Uniform Commercial Code and Mezzanine Financing
The Protection You Need on Mezzanine Loans
With greater risk comes greater reward, as well as a greater need to have your interests protected. Whether you are looking to explore mezzanine loans as an option for your next project or have experience with the UCC, our team offers comprehensive solutions that protects your security interest in mezzanine loan transactions.
Understanding the Uniform Commercial Code
What is mezzanine financing?
A mezzanine loan is an equity loan secured by pledges of the ownership interests in the titleholder. In other words, the mezzanine lender receives a security interest in the owner of the property rather than the property itself.
Why are mezzanine loans becoming more common?
Due to the more conservative rules regulating banks, lenders are requiring lower LTV’s, leaving more of the property’s equity locked up. Mezzanine loans serve to bridge that gap by unlocking more equity in the property.
What is the difference between a traditional real estate loan and a mezzanine loan?
A traditional real estate loan is secured by a mortgage, which secures an interest in the real estate (i.e. buildings and land). A mezzanine loan is secured by a pledge of the ownership interests in the property owner (i.e. membership/ partnership/stock interests).
How does the outcome of a foreclosure differ?
Upon foreclosure of a traditional real estate loan, the lender becomes the owner of the real estate subject only to matters prior in right. Upon foreclosure of a mezzanine loan, the lender becomes the owner of the property owner subject to all matters of record. Therefore, mezzanine loans are considered junior loans.
Can UCC policies be co-insured?
Yes, co-insurance is available for UCC lender’s policies.
What information is needed to place an order for a UCC lender’s policy?
At a minimum, we require the name and state of formation of the mezzanine debtor. Pre-closing and post-closing organizational charts are also very helpful for us to ensure all the appropriate searches are ordered.
About UCC One, Our Title Insurance Solution for Mezzanine Lenders
UCC One offers protection and a dedicated UCC team to help you meet tight deadlines no matter the size of your loan. Work with the industry’s best underwriters and get the protection you need on your mezzanine loans.
Article 9 Comprehensive Plus
This lender’s policy insures the lender’s attachment, perfection and first-priority security interest in the pledged collateral. We also offer additional coverage for certificated security interests to protect the lender under Article 8 of the Uniform Commercial Code (UCC).
Mezzanine Endorsement to an Owner’s Policy of Title Insurance
This policy assigns payments made under the owner’s policy to the mezzanine lender. It also provides non-imputation coverage and insures the continuation of coverage should the mezzanine lender decide to foreclose.
Place a UCC Order
Since 2002, Stewart Title has been protecting personal property interests for lenders when closing mezzanine financing deals. Place your order to work with our industry-leading team for a customer-focused experience.
Have questions before you place an order? Contact our dedicated UCC team.