mortgage comprehensive repot

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HISTORY OF MORTGAGEThe word "mortgage" comes from both the Old French ("mort") and English ("gage") meaning

"dead pledge." In the late 12th century, the first mortgages were recorded in England. One would

borrow money to buy property if they could not afford it. If they did not pay up, the creditor

would take the real estate and the property ownership would be dead to them. On the flip side, if

a debtor paid off the loan, the debt would be extinguished and therefore dead in that respect.

This system was brought to America with the pilgrims and as people bought property they would

take out a loan from a local bank. In those days, the banks were smart and the buyer had to put

down 50% of the purchase price and pay back the loan over a shorter period of time. Property

ownership was nationwide come the early 1900's when the depression hit. The government, the

people and the banks all went belly up and it was foreclosure city!

When Roosevelt became president, he created the FHA (Federal Housing Administration) to

insure banks in case of mortgage default. This made lenders more apt to lend to people and not

worry about foreclosure. However, the lending system was more local and each area had its own

economy and based rates and lending on that.

MORTGAGEMortgage is a security interest in real property, held by lender as a security for debit. To be more

specific, It is a transfer of interest in land from the owner, to the mortgage lender on thecondition that this interest will be returned to the owner when the terms of mortgage had been

satisfied or performed, as such, is a security for the loan that the lender makes to the borrower.

The transferor is called “mortgager”, a transferee is called a “mortgage”, the principle money

loan is called mortgage money”, and the instrument by which the transfer is effected is called

“mortgage deed”.

PARTIES & TERMS INVOLVED

MORTGAGE: A temporary loan secured (or money borrowed) from a creditor by keeping one's

(owned) valuable property (e.g. House, Land, etc) as a mortgage security in order to give creditor

an assurance for the repayment of debt within fixed time period.

MORTGAGOR : The transferor or the one who makes/gives the mortgage is called a mortgagor.

MORTGAGEE: The transferee or the one to whom mortgage is given or the one who

takes/accepts the mortgage is called a mortgagee.



MORTGAGE AGREEMENT: The legal document specifying terms, conditions, duties and

obligations of parties involved in a mortgage contract is called Mortgage agreement.

MORTGAGE MONEY: The principal money and interest of which payment is secured for the

time being are called the mortgage money.

MORTGAGE DEED: The instrument (if any) by which the transfer is effected is called amortgage deed.

KINDS OF MORTGAGEThere are six kinds of mortgage

A) SIMPLE MORTGAGE:

A simple mortgage is a mortgage where without delivering position of the mortgage property,

the mortgagor binds himself personally to pay the mortgage money and agrees expressly or

impliedly that in the event of his failure to pay, the mortgagee shall have the right to cause the

mortgage property to be sold and the proceeds of the sale to be applied. The period of limitation

for filing of suit is twelve years from the date when the money suit becomes due. Registration of

mortgage deed is required to make it enforceable under law.

B) MORTGAGE BY CONDITIONAL SALE:

Is a mortgage where the mortgagor sells the property on the condition?

That on default of payment of mortgage money on a certain date, sale shall become absolute or

on the condition that on such payment being made the sale shall become void or on condition

that on such payment being made the buyer/mortgagee shall transfer the property to seller.

Registration required.

C) USUFRACTUARY MORTGAGE:

In this kind of mortgage, the mortgagee is placed in possession and has a right to enjoy the rents

and profit until the debt is paid. It is not necessary that mortgagee shall take physical possession

and the mortgagor shall continue in possession as lessee of the mortgagee or he may direct the

tenants to pay rent to the mortgagee. The title deeds remain with the owner/mortgager.

The mortgagee retains possession until the mortgagee money is paid. Registration required.

D) ENGLISH MORTGAGE:

Where the mortgagor binds himself to repay the mortgage money on a certain date and transfer

the mortgage property to the mortgagee but subject to a condition that he will retransfer it to a

mortgagor upon payment of the mortgage money as agreed .Registration required.



E) EQUITABLE MORTGAGE:

Equitable mortgage can be created by deposit of title deed to a creditor with the intent to create a

security. In such mortgage; the mortgager delivers the title documents of the property to the

mortgagee with the intention to create security thereon.

F) ANOMALOUS MORTGAGE:Mortgage which consist of different types of mortgages. Registration required. A mortgage

which is not a simple mortgage, a mortgage by conditional sale, a usufructuary mortgage, an

English mortgage or a mortgage by deposit of title-deeds within the meaning of this section is

called an anomalous mortgage.

