(a) A preferred mortgage is a mortgage, whenever made, that—
(1) includes the whole of the vessel;
(2) is filed in substantial compliance with section 31321 of this title;
(3)(A) covers a documented vessel; or
(B) covers a vessel for which an application for documentation is filed that is in substantial compliance with the requirements of chapter 121 of this title and the regulations prescribed under that chapter; and
(4) with respect to a vessel with a fishery endorsement that is 100 feet or greater in registered length, has as the mortgagee—
(A) a person eligible to own a vessel with a fishery endorsement under section 12113(c) of this title;
(B) a State or federally chartered financial institution that is insured by the Federal Deposit Insurance Corporation;
(C) a farm credit lender established under title 12, chapter 23 of the United States Code;
(D) a commercial fishing and agriculture bank established pursuant to State law;
(E) a commercial lender organized under the laws of the United States or of a State and eligible to own a vessel for purposes of documentation under section 12103 of this title; or
(F) a mortgage trustee under subsection (f) of this section.
(b) Any indebtedness secured by a preferred mortgage that is filed or recorded under this chapter, or that is subject to a mortgage, security agreement, or instruments granting a security interest that is deemed to be a preferred mortgage under subsection (d) of this section, may have any rate of interest to which the parties agree.
(c)(1) If a preferred mortgage includes more than one vessel or property that is not a vessel, the mortgage may provide for the separate discharge of each vessel and all property not a vessel by the payment of a part of the mortgage indebtedness.
(2) If a vessel covered by a preferred mortgage that includes more than one vessel or property that is not a vessel is to be sold on the order of a district court in a civil action in rem, and the mortgage does not provide for separate discharge as provided under paragraph (1) of this subsection—
(A) the mortgage constitutes a lien on that vessel in the full amount of the outstanding mortgage indebtedness; and
(B) an allocation of mortgage indebtedness for purposes of separate discharge may not be made among the vessel and other property covered by the mortgage.
(d)(1) A mortgage, security agreement, or instrument granting a security interest perfected under State law covering the whole of a vessel titled in a State is deemed to be a preferred mortgage if—
(A) the Secretary certifies that the State titling system complies with the Secretary's guidelines for a titling system under section 13107(b)(8) of this title; and
(B) information on the vessel covered by the mortgage, security agreement, or instrument is made available to the Secretary under chapter 125 of this title.
(2) This subsection applies to mortgages, security agreements, or instruments covering vessels titled in a State after—
(A) the Secretary's certification under paragraph (1)(A) of this subsection; and
(B) the State begins making information available to the Secretary under chapter 125 of this title.
(3) A preferred mortgage under this subsection continues to be a preferred mortgage even if the vessel is no longer titled in the State where the mortgage, security agreement, or instrument granting a security interest became a preferred mortgage under this subsection.
(e) If a vessel is already covered by a preferred mortgage when an application for titling or documentation is filed—
(1) the status of the preferred mortgage covering the vessel to be titled in the State is determined by the law of the jurisdiction where the vessel is currently titled or documented; and
(2) the status of the preferred mortgage covering the vessel to be documented under chapter 121 is determined by subsection (a) of this section.
(f)(1) A mortgage trustee may hold in trust, for an individual or entity, an instrument or evidence of indebtedness, secured by a mortgage of the vessel to the mortgage trustee, provided that the mortgage trustee—
(A) is eligible to be a preferred mortgagee under subsection (a)(4), subparagraphs (A)–(E) of this section;
(B) is organized as a corporation, and is doing business, under the laws of the United States or of a State;
(C) is authorized under those laws to exercise corporate trust powers;
(D) is subject to supervision or examination by an official of the United States Government or a State;
(E) has a combined capital and surplus (as stated in its most recent published report of condition) of at least $3,000,000; and
(F) meets any other requirements prescribed by the Secretary.
(2) If the beneficiary under the trust arrangement is not a commercial lender, a lender syndicate or eligible to be a preferred mortgagee under subsection (a)(4), subparagraphs (A)–(E) of this section, the Secretary must determine that the issuance, assignment, transfer, or trust arrangement does not result in an impermissible transfer of control of the vessel to a person not eligible to own a vessel with a fishery endorsement under section 12113(c) of this title.
(3) A vessel with a fishery endorsement may be operated by a mortgage trustee only with the approval of the Secretary.
(4) A right under a mortgage of a vessel with a fishery endorsement may be issued, assigned, or transferred to a person not eligible to be a mortgagee of that vessel under this section only with the approval of the Secretary.
(5) The issuance, assignment, or transfer of an instrument or evidence of indebtedness contrary to this subsection is voidable by the Secretary.
(g) For purposes of this section a "commercial lender" means an entity primarily engaged in the business of lending and other financing transactions with a loan portfolio in excess of $100,000,000, of which not more than 50 per centum in dollar amount consists of loans to borrowers in the commercial fishing industry, as certified to the Secretary by such lender.
(h) For purposes of this section a "lender syndicate" means an arrangement established for the combined extension of credit of not less than $20,000,000 made up of four or more entities that each have a beneficial interest, held through an agent, under a trust arrangement established pursuant to subsection (f), no one of which may exercise powers thereunder without the concurrence of at least one other unaffiliated beneficiary.