modern lien management.