TYPES OF MORTGAGE

EQUITABLE MORTGAGES

An equitable mortgage is an arrangement that involves borrowing money with the understanding

the borrower's land will secure the loan or some other situation where a lien on the owner's real

estate is implied by some credit arrangement. However, a formal mortgage document is not

executed and recorded in the land records. It can arise under different circumstances and can also

be referred to as an implied or constructive mortgage. A problem with equitable mortgages is

that there is no notice to the public in the land records in most cases and the property could be

sold without the loan being paid. Generally, if an equitable mortgage is not paid it must be

enforced in a court of equity by a court decree against the debtor.

FIXED-INTEREST MORTGAGE

With a fixed-rate home loan, your interest rate remains the same for the life of the loan and the

payment is split into equal monthly payments for the duration. In other words, it is amortized

over the life of the loan.

The interest payments are front-loaded, however, so that during the first few years of the loan

term, only a small portion of the payment pays off the principal.

Most commonly taken as a 30-year loan, fixed-rate mortgages can be shorter in duration or, more

rarely, longer.

"Fixed-rate home loans can be 10 years, 15 years or 20, but most popular is the 30-year because

that makes your payment the lowest,"

ADJUSTABLE-RATE MORTGAGE

Unlike a fixed-rate home loan, this sports a static interest rate over the life of the loan, the

interest rate on an adjustable-rate mortgage, or ARM, changes every year.

ARMs come in various permutations. For instance, a hybrid ARM features aspects of both

adjustable and fixed-rate mortgages.



"Hybrid mortgages can be anything from a three-year, five-year, seven-year or 10-year fixed

interest rate period,"

INTEREST-ONLY LOAN

For those buyers who need a rock-bottom payment for several years, the interest-only mortgage

product, as its name implies, allows them the option of paying only the interest for the first few

years of the loan.

The most common one is the five-year fixed 30-year loan," says Klein. "The payment and

interest rate are fixed for five years and the payment could be based on only the interest payment,

so you're not paying down the principal. When it resets your payments can go up pretty

significantly, even if the interest rate doesn't change that much.

REGISTRATION OF MORTGAGES AND CHARGES

1. WHICH DOCUMENTS ARE REQUIRED TO BE FILED FOR REGISTRATION OF

MORTGAGE OR CHARGE?

The following documents are required to be filed for registration of a mortgage or charge:

• Form 10 containing particulars of mortgage/charges etc.

• Copy of instrument(s) creating the mortgage or charge.

• An Affidavit to the effect that the copy(ies) of the instrument(s) is/are the true copy(ies).

• Bank challan evidencing the payment of Rs. 7,500 being filing fee for submission in physical

form or Rs. 5,000 for submission through eServices as the case may be.

2. FORM USED

Different forms are required to be used for different purposes as per details given hereunder. The

form numbers in this table correspond to the relevant sections of the Companies Ordinance, 1984

and rules contained in the Companies (General Provisions and Forms) Rules, 1985.

Form Description Section

Form 10 Particulars of mortgages, charges, etc. 121, 129 and 463

Form 11 Particulars of mortgage or charge subject towhich property has been acquired

122 and 463

Form 16 Particulars of modification of

mortgage, charge, etc.

129(3) and 463

Form 17 Memorandum of complete

satisfaction of mortgage, charge, etc.

132 and 463

ESSENTIALS OF A MORTGAGE

SPECIFY IMMOVABLE PROPERTY: A mortgage is that the immovable property must be

distinctly specified.



CONSIDERATION: The consideration of a mortgage may be either:-

The performance of a contract giving rise to a pecuniary liability, Money advanced or to be

advanced by way of loan, or an existing or future debt.

TRANSFER OF AN INTEREST: According to the definition given above the third requisite of

mortgage is that there should be a "transfer of an interest" of an immovable property for the purpose of securing the payment of money advanced by way of loan or for the purpose of

securing the performance.

The words "transfer of interest" signifies that the interest which passes to the mortgage is not

ownership or dominion, which notwithstanding the mortgage, resides in the mortgagor. This

right is only an accessory right which is intended merely to secure the due payment of the debt.

In mortgage, there is a transfer of a partial interest.

PARTIES: The person who transfers an interest in the property is called the mortgagor; the

person to whom the interest is transferred is called the mortgagee. The mortgagor must be

competent to transfer. Thus a minor cannot be a mortgagor but a minor can be a mortgagee.

