Prerequisites for Priority Status

  1. Law
  2. Tennessee Code
  3. Commercial Instruments and Transactions
  4. Open-End Mortgages and Mortgages Securing Future Advances
  5. Prerequisites for Priority Status

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  1. All open-end mortgages, in order to have the priority provided in § 47-28-103, must contain the following:
    1. A statement or other notice conspicuously identifying the mortgage as an open-end mortgage;
    2. A provision fixing a stated term for the duration of the open-end credit agreement, which term and any extension thereof made pursuant to the provisions of the mortgage shall not exceed a total of thirty (30) years from the date of the original execution thereof;
    3. A provision fixing a maximum limit on the total amount of principal indebtedness to be secured by the mortgage at any time, i.e., the credit limit, which limit shall include precomputed interest and other precomputed charges validly included in such principal amount, but shall not include other interest, loan charges, commitment fees, brokerage commissions, and other charges validly made pursuant to the mortgage, including but not limited to, those made or incurred in protecting the efficacy of the security, including, without limitation, payment of taxes or insurance premiums, or expenses incurred in the collection of the debt or the enforcement of the mortgage;
    4. A conspicuous notice to the borrower of the borrower's right pursuant to this chapter to reduce the limit on the maximum amount of total principal indebtedness to be secured under the mortgage, but the inclusion of such notice in an open-end credit agreement separate from the mortgage shall be deemed compliance with this subdivision (a)(4); and
    5. A provision, either in the mortgage or in the open-end credit agreement, governing the duty of the borrower to return checks, credit cards, or other devices to obtain further advances on the service by the borrower of a notice of limitation, upon notice from the creditor pursuant to the terms of the open-end credit agreement.
  2. All mortgages securing future advances which may be obligatory and which are for commercial purposes, in order to have the priority provided in § 47-28-103, must contain a statement or other notice identifying the mortgage as securing obligatory advances and as being for commercial purposes.


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