In order to accommodate the increased interest in Construction, Construction-to-Perm, and Renovation/Rehabilitation loans, we are making some specific modifications to some of our standard security instruments to reflect certain state requirements for renovation or construction loan types. The updates that have been completed so far are as follows:
- ARS § 47-9334 allows a mortgage to be a construction mortgage as long as the recorded instrument so indicates. This will give priority to construction mortgages over fixtures as long as the mortgage is recorded before goods becomes fixtures. Also, § 47-9502 allows a security instrument for real property to satisfy the fixture financing statement requirements, as long as the security instrument indicates that it covers that type of collateral. Accordingly, we are adding the statement, “This instrument constitutes a “Construction Mortgage” pursuant to ARS § 47-9334 and as a fixture filing under ARS § 47-9502.” under the title of the Arizona Deed of Trust (Cx311). Even though it may not be necessary, this additional statement will print for loans that have Field 1063 “Loan Purpose” set to Construction or Construction-to-Perm, or when Field 29861 “Rehabilitation/Renovation Yes/No” is set to Yes.
- According to NCGSA § 25-9-502 a real property security instrument is sufficient as a financing statement for goods that are fixtures, as long as the Security instrument (1) indicates that it covers this type of collateral; (2) Provides a description of the real property; and (3) if the debtor does not have an interest of record in the real property, provides the name of the record owner. For loans that have Field 1063 “Loan Purpose” set to Construction or Construction-to-Perm, or when Field 29861 “Rehabilitation/Renovation Yes/No” is set to Yes, we are adding the statement, “COLLATERAL IS, OR INCLUDES, FIXTURES” beneath the title of North Carolina Deed of Trust (Cx336).
- According to SC Code § 36-9-334(h) a mortgage can secure an “obligation incurred for the construction of an improvement on land, including the acquisition cost of the land, if a recorded record of the mortgage so indicates.” This construction mortgage will have priority over fixture filings as long as the mortgage is recorded before the goods become fixtures. Also, SC Code § 36-9-502 allows a real property security instrument to act as a financing statement which will cover fixtures, as long as the security instrument indicates that it covers that type of collateral. Due to SC Code §§ 36-9-334 and 36-9-502, we have added the statement, “This Instrument constitutes a Construction Mortgage pursuant to SC Code § 36-9-334 and shall constitute a fixture filing under SC Code § 36-9-502.” under the title of the South Carolina Mortgage (Cx349). Even though it may not be necessary, this additional statement will print for loans that have Field 1063 “Loan Purpose” set to Construction or Construction-to-Perm, or when Field 29861 “Rehabilitation/Renovation Yes/No” is set to Yes.
Note that these are the first of several edits to our standard first lien security instruments that will be made in order to better represent construction and renovation loans. Similar edits will also be made to the FHA security instruments, and any other instruments that we determine should be modified for this purpose. As these edits are made to other instruments, this announcement will be updated with information for each update.
The first of these construction and renovation changes, as outlined above, will take effect on August 18, 2018. Other changes for this purpose will be made and pushed out as they are completed in the future. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
DR 268181, 268749, 268174