- clause in a mortgage bond stating that any property acquired by the mortgagor after the mortgage is signed will be included as collateral in the mortgage lien. Such clauses provide additional protection for lenders and may also help borrowers obtain financing at a better rate, although they limit a mortgagor's ability to raise capital through new borrowings.
- in asset-based lending, lien extending the lender's security interest to any additional inventory or receivables acquired by the borrower. Sometimes called a floating lien, this gives the lender adequate protection against loss when the loan collateral is constantly changing.
clause in a mortgage agreement providing that any additional mortgageable property acquired by the borrower after the mortgage is signed will be additional security for the obligation.
While such provisions can help give mortgage bonds a good rating and enable issuing corporations to borrow at favorable rates, by precluding additional first mortgages, they make it difficult to finance growth through new borrowings. This gives rise to various maneuvers to remove after acquired clauses, such as redemption or exchange of bonds or changes in indenture agreements.
a provision in a mortgage loan that includes property subsequently purchased as security on the existing mortgage.
Example: The land and buildings of the Greasy Spoon restaurant were mortgaged under a loan with an after acquired clause. Business was so good that the Greasy Spoon bought adjacent land for additional parking. However, that land was included in the existing mortgage, preventing the restaurant from arranging a new first mortgage to purchase it.
