Article 9 Does Not Govern Real Property Security Instruments

It is a misnomer and misconception that UCC Article 9 or your states equivalence applies to Security Instruments (Mortgage and Deeds of Trust) pertaining to real property. That is not true. Pursuant to U.C.C Article 9 109 (d) or your states equivalence of which states:

U.C.C § 9-109. SCOPE. (d) [Inapplicability of article.]
This article does not apply to: (5) an assignment of accounts, chattel paper, payment intangibles, or promissory notes which is for the purpose of collection only; (7) an assignment of a single account, payment intangible, or promissory note to an assignee in full or partial satisfaction of a preexisting indebtedness; (11) the creation or transfer of an interest in or lien on real property, including a lease or rents thereunder, except to the extent that provision is made for: (A) liens on real property in Sections 9-203 and 9-308; (D) security agreements covering personal and real property in Section 9-604

U.C.C Article 9 will apply to security instruments pertaining to personal property. The banks will also have you believe that the rights of the security instrument being either the Mortgage or the Deed of Trust also extend to the Tangible Mortgage Promissory Note due to their fancy word crafting. The banks want you to believe that a Mortgage Note is the same as a personal Promissory Note, and it is not.

A Mortgage Note requires its underlying security instrument to be in compliance with state law and a Promissory Note requires it to be in compliance with U.C .C. Article 9. But a Mortgage Note if in compliance with local laws of jurisdiction can also be a Promissory Note. However, you have 2 sets of laws in which to comply with which are U.C.C Article 3 and local laws of jurisdiction for a Mortgage Note. You can not take a Mortgage Note and convert it into a transferable record as you would get caught in the statutes of fraud and this affects an interest in real property. However, they can sell off the payment stream of that Mortgage Note as a transferable record, but you can not have a real property Security instrument following that transferable record as that is prohibited.

You can not have the rights of the Mortgage Note in contradiction with the state law follow the Intangible Obligation. You can have the personal property, which is the paper Mortgage Note, meaning the paper in which it is written on is the personal property but not the rights contained within.

Be careful of what you allow by not knowing as there is no excuse for ignorance.


Joseph Esquivel
Mortgage Compliance Investigators
Copyrighted© 2014

The post Article 9 Does Not Govern Real Property Security Instruments appeared first on U.S Equity Initiative.

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