Parties & their Capacities

RIGHTS OF THE MORTGAGOR

THE R IGHT OF R EDEMPTION: or simply, 'The Right of Redemption'. The mortgagor is

supposed to be the natural owner of the property and hence it is accepted that his interests in the

property are always supposed to be natural. His rights are supposed to be statutory and legal for

which legal remedies are available for him to establish his rights at the end.

R E-TRANSFER CASE: He being, the natural owner of the property has the inherent right to re-

transfer his property to anybody else irrespective of the person in whose favor he has firstlytransferred the property for the sake of money.

R IGHT TO GRANT LEASE: It should also be not treated that after mortgaging the property the

mortgagor is not free to lease the property to any of the lease. We have noted that mortgage

implied the temporary charge over the immovable property belonging to the mortgagor till the

money taken is repaid to the mortgagor. It is, therefore, the inherent right of the mortgager to

make the lease of the property whenever he desires for any purpose. Each such lease is supposed

to be binding on the mortgagee.

R IGHT OF INSPECTION OF THE PROPERTY: Since the mortgager is the natural owner of

the property it is supposed to be his inherent right to inspect the property at any time and as and

when he desires. It is his right to ascertain whether the property mortgaged is maintained

properly or not and hence this right has been conferred on by the law itself. He can also ask for

the documents of the property and is also eligible to get the copies of the documents.

R IGHT OF R EASONABLE WASTAGES: The right of reasonable wastages is also guaranteed

by the law but it is to be noted that such of the wastages are minimum and reasonable and does



not affect the property in any way or does not cause any destruction or the injury to the property

of a permanent nature.

R IGHT OF ACCESSION: It should not be supposed that on transfer, due to mortgage, the right

of the mortgagor extinguished with regards to the property so mortgaged.

THE MORTGAGE PROCESS

GATHER ESSENTIAL INFORMATION

Before you start your application, have the following information on hand:

Financial information: Income, asset and expense information.

Property information: Estimated purchase price and down payment amount (if buying) or

estimated property value and loan amount (if refinancing).

BEGIN THE APPLICATION PROCESS

Your home mortgage consultant will ask for the financial and property information you’ve

gathered. To complete your application, you’ll also need to submit your supporting documents.

PROVIDE SUPPORTING DOCUMENTS

Your home mortgage consultant will:

Request any additional documents that we’ll need from you.

Provide important disclosure documents to review, sign, and return, including:

o A Good Faith Estimate that gives a breakdown and estimate of your closing costs.

o A Truth-In-Lending Disclosure that shows the terms of the loan, the monthly

payment schedule, the annual percentage rate (APR), and the costs associatedwith making and closing the loan, including your finance charges.

FINANCIAL AND PROPERTY R EVIEW

Your home mortgage consultant will submit your application for review. Next, we’ll:

Verify your employment, income, and financial information.

Order an appraisal so a professional can determine the appraised value of the property.

o If you are purchasing, the appraised value is expected to match or exceed the

home’s purchase price.

o If you are refinancing, the appraised value helps to determine your maximum loan

amount. Get title insurance, flood certification, and other services as necessary.

Upon loan approval, send you a list of conditions that have to be met before you can

prepare to close your loan.



PREPARE TO CLOSE

Once your application is approved, we’ll work with you and your closing agent to complete the

following steps:

Confirm or set a closing date to sign your loan documents.

Review the title insurance to make sure you have clear title to the property.

Review your homeowners insurance policy to make sure you have adequate coverage.

AT CLOSING

We’ll send the closing documents to your closing agent. On your closing day, review the

documents carefully with your agent, then sign and date them.

If you're buying a home, collect the keys and move in. Congratulations!

If you're refinancing, you have a three-day right-of-rescission to cancel the transaction.

LEGAL DOCUMENTSThere are two (2) types of set of documents required legally to be executed for obtaining the

house finance.

1. Charge documents

2. Security documents.

1. CHARGE DOCUMENTS.

a) Agreement for financing

b) Promissory Note

c) Personal Guarantee

d) Letter of installmentse) Debit authority.

f) Undertaking to comply with the SBP rules & regulations

g) Letter of continuity.

h) Mortgage Deed

i) MODT.



2. SECURITY DOCUMENTS.

a) Property outside the Revenue Record:

b) Property falls in Revenue Record:

c) Property/House of Lahore Development Authority.

d) Property/Plot of LDA.

e) Property of Co-Operative Society.

f) Property of MEO/Cantonment.

g) Property of DHA.

h) Agricultural land.



SALE OF MORTGAGE PROPERTY WITH INTERVENTION OF

COURT.

