This Draft was mentioned in the [IN RE VEAL]

On March 29, 2011, the PEB released for public comment its Draft Report on UCC Rules Applicable to the Assignment of Mortgage Notes and to the Ownership and Enforcement of Those Notes and the Mortgages Securing Them. The PEB is now reviewing the comments received by the submission deadline of May 28, 2011.

From: John A. Sebert, Chair, Permanent Editorial Board for the Uniform Commercial Code (PEB)

Summary

The Uniform Commercial Code provides four sets of rules that determine matters that are important in the context of enforcement of mortgage notes and the mortgages that secure them:

• First, in the case of a mortgage note that is a negotiable instrument, Article 3 of the UCC determines the identity of the person who is entitled to enforce the note and to whom the maker owes its payment obligation; payment to the person entitled to enforce the note discharges the maker’s obligation, but failure to pay that party when the note is due constitutes dishonor.
• Second, for both negotiable and non-negotiable mortgage notes, Article 9 of the UCC determines whether a transferee of the note from its owner has obtained an attached property right in the note.
• Third, Article 9 of the UCC provides that a transferee of a mortgage note whose property right in the note has attached also automatically has an attached property right in the mortgage that secures the note.
• Finally, Article 9 of the UCC provides a mechanism by which the owner of a note and the mortgage securing it may, upon default of the maker of the note, record its interest in the mortgage in the realty records in order to conduct a non-judicial foreclosure.

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Source: The American Law Institue and The National Conference of Commissioners on Uniform State Laws