We originated a consumer mortgage loan to joint borrowers, who recently informed us that they have legally changed their names. Is there anything we need to do other than document this in the loan file? Should we be concerned that the borrowers’ names now do not match the loan documents?

No, we do not believe you need to take any additional action to address a consumer customer’s name change after updating your internal loan file and verifying the name change, as your promissory note, mortgage, and current lien position would not be affected by a name change (subject to the caveat for blanket UCC financing statements discussed below). However, if you are still concerned about the borrowers’ names not matching the loan documents, you might consider having the borrowers sign same name affidavits affirming their identities.

The Seventh Circuit federal appellate court has confirmed that “a change in the name of the debtor doesn’t defeat a creditor’s claim.” Additionally, the Illinois Code of Civil Procedure provides that “from the time a mortgage is recorded it shall be a lien upon the real estate that is the subject of the mortgage,” and the Illinois Conveyances Act provides that the first to record a mortgage (without notice of a prior encumbrance) has superior rights to those who record later. Consequently, we believe your promissory note and mortgage should remain enforceable and retain priority over subsequent creditors.

Other security instruments may be affected by a customer’s name change and require further action. For example, if a loan is secured by a “blanket” financing statement (UCC-1), you may need to amend the financing statement within four months of the name change to ensure that the financing statement remains effective for property acquired after the borrower’s name change, as required under the Illinois Uniform Commercial Code.

Also, the federal Customer Identification Program (CIP) regulations do not impose specific procedures for name changes. However, as a best practice, we recommend verifying your customers’ new names through documentation (such as a driver’s license) and by requesting the legal document that changed the customers’ names, such as a marriage license, divorce decree, or court order.

For resources related to our guidance, please see:

Sample Same Name Affidavit

Brandon v. Anesthesia & Pain Mgmt. Assocs., 419 F.3d 594, 598 (7th Cir. 2005) (“Basically what happened was a change in name, and a change in the name of the debtor doesn’t defeat a creditor’s claim.”)

Illinois Code of Civil Procedure, 735 ILCS 5/15-1301 (“Except as provided in Section 15-1302, from the time a mortgage is recorded it shall be a lien upon the real estate that is the subject of the mortgage for all monies advanced or applied or other obligations secured in accordance with the terms of the mortgage or as authorized by law, including the amounts specified in a judgment of foreclosure in accordance with subsection (d) of Section 15-1603.”)

Illinois Conveyances Act, 765 ILCS 5/30 (“All deeds, mortgages and other instruments of writing which are authorized to be recorded, shall take effect and be in force from and after the time of filing the same for record, and not before, as to all creditors and subsequent purchasers, without notice; and all such deeds and title papers shall be adjudged void as to all such creditors and subsequent purchasers, without notice, until the same shall be filed for record.”)

Olsen v. Bank One, NA (In re Bruder), 207 B.R. 151, 156–57 (N.D. Ill. 1997) (“Illinois is a race-notice jurisdiction, which means that the first to record, without notice, has superior rights to those who record later.”)

Illinois UCC, 810 ILCS 5/9-507(c) (“If the name that a filed financing statement provides for a debtor becomes insufficient as the name of the debtor under Section 9-503(a) so that the financing statement becomes seriously misleading under Section 9-506 . . . (2) the financing statement is not effective to perfect a security interest in collateral acquired by the debtor more than four months after the filed financing statement becomes seriously misleading, unless an amendment to the financing statement which renders the financing statement not seriously misleading is filed within four months after the filed financing statement becomes seriously misleading.”)

CIP Rules, 31 CFR 1020.220(a)(2) (“The CIP must include risk-based procedures for verifying the identity of each customer to the extent reasonable and practicable. The procedures must enable the bank to form a reasonable belief that it knows the true identity of each customer. . . .”)