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Foreclosing on a Preferred Ship Mortgage (101)

Maritime loans may be secured by means of ship mortgages – the pledging and charge (lien) upon title of a vessel and its cargo, machinery, equipment, etc…, as security for the loan.  46 U.S.C. §§ 31301-30, commonly referred to as the Ship Mortgage Act, governs liens upon vessels in navigable waters, including Preferred Ship Mortgage liens.  The proper filing of appropriate documents with the National Vessel Documentation Center[1] creates and perfects a Preferred Ship Mortgage lien on a registered vessel, granting the lien holder record, priority status in the event of a default.  Depending upon the language of the Preferred Ship Mortgage, the lien may attach to the vessel, as well as the vessel’s cargo, machinery (engines, shafts, propellers, etc…), equipment, electronics, gear, furniture, parts, spare parts, fuel, and other property that has been acquired or salvaged by or for the vessel.

A maritime lien that arises pursuant to a Preferred Ship Mortgage may be foreclosed or “executed,” by the filing of an admiralty action in Federal Court by the lien claimant.  The Federal Courts in Mississippi have set forth comprehensive and intricate rules governing the procedures for such admiralty and maritime claims.[2]  Once the action is filed, the vessel is usually arrested by a deputy of the U.S. Marshals’ Office and held in custody pending further action in the federal case.  The properly recorded Preferred Ship Mortgage allows the lien claimant to prove entitlement to foreclosure and payment.  Once entitlement is confirmed, the Court typically orders the vessel to be sold, usually at public auction conducted by the U.S. Marshals’ Office, with the proceeds of the sale benefiting the successful lien claimants in order of priority.  The Court ordered foreclosure sale generally clears the vessel of valid liens short of satisfying the underlying obligation.

Ideally, the arrest of a vessel prompts payment resulting in abbreviated proceedings and a shortened period of custody.  Even when payment is not forthcoming, and no owner or other entity appears to defend the vessel from the claim, foreclosure may be taken through the U.S. Marshals’ sale in approximately 75-90 days.  However, if a defense is asserted on behalf of the vessel, resolution may require many more months of civil litigation, and may further include special requirements such as posting of a bond and publication of certain notices.

In short, the law governing foreclosure on a Preferred Ship Mortgage is laden with requirements, qualifications, exceptions and complex challenges.

Paul S. Murphy


[1] For information, instructions, forms and answers to frequently asked questions, visit the website of the National Vessel Documentation Center at www.uscg.mil/nvdc/default.asp

[2] Admiralty and Maritime Rules for the United States District Courts of Mississippi may be viewed at www.mssd.uscourts.gov.