What is Secured Lending? Secured lending is the term used to describe loans which are supported by a lien on some type of property owned by the borrower or a third party. The owner of the property agrees that if the money borrowed from the Bank is not repaid by the borrower, the Bank (which is the “Secured Party”) can sell the property securing the loan and use the proceeds to repay the loan. [UCC 9.102(a)(73)] Secured lending is typically safer than unsecured lending. In the event the borrower files bankruptcy, a secured lender generally gets paid before an unsecured lender. This Guide deals with “secured” or collateralized lending and primarily with the types of collateral covered by the Texas Uniform Commercial Code which is Chapter 9 of the Texas Business and Commerce Code (the “UCC”) located in the Appendix. Bracketed references in this Guide to the UCC such as [UCC 9.101] refer to the Texas UCC. A working knowledge of the UCC, its terminology and its applications to secured transactions is essential.
This Guide’s purpose is to assist loan officers in understanding various secured lending arrangements and documents so that loan agreements are clearly spelled out and all parties know their respective rights and responsibilities. With such a broad spectrum of topics and issues, it is impossible to give an exhaustive treatment of the many questions and problems that may arise in complex lending situations. Instead, the goal of this Guide is to acquaint the lending officer with the relevant terminology, legal principles and practices, and standard security arrangements. The loan officer should become generally familiar with the format and the content of this Guide and then study in detail the subjects which apply to particular loan transactions. This Guide is divided into chapters by types of collateral. If more than one type of collateral is involved, all applicable chapters should be consulted and reviewed.
Forms are included at the end of various chapters. These forms are either issued by state and federal governmental agencies which oversee lien perfection on specified types of collateral or are produced, marked and copyrighted by Wolters Kluwer. The Wolters Kluwer forms serve as guides only and may or may not be the most current version of the document, are reproduced in this Guide with the permission of Wolters Kluwer and neither the author of this Guide nor the Texas Bankers Association has undertaken an independent review of these forms. For Information about Wolters Kluwer forms please contact your Wolters Kluwer Account Executive or the Texas Bankers Association. The state and governmental forms used are current as of the date of this Guide.