12. Transfer and Payment.—
A vessel mortgage may be assigned or transferred like other similar forms of security. If the debt is evidenced by negotiable promissory notes or bonds, the transfer of them carries with it the security, although the more usual and convenient way is by a formal assignment of mortgage placed on record with the collector. The assignee succeeds to all the rights of the original mortgage. So the mortgage may descend to heirs or pass to creditors like other personal property, in accordance with the law of the owner's domicile.
On payment of the debt, the mortgage is automatically canceled and the mortgagor is entitled to have the fact placed upon the records by the usual certificate of payment and discharge.
In the case of "preferred mortgages" under the Ship Mortgage Act, 1920, the ship's documents may not be surrendered (except in case of forfeiture or judicial sale) without the approval of the Shipping Board which will be withheld unless the mortgagee consents, and the interest of the mortgagee will not be terminated by a forfeiture of the vessel unless the mortgagee was implicated in the act which caused the forfeiture. No rights under any mortgage of an American ship, whether preferred or not, may be assigned to any person not a citizen of the United States without the approval of the Shipping Board.