Define: Ship Mortgage Act

The Ship Mortgage Act is a federal law that governs the creation, perfection, and enforcement of mortgages on vessels in the United States.

The purpose of the Ship Mortgage Act is to provide a framework for financing vessels by allowing lenders to secure their loans with a mortgage on the vessel, similar to how real estate mortgages work.

The Ship Mortgage Act provides lenders with a priority lien on the vessel, which means that in the event of default, the lender has the right to foreclose on the vessel and sell it to recover their loan amount.

No, only vessels that are eligible for documentation with the U.S. Coast Guard can be mortgaged under the Ship Mortgage Act. This typically includes vessels that are at least 5 net tons and engaged in commercial activities.

To create a valid ship mortgage, the mortgage must be in writing, signed by the mortgagor, and recorded with the U.S. Coast Guard. Additionally, the mortgage must include certain specific information, such as the names of the parties, vessel identification, and the amount of the mortgage.

Yes, ship mortgages can be transferred or assigned to another party, subject to certain requirements. The transfer or assignment must be in writing, signed by the parties, and recorded with the U.S. Coast Guard.

If a vessel is sold while it is subject to a ship mortgage, the mortgage remains attached to the vessel. The new owner takes the vessel subject to the mortgage, and the mortgagee’s rights and remedies continue against the vessel.

Yes, a ship mortgage can be discharged or released once the underlying debt is paid off. The discharge must be in writing, signed by the mortgagee, and recorded with the U.S. Coast Guard to remove the mortgage from the vessel’s record.

If a vessel owner defaults on their mortgage payments, the mortgagee has the right to foreclose on the vessel and sell it to recover their loan amount. The foreclosure process is typically governed by state law and may involve court proceedings.

Yes, there are certain limitations on ship mortgages, such as restrictions on the maximum amount that can be secured by a mortgage and limitations on the mortgagee’s ability to recover attorney’s fees and costs in foreclosure proceedings. These limitations are outlined in the Ship Mortgage Act and should be carefully considered when entering into a ship mortgage agreement.