(a) Ensuring validity of security interest. The Borrower must obtain and provide legal opinions from independent, outside legal counsel, which must be satisfactory to MARAD and state, among other things, that the Mortgage or other security interest(s) are valid and enforceable.

(b) Alternative forms of security. In the case where a Mortgage or security interest on the financed assets may not be available, enforceable, or requested, MARAD will require alternative forms of security with satisfactory legal opinions opining as to the validity of such security interest.

(c) Mortgage in MARAD's favor. Upon delivery of a new Vessel or upon final completion of the Shipyard Project, or at the time a Note is guaranteed by MARAD with respect to an existing Vessel or Shipyard Project, a Mortgage on the Vessel and a Mortgage or other security interest on the Shipyard Project will be executed in MARAD's favor, unless MARAD determines that a Mortgage or a security interest is not available, enforceable, or required in accordance with paragraph (b) of this section.

(d) Filing. A Borrower must file a Mortgage, a security interest, or both with the proper authorities. After a Borrower has recorded the Mortgage, the recorded Mortgage or evidence of the filing of the security interest must be provided to MARAD.

(e) Mortgage secured by multiple Vessels. (1) When MARAD has a security interest in two or more Vessels, the Financing Documents may provide that one Mortgage relating to all the Vessels (Fleet Mortgage) be executed, perfected, and delivered to MARAD by the Borrower.

(2) If the Fleet Mortgage relates to undelivered Vessels, the Fleet Mortgage will be executed upon delivery of the first Vessel. At the time of each subsequent Vessel delivery, the Borrower must execute a supplement to the Fleet Mortgage that makes that Vessel subject to MARAD's mortgage lien.

(3) The Fleet Mortgage must provide that payment by the Borrower of the entire amount of the Note(s) guaranteed by MARAD will be required to discharge the Fleet Mortgage, regardless of the amount of the Note(s) issued and outstanding at the time of execution and delivery of the Fleet Mortgage or the number of Vessels covered by the Fleet Mortgage.

(4) The discharge date of the Fleet Mortgage will be the maturity date of the Note. MARAD may require, as authorized by the Act, such payments of principal prior to maturity (redemptions), regarding all related notes, as deemed necessary to maintain adequate security for the Note.

(5) Each Fleet Mortgage must provide that in the event of constructive total loss, requisition of title or sale of any Vessel covered by the Fleet Mortgage, indebtedness represented by the Note will be paid, unless MARAD otherwise determines that there remains adequate security for the Note, and the Vessel will be discharged from the mortgage lien.

(f) Adequacy of collateral. (1) A Mortgage on the Vessel(s) or Shipyard Project may be adequate security for the Note.

(2) If MARAD determines that the mortgage on the Vessel(s) or Shipyard Project is insufficient to provide adequate security or if MARAD finds that other security is adequate, as a condition to approving the Project, MARAD may require other or additional collateral, such as a mortgage(s) on other Vessels, security interests on other assets, special escrow funds, pledges of stock, charters, contracts, notes, letters of credit, accounts receivable assignments, and guarantees.