Removing a lien filing before a future lender will lend to refinance a loan?

I loaned money to a person and his business.  The loan is secured and I filed a “Uniform Commercial Code financing statement” on state lien records.

The person is now claiming that he can’t get anyone else to lend to him because of the “Uniform Commercial Code financing statement”, and that other lenders require that it be removed.  Then they will lend to me.

Is that how bank loans work: first the evidence of an existing loan is removed from lien records and then the new loan is made?

I handle plenty of business loans in my job.  If someone has borrowed a loan and there is a lien due to the loan, if a new lender plans to loan funds to the borrower under a new loan, the bank receives approval to remove the lien filing once it funds the new loan, and the existing lender is paid off by the new loan, with the borrower keeping the rest of the new loan; it’s all one transaction, coordinated with both lenders.

Isn’t it fishy for a borrower to demand that a lien filing be removed, and then the borrower will get a new loan?  The lien removal, payoff of the old loan and disbursement of the new loan are all one transaction, right?

Thanks.

6 Answers

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  • 1 month ago
    Favourite answer

    Yes, loan payoff with lien release out of proceeds of a new loan can be done. But removing a lien without payment in full is dangerous, and a red flag to lenders that something is probably fishy. Do not release the lien until the loan is paid in full. 

  • 1 month ago

    It sounds about right.  If he hasn't paid off his current loan, then why would a lender lend him more money?

  • 1 month ago

    It is true, maybe they won't lend to him with an existing lien.  That seems to be his problem and not yours.  You need to discuss with them how you are going to get paid.  

  • Anonymous
    1 month ago

    If u have not been paid why is the person is trying to borrow more money if he already tied the lien to you?don't take the lien off until paid.also this person is a red flag

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  • 1 month ago

    The closing agent will get the UCC satisfaction and payoff from the lender.  You will get your money and the closing agent will record the satisfaction.  The borrower has no say in it.

  • R P
    Lv 7
    1 month ago

    Do not release the lien unless you have been paid, or that you have verification that you will be paid at closing.  If you do, you will most likely never see your money.

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