Security interest in collateral securing a debt protected from claims by third parties. To properly file a lien and take a security interest in property owned by the borrower, a lender must file the lien with the appropriate legal authority. Perfection of a lien on real estate is accomplished by recording the mortgage deed of trust in public land records of a municipality, such as a town clerk's office.
Perfecting a lien on stocks, bonds, or other assets owned by the borrower (known as Personal Property, as opposed to Real Property or real estate) occurs when the lender files a Financing Statement (Ucc-1) listing the type of collateral securing the loan, and its location, in a designated filing place, generally the office of the Secretary of the State or a county recorder's office.
The lender's financing statement gives the lender priority status ahead of creditors filing subsequent liens, and is valid for a five-year period. The filing date is recorded, and the lender's documents are assigned a file number. These documents contain a detailed record of the collateral pledged or taken by the lender, establishing the lender's claim against assets by the borrower in event that the borrower defaults or goes bankrupt. See also Continuation Statement; Preference; Priority of Lien.
