Ensuring lien perfection is an ongoing challenge for many commercial lenders. Yet because properly recording and maintaining a lien is needed to protect a claim on the title of a secure asset, lenders must find ways to complete this procedure successfully.
Today’s unstable financial conditions make lien perfection more crucial than ever. Rising interest rates, high inflation, and declining commercial real estate values have increased delinquent loan payments. These delays expose lenders to greater commercial portfolio risk.
With the proper tools to diagnose, remediate, and prevent unperfected liens, lenders can better protect their position. One of the easiest ways to ensure lien perfection is to reduce or eliminate common mistakes that result in higher risk ― upfront.
By correctly protecting their position from the start, lenders are less likely to encounter issues further down the line. Preventive measures that can help lenders do so include:
Monitoring
Lack of visibility is one of the primary reasons it is difficult for lenders to stay on top of borrower changes. It is important for them to know what has happened ― and what will happen ― to the liens in their portfolio. By learning sooner about issues such as debtor name changes or lien termination filings, lenders can act swiftly to protect their investments.
Attempting to manually monitor debtor activity and status changes creates its own set of challenges. Not only is the process time-consuming, it can strain internal resources and result in oversight and errors when there is a personnel change.
Using a monitoring solution such as iLien can help lenders catch errors that compromise lien perfection. By constantly checking the status of factors such as debtors’ UCCs activities and debtor name changes, business status changes, monitoring enables lenders to see the activities occurring in their portfolios.
Notifications may also be implemented for events such as debtor name changes, dissolutions, loss of good standing, and other changes that could compromise lien position.
An effective monitoring solution gives lenders the knowledge they need to take proactive measures to protect better their ability to collect.
Due diligence prior to lending
Completing due diligence upfront is critical to the loan process. Lenders need up-to-date, reliable information to evaluate the risk associated with a buyer and make sure a debtor is in good standing. But accessing this information can be both difficult and time-consuming.
iLien UCC search helps lenders determine collateral and borrower risks before lending. Lenders can access the most current public records and expert search services across multiple jurisdictions all in one place, providing reliable results, an easy-to-use experience, and the broadest lien coverage.
As a result, lenders can make faster, well-informed, and confident loan decisions.
Manage UCC filings
UCC filings are complex, requiring lenders to understand varying requirements across different jurisdictions. And as an organization grows, so do its filings demands. This aspect of lien perfection can be challenging between staffing limitations, the potential for manual process errors, and filing rejections.
Automated solutions like Lien Solution’s UCC filing improves productivity by streamlining processes and simplifying jurisdictional requirements. The built-in validation tools enable lenders to reduce errors and file faster, more accurately, and more efficiently.
Achieve a full portfolio view
When lenders use multiple agencies for their UCC filings ― including law firms, title companies, or multiple third-party providers ― it can be tough to maintain a complete and accurate view of a portfolio.
To understand the full extent of their portfolio risk, and take action on UCCs, lenders should be able to view filings in one place.
Wolters Kluwer’s Portfolio Sync solves these challenges by bringing together UCC filings across all portfolios into a single view. Providing full visibility into all liens, regardless of how they are filed, the solution makes it easy for lenders to take prompt action on liens that require amendments continuations due to upcoming expiration dates, assignments, and terminations.
Stay on top of UCC continuations
One of the biggest pain points for lenders is the need to file UCC-3 continuations every five years. If a deadline is missed, it can result in the lender losing its position.
In addition, high volumes of continuations and constantly rekey lien information can strain internal staff, leading to errors that may result in pending UCC expirations getting lost in the shuffle.
It is important for lenders to take preventive measures to avoid lapses and errors while reducing risks. Tools such as iLien’s Auto Continuation will help improve the filing process by ensuring continuation happens as a matter of course, and operations run smoothly, quickly, and with fewer errors. This proactive approach helps reduce errors and ensures that liens are monitored and automatically continued.
Manual processes can be slow, labor intensive, and a strain on resources. With automated solutions for monitoring, searching, and filing and tools like Portfolio Sync and Auto Continuation, lenders can take a more timely, accurate and complete approach to lien perfection. By reducing real risks preventively, lenders can achieve greater confidence in the health of their portfolio.
