Mortgage is a registered security, which is registered under the contract

For mortgage loans is characterized by the availability of collateral in the form of real estate. This type of transaction requires official confirmation with the help of a special document, because a real estate loan is a loan of a fairly large amount of money. In addition, here we are talking about a certain pledge, the role of which is played by the acquired house, apartment or other housing.

In this regard, Russian banks have introduced into practice the registration of a mortgage along with a mortgage agreement.

What is a mortgage?

Mortgage is a security that regulates the relationship between the lender and the borrower.

Thanks to it, the owner becomes the owner of two rights at once:

1. The right to execute monetary obligations on a mortgage loan, without providing other evidence for its existence.
2. The right to use property issued under a mortgage, as collateral.

More precisely define what a mortgage is and how it differs from a mortgage contract, you can use the following table:

General information

A mortgage is a debt security whose operation ends only after the full repayment of all the borrower's obligations to the creditor. While its validity has not expired, the right bank may re-mortgage or sell the mortgage to other financial and credit organizations. Of course, only with the personal consent of the borrower. However, this does not have any significant impact on the security itself: the terms of the mortgage agreement, like the terms of the mortgage, are unchanged.

Russian credit practice does not provide for mandatory execution of this paper. Large banks, for example, do not consider it necessary to oblige a borrower to sign a mortgage, because in their reserves there are impressive financial assets, that is, they thus do not risk losing any significant amount for themselves. But not so large participants of the credit and financial market insist on drawing up a mortgage in order to secure themselves.

An important feature of the mortgage is that its terms are higher than the mortgage agreement by priority. It turns out that in case of non-compliance, the obligations will be fulfilled according to the provisions of the mortgage.

The mortgage loan agreement is the main document of this transaction, it certifies a mortgage, and a mortgage is its guarantee. The original mortgage remains with the bank that provided the loan, the borrower receives a copy certified by the notary.

Mortgage is a security whose registered possession does not allow the credit and financial organization to transfer it to third parties without the written permission of the borrower.

Essence of mortgages

The mortgage is the link between real estate and securities markets. The essence of the mortgage is to refinance, that is, the mortgage debt can be sold or mortgaged. The Institute of Mortgages was introduced very recently, which undoubtedly means progress in the development of the debt securities market. Thus, banks will be able to sell debt in the secondary market, thereby providing themselves with an extensive cash base for long-term lending.

In the mortgage, the most important is the massive lending by banks of the housing being built and ready. Long-term housing loans can not be based only on deposits and other accounts of depositors. Mass and long-term crediting of construction and purchase of private real estate require the possibility of refinancing, in the stock market as well. World financial history proved the impossibility of a normal development of the market of housing loans without mortgages.

Terms of mortgage issue

This security may be issued subject to three conditions:

• The main obligation is monetary;
• When entering into a mortgage contract, the amount of the debt according to it or criteria on which it will be possible to determine it;
• In the mortgage agreement there should be an item on the issue of the mortgage.

This does not mean that the mortgage or the main contract is losing its force. They both continue to be valid. But it must be remembered that a mortgage is a security, obligations under which are secured by a pledge. The holder may recover the subject of a mortgage loan or receive performance under the main contract for the mortgage, and not on the basis of a mortgage or a basic contract. In addition, one of the features of the mortgage is the mandatory state registration of this security.

The document is issued by the mortgagor. Mortgage is a pledge agreement, which is issued in a single copy, in writing, on a special form of the standard form. State registration of a mortgage implies the existence of an individual registration number and seal, without which this security is considered invalid.

Categories of objects

Mortgage is a security, the security of which may be one of the following categories:

• Apartments, houses and their parts;
• Unfinished objects;
• land;
• Garages, garden houses, cottages and other buildings for consumer use;
• Inland navigation vessels, ships and aircraft, and space objects.

A mortgage can not be executed if the subject of the contract is an immovable object with specific properties, such as:

• Plot of land;
• The enterprise as a single and indivisible property complex;
• Forest, etc.

In a mortgage contract, the right of lease may be indicated as an object.

What is a mortgage on the securities market?

Mortgage is a securely secured debt obligation. A company that owns a portfolio of such mortgages has the right to start issuing its own bonds to attract additional finance. Their repayment is due to payment of interest on mortgages, owned by the company that issued these bonds.

A mortgage on the securities market is a document that meets a number of requirements. In particular, it must be literal, that is, there must be certain requisites on the paper. The presence of not all of them automatically annuls its value.

In addition to the items and data provided by law, the mortgage information may be represented by the pledgee and the pledgor. For example, it may be certain sanctions applicable to the borrower in the event of late payment of a regular payment, or some additional opportunities that presuppose the preservation of the pledged property. The Bank has the right to independently set these additional conditions without the debtor's participation.

Transfer of mortgage and its legal consequences

Transfer mortgage in the legal sense is divided into two stages:

• Registration of the transfer inscription in favor of the endorser (of any third person);
• Actual transfer of the original.

The endorser (the one who transfers the security) is obliged to provide the debtor with a written notification of the fact of the transfer of the mortgage. Having received the document, the endorser becomes the owner of all rights of the mortgagee under the mortgage and basic contracts. The endorser is responsible to him for the degree of reliability of the information contained in the transferred security. In addition, the transfer of a mortgage means an endorser confirming in good faith the fulfillment of all obligations of the debtor under the contract. After the transfer of the paper, the pledgor withdraws all responsibility to the endorser for the failure of the debtor to perform any duties.

However, there is a reservation in the Law "On Mortgage", which provides for the designation of conditions for liability. Thus, the mortgage buyer increases his own comfort and security of his investments.

Refinancing with mortgages

The Law "On Mortgage" provides for several methods that allow refinancing with mortgages:

• Mortgage sale;
• Its pledge;
• Sale of this document with a mandatory condition for its repurchase;
• Issue of mortgage securities.

A very important nuance in this matter is that it is possible to refinance a mortgage only until the debtor fulfills all obligations under the loan.

Advantages and disadvantages of mortgage securities

The advantages of issuing mortgage bonds and certificates are:

• The acquisition by the mortgage market of financial resources that allow expanding the scale of mortgage lending;
• The receipt by investors of securities with high incomes and guarantees.

The disadvantage of mortgage bonds and certificates for the owner is the possibility of paying the loan by the debtor ahead of time. The risk of returning the nominal value of the certificate is high, as a result of which the owner of the mortgage security will be deprived of long-term profit in the form of interest.