USA - NEW YORK Law and Practice Contributed by: Adam S. Walters, Erin C. Borek, Timothy P. Moriarty and Kelly E. Marks, Phillips Lytle LLP
3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders The Bank Secrecy Act governs the obligation of financial institutions, including lenders, to engage in strict compliance and reporting meas - ures with regard to the prevention of possible money laundering, terrorism finance, or sanc - tions violations in international funds transfers or guarantees. Institutions must conduct exten - sive diligence of the parties to such transfers, routinely report all details, and file immediate reports of suspicious activity. It is worth noting that CFIUS continues to expand and modify its list of installations and infrastruc - ture subject to the special requirements dis - cussed above; moreover, several pending Con - gressional measures would, if enacted, expand the types of property acquisitions (especially in the agribusiness area) subject to investment review, and even prohibit certain parties from such investments. In addition, in the last year a number of state legislatures have adopted laws restricting such investments by purchasers from certain “adversary” nations and mandating review. Extensive diligence into the then-current state of both federal and state restrictions is rec - ommended for prudent counsel when advising prospective foreign investors in such transac - tions. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Mortgage recording taxes vary based on the county where the property is located, but gener - ally range between 0.75% and 1.25% of the loan amount. The county clerk will also charge a fee to record the mortgage and accompanying loan documents or the filing of UCC Financing State - ments, the costs of which vary widely based on the type of mortgage or other document being recorded, and the length of the document.
loaned by the institutional mortgage lender. Mez - zanine loans are secured by a pledge of the bor - rower’s equity interest in the entity which owns the property. Developers also raise funds to pur - chase real estate by selling equity in exchange for cash contributions. 3.2 Typical Security Created by Commercial Investors Typically, the security interest created in con - nection with a mortgage loan is a first-in-priority mortgage lien on the real property. If permitted by the lender, one could borrow additional mon - ey from the same or a different lender secured by a mortgage, which would be subordinate to the first mortgage. The security interest is created upon recordation. The mortgage lender may also choose to file a Uniform Commercial Code (UCC) Financing Statement to create a security interest in any fixtures located at the property or to perfect a security interest in other non-real estate assets of the borrower. With respect to mezzanine financing, the mez - zanine lender may perfect its security interest by filing a UCC Financing Statement in the state of formation of the borrower entity. In addition, the mezzanine lender may require the borrower to opt in to Article 8 of the New York UCC, which changes the characterisation of the pledged equity interest to a “security” under Article 8, as opposed to a “general intangible” under Article 9. In order to perfect its security interest in this manner, the mezzanine lender would require the borrower to deliver original certificates of equity interest.
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