After-Acquired Clause
Barron's Banking Dictionary:
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After Acquired Clause
1. Clause in a mortgage bond stating that any property acquired by the mortgagor after the mortgage is signed will be included as collateral in the mortgage lien. Such clauses provide additional protection for lenders and may also help borrowers obtain financing at a better rate, although they limit a mortgagor's ability to raise capital through new borrowings.
2. In Asset-Based Lending lien extending the lender's security interest to any additional inventory or receivables acquired by the borrower. Sometimes called aFloating Lien this gives the lender adequate protection against loss when the loan collateral is constantly changing.
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After-Acquired Clause
Barron's Real Estate Dictionary:
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After-Acquired Clause
A provision in a mortgage loan that includes property subsequently purchased as security on the existing mortgage.
Example: The land and buildings of the Greasy Spoon restaurant were mortgaged under a loan with an after acquired clause. Business was so good that the Greasy Spoon bought adjacent land for additional parking.
However, that land was included in the existing mortgage, preventing the restaurant from arranging a new first mortgage to purchase it.
Example: The land and buildings of the Greasy Spoon restaurant were mortgaged under a loan with an after acquired clause. Business was so good that the Greasy Spoon bought adjacent land for additional parking.
However, that land was included in the existing mortgage, preventing the restaurant from arranging a new first mortgage to purchase it.
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Investopedia Financial Dictionary:
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After-Acquired Clause
A provision included in legal contracts ensuring that subsequent acquisitions of assets will be included in the debtors liability to the lender.
Investopedia Says:
This is clause is used to provide extra protection to lenders. The clause ensures that new purchases can be seized if previously held loan payments are defaulted. This type of clause is commonly included in bond indentures and mortgage agreements.
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Copyrights:
Barron's Banking Dictionary
Dictionary of Banking Terms. Copyright © 2006 by Barron's Educational Series, Inc. All rights reserved.
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Barron's Real Estate Dictionary
Dictionary of Real Estate Terms. Copyright © 2008 by Barron's Educational Series, Inc. All rights reserved.
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