SALE OF MORTGAGE PROPERTY WITHOUTINTERVENTION OF COURT.

Under section 15(2), the financial institution can send following notices in case of default in

payment by customer, demanding payment of the mortgage money and incase of failure to sell

the mortgage property.



1.FIRST NOTICE FOR 14 DAYS.FORMAT OF NOTICES

1. FIRST DEMAND NOTICE

Ref: ______________ Dated:____________

MR. ___________________

______________________

THROUGH COURIER Subject: First Demand Notice for the Payment of Mortgage Money under Section 15(2) of the Financial

Institutions (Recovery of Finances) Ordinance, 2001.

Dear Sir/Madam,

We have been instructed by our client i.e The Bank Of Punjab, having its Head Office, at Lahore and a Branch amongst

others known as _________ Branch, (hereinafter referred to as ‘ The Bank’) hereby serve upon you notice under Section

15(2) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 for demanding the mortgaged money.

At your guarantee/mortgage, the Bank sanctioned a running finance facility (hereinafter referred to as “TheFinance”) to

M/s. __________________, through its Proprietor namely Mr. _______________, by way of agreement for financing

dated ___________, having its office at _____________________, (hereinafter referred to as the “Customer’).

In consideration and in pursuance of the above, you with intent to create mortgage had executed Memorandum of

Deposit of Title Deed and also Registered Mortgage Deed in favor of the Bank, with regard to the Property/Residential

House, measuring _______________________________________, to secure the amounts due towards the Customer.

The above Customer availed the said finance facility, however, failed to repay the due amount to the Bank. TheCustomer was reminded time and again to discharge its/their outstanding financial obligations but all efforts in this

regard failed and the Customer ignored/neglected to discharge and liquidate the financial obligation(s) under the

agreement, commitments, promises, and undertakings executed by the Customer in this behalf.That Section 15 of the

Financial Institutions (Recovery of Finances) Ordinance, 2001, empowers the Bank to sell the mortgaged property

without the intervention of the Court. In pursuance thereof, you are called upon to pay the due amount of

Rs._____________/- (Rupees ___________________only) as on ____________ along with all costs, charges and mark-

up within 14 days from the receipt of this notice, failing which, the Bank shall proceed in accordance with Section 15 of

the Ordinance to sell mortgaged property by public auction and recover its outstanding amounts.

Please be informed that by virtue of Section 15(3), upon service of this First Notice, all the powers of the Mortgagor and

benefits and/or profits from mortgaged property shall transferred to BOP, until this notice is withdrawn.

Since, the Customer has defaulted in discharge of his liabilities and has not given positive response and willfully

neglected/refused to pay the amounts which continues to remain outstanding, hence this notice.

Thatthe Bank hereby call upon you, to pay the outstanding amount of

Rs.__________/- (Rupees________________________________________ only) as on _______________ along with allPRESENT AND FUTURE costs, charges and mark-up within Fourteen (14) days from the date of receipt of this notice,

failing which the Bank shall be constrained to initiate the proceedings under Section 15 of the Financial Institutions

(Recovery of Finances) Ordinance, 2001 for sale of mortgaged property at your own risk and costs.

A copy of this notice is being retained in our office for future reference and record.

Yours truly,

Sd/-

ATTORNEY-AT-LAW

Copy to:

The Manager, _______________________ Branch.

The Head, SAM (Commercial) Division.

ATTORNEY-AT-LAW



2.SECOND NOTICE FOR 14 DAYS.2. SECOND DEMAND NOTICE

Ref: ______________ Dated:____________

MR. ___________________

______________________

THROUGH COURIER

Subject: Second Demand Notice for the Payment of Mortgage Money under Section 15(2) of the Financial


Dear Sir/Madam,

Reference Notice Under section 15 of the Financial Institutions (Recovery of Finances) Ordinance dated 16 March 2010,

served upon you. We have been instructed by our client i.e The Bank Of Punjab, having its Head Office at BOP Tower, 10-

B, Block E-II, Main Boulevard, Gulberg-III, Lahore and a branch amongst others known as __________, (hereinafter

referred to as (‘The Bank’) hereby serve upon you second notice under Section 15(2) of the Financial Institutions

(Recovery of Finances) Ordinance, 2001 for demanding the mortgaged money.At your guarantee/mortgage, the Bank sanctioned a running finance facility (hereinafter referred to as “TheFinance”) to

M/s. __________________, through its Proprietor namely Mr. _________________, by way of agreement for financing

dated ________________, having its office at ___________________________________________, (hereinafter referred

to as the “Customer’).




