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A security agreement is a contract between debtor and creditor that allows the latter to place a lien on personal property belonging to the former.
Formerly known as a chattel mortgage, this can include chattels that are attached to the land as fixtures.
The adoption of the Uniform Commercial Code (UCC) provides filing notices of security agreements in a more efficient manner via a financing statement.
This statement serves as a notice of of security interest.
The main reason why lenders would want to do this is so that should a borrower default, he or she would not be able to contest that something is legally considered as personal property and therefore protected from the lender’s loss mitigation.
With this documentation filed as public records, lenders are protected as personal and real property would be within their legal reach.
Borrowers would not be able to use this tactic to pull a fast one on lenders.