A preferred ship mortgage lien is a type of secured loan that is used to finance the purchase or construction of a vessel. The loan is secured by a lien on the [[Yachts, Boats or Vessels | vessel]], which means that if the borrower [[Default | defaults]] on the loan, the lender can take possession of the vessel and sell it to repay the debt. A preferred ship mortgage lien has priority over other liens on the vessel, meaning that it must be paid off first in any sale of the vessel. #### Banking Considerations There is **no** government form for a preferred mortgage. There is an Optional Application for Filing Form, CG-5542 which may be attached to the instrument. #### Collateral interests in exempt vessels should be registered per the [[UCC]] rules for each state in which the vessel is principally located. > **In some states, the process for perfecting an interest in an exempt vessel is similar to titling a vehicle.** The United States Coast Guard's Documentation Center (NVDC) online system is: https://www.dco.uscg.mil/Our-Organization/Deputy-for-Operations-Policy-and-Capabilities-DCO-D/National-Vessel-Documentation-Center/