IBA Compliance Connection

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We refinanced a mortgage loan that is secured by a manufactured home and the underlying land. The original lender had taken a mortgage in the underlying land, notated its lien on the manufactured home’s title, and filed a UCC-2 form for the manufactured home. That lender released its mortgage and removed its lien from the title, but it has not released its UCC lien. We have had no luck working with the lender — they appear not to understand (they just keep resending the mortgage release instead of a UCC release). Can the borrower file something to release the UCC lien?

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Yes, the borrower (or even your bank) may file a termination statement regarding the UCC lien, provided that the borrower is entitled to the termination, and, if your bank files it, the termination statement indicates that the borrower authorized the filing.

Once a secured obligation has been satisfied, the UCC requires the secured party to file a termination statement within 20 days after receiving an authenticated demand from the debtor. If the secured party fails to file a termination statement, the UCC permits any other person to file the statement, as long as the termination statement indicates the borrower authorized the filing. In addition, the UCC comments clarify that as long as the borrower is entitled to the termination, “it is insignificant whether the secured party or another person files any given record.”

For resources related to our guidance, please see:

  • Uniform Commercial Code, 810 ILCS 5/9-513 (Requires that a secured party must file a termination statement for a financing statement within 20 days after receiving an authenticated demand from the debtor.)
  • Uniform Commercial Code, 810 ILCS 5/9-509(d) (“A person may file an amendment other than an amendment that adds collateral covered by a financing statement or an amendment that adds a debtor to a financing statement only if: . . . the amendment is a termination statement for a financing statement as to which the secured party of record has failed to file or send a termination statement as required by Section 9-513(a) or (c), the debtor authorizes the filing, and the termination statement indicates that the debtor authorized it to be filed.”)
  • UCC § 9-509, Comment 2 (“Under these sections, the identity of the person who effects a filing is immaterial. . . As long as the appropriate person authorizes the filing, or, in the case of a termination statement, the debtor is entitled to the termination, it is insignificant whether the secured party or another person files any given record.”)
  • UCC § 9-509, Comment 6 (“[T]he authorization of the secured party of record is not required for the filing of a termination statement if the secured party of record failed to send or file a termination statement as required by Section 9-513, the debtor authorizes it to be filed, and the termination statement so indicates.”)