Liens are a form of notice filed with the government to tell the world that a piece of property is being used as collateral to ensure that the lender is re-paid on a loan.  If the borrower stops making payments on the loan, the lender has the right to foreclose on the property, or sell it at a public auction.  The proceeds of this sale are applied to the loan.  In California, the two main types of liens used by lenders are the and the UCC-1. 

 

Trust Deeds

Instead of using mortgages in California, lenders use trust deeds as liens on real estate.  If, for example, a home buyer cannnot buy a house for all cash, he or she applies to a bank for a loan.  The bank records a trust deed with the local county recorder to give notice to the world that the bank has made a loan to the borrower, and that this specific piece of property is collateral for the loan.  If the home buyer stops making payments on the loan to the bank, the bank can foreclose on the trust deed.  After a waiting period lasting a minimum of three months and three weeks after filing a Notice of Default, there is a foreclosure sale.   At the foreclosure sale, the highest bidder can buy the house.  After the foreclosure sale, the home buyer loses the house and must move out.  The buyer at the foreclosure sale becomes the new owner.  Sometimes the bank “buys” the house at the foreclosure sale, and becomes the new owner. 

 

UCC-1

Just as mortgages and trust deeds are used to secure real estate, UCC-1's are used in the United States to secure personal property, like equipment.  Using a UCC-1 in the United States, a lender can take personal property as collateral for a loan.  If the borrower defaults on the loan, the lender can foreclose on the personal property specified in the UCC-1. 

Technically, a UCC-1 is simply the name of a form.  UCC stands for Uniform Commercial Code.  Generally speaking, this form is filed with the secretary of state in the state where the personal property is located.  The secretary of state keeps the information on the UCC-1 in a data base, which allows others to search the records to determine whether a company has borrrowed money and whether certain of the company's personal equipment is being used as collateral for the loan