I am preparing a mortgage and promissory note for a client. The client lent money to a friend and now wants to secure that loan. What else should I do?

The mortgage secures the loan agreement and is records in teh chain of title. The promissory note evidences the debt.

I would obtain a personal guarantee or a continuing guarantee on the note and I would make the mortgage a future advance mortgage to secure additional loan amounts.

Make sure an appraisal is performed on all property and if personal property or trade fixtures are involved in the security agreement, then perform a UCC title search.

That is a starting point. Good luck.

Consider putting together a future advance mortgage though, in this type of situation. the nice part about a future advance mortgage is that if any subsequent loans are made to that person or entity, they will be secured by the previously filed future advance mortgage without have to re-file a new mortgage.

Below is some sample language to get you started - the rest would read, basically like a standard mortgage document to whatever type of property your are mortgaging:

Mortgage

This Mortgage constitutes a “Future Advance Mortgage” under applicable Michigan law. All future advances under this Mortgage or under any of the Loan Documents shall have the same priority as if the future advance was made on the date that the Mortgage was first recorded. The indebtedness secured by this Mortgage may also increase as a result of any defaults by Mortgagor due to, for example and without limitation, unpaid interest or late charges, unpaid taxes or unpaid insurance premiums or payment of amounts owed under a prior mortgage given by Mortgagor which Mortgagee elects to advance pursuant to the terms of the Mortgage and Loan Documents, attorneys fees and costs incurred in enforcing the Loan Documents or other expenses incurred by Mortgagee in protecting the Premises, the security of the Mortgage and Mortgagee’s rights and interests.

This Mortgage is made this [date], by [name] a Michigan [type of entity], whose address is [address] (the “Mortgagor”), to and for the benefit of [name], a Michigan [type of entity], whose address is [address] (the “Mortgagee”) upon the terms and conditions stated in this document.

Purpose.


This Mortgage is given to secure all indebtedness of the Mortgagor to the Mortgagee, of whatever kind or nature, whether now existing or hereafter arising and including, without limitation (i) the payment of all sums owed to Mortgagee under a construction contract (the “Contract”) and a site development loan agreement (the “Loan Agreement”) entered into between Mortgagee and Mortgagor of even date to pay for the construction of improvements by Mortgagee on the property described on the attached Exhibit A (the “Premises”), and the promissory note (the “Note”) given by the Mortgagor to the Mortgagee of even date in payment of the amounts owed under the Contract for the improvements and the Loan Agreement, together with interest, in accordance with the terms of the Note, and any and all renewals, modifications or extensions of the Loan Agreement and the Note, (ii) the performance of the covenants contained in the Loan Agreement, the Note or in this Mortgage and any monies expended by the Mortgagee in connection with those documents, and (iii) the payment of all obligations and performance of all covenants of the Mortgagor under the documents issued pursuant to the Loan Agreement (all of the aforesaid indebtedness and obligations of the Mortgagor are referred to as the “Mortgage Indebtedness”, and all of the documents, agreements and instruments between the Mortgagor and the Mortgagee evidencing or securing the repayment of, or otherwise pertaining to, the Mortgage Indebtedness including, without limitation. The Note, this Mortgage, the Contract, and the Loan Agreement are collectively called the “Loan Documents.”