The above Customer availed the said finance facility, however, failed to repay the due amount to the Bank. The

Customer was reminded time and again to discharge its/their outstanding financial obligations but all efforts in this


agreement, commitments, promises, and undertakings executed by the Customer in this behalf.

That Section 15 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, empowers the Bank to sell the

mortgaged property without the intervention of the Court. In pursuance thereof, you are called upon to pay the dueamount of Rs.___________/- (Rupees ______________________only) as on 29.03.2010 along with all costs, charges

and mark-up within 14 days from the receipt of this notice, failing which, the Bank shall proceed in accordance with

Section 15 of the Ordinance to sell mortgaged property by public auction and recover its outstanding amounts.

Please be informed that by virtue of Section 15(3), upon service of this Second Notice, all the powers of the Mortgagor

and benefits and/or profits from mortgaged property shall be transferred to BOP, until this notice is withdrawn.



Thatthe Bank hereby once again call upon you, to pay the outstanding amount of Rs.__________________/- (Rupees

_________________________________only) as on __________ along with all PRESENT AND FUTURE costs, charges and

mark-up within Fourteen (14) days from the date of receipt of this notice, failing which the Bank shall be constrained to

initiate the proceedings under Section 15 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 for sale of

mortgaged property at your own risk and costs.


Yours truly,

Sd/-

ATTORNEY-AT-LAW

Copy to:


The Head, SAM (Commercial) Division. ATTORNEY-AT-LAW



3.IF CONTINUOUS TO DEFAULT IN PAYMENT THAN FINAL NOTICE TO BE SERVED

FOR 30 DAYS

3. FINAL DEMAND NOTICE

Ref: ______________ Dated:____________

MR. ___________________

______________________

THROUGH COURIER

Subject: Final Demand Notice for the Payment of Mortgage Money under Section 15(2) of the Financial


Dear Sir/Madam,

Reference Notice Under section 15 of the Financial Institutions (Recovery of Finances) Ordinance dated 16 March 2010,

served upon you. We have been instructed by our client i.e The Bank Of Punjab, having its Head Office at BOP Tower, 10-

B, Block E-II, Main Boulevard, Gulberg-III, Lahore and a branch amongst others known as ____________ Branch,

(hereinafter referred to as (‘The Bank’) hereby serve upon you Final Notice under Section 15(2) of the Financial

Institutions (Recovery of Finances) Ordinance, 2001 for demanding the mortgaged money.At your guarantee/mortgage, the Bank sanctioned a running finance facility (hereinafter referred to as “TheFinance”) to

M/s. ________________, through its Proprietor namely Mr. ____________, by way of agreement for financing dated

________________, having its office at __________________, (hereinafter referred to as the “Customer’).




The above Customer availed the said finance facility, however, failed to repay the due amount to the Bank. The

Customer was reminded time and again to discharge its/their outstanding financial obligations but all efforts in this


agreement, commitments, promises, and undertakings executed by the Customer in this behalf.

That Section 15 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, empowers the Bank to sell the

mortgaged property without the intervention of the Court. In pursuance thereof, you are called upon to pay the due

amount of Rs.___________/- (Rupees ______________________only) as on _____________ along with all costs,charges and mark-up within 30 days from the receipt of this final notice, failing which, the Bank shall proceed in

accordance with Section 15 of the Ordinance to sell mortgaged property by public auction and recover its outstanding

amounts.

Please be informed that by virtue of Section 15(3), upon service of this Final Notice, all the powers of the Mortgagor and

benefits and/or profits from mortgaged property shall be transferred to BOP, until this notice is withdrawn.



Thatthe Bank hereby once again call upon you, to pay the outstanding amount of Rs.____________/- (Rupees

______________________________ only) as on ____________ along with all PRESENT AND FUTURE costs, charges and

mark-up within Thirty (30) days from the date of receipt of this final notice, failing which the Bank shall be constrained

to initiate the proceedings under Section 15 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 for sale

of mortgaged property at your own risk and costs.


Yours truly,

Sd/-

ATTORNEY-AT-LAW

Copy to:


The Head, SAM (Commercial) Division.

ATTORNEY-AT-LAW



SALE OF PROPERTY.

Where mortgagor fails to pay the amount as demanded after final notice has been served and 30

days passed then the financial institution may without intervention of any court sell the mortgage

property or any part thereof by public auction and appropriate the proceeds thereof towards total

or partial satisfaction of the outstanding mortgage money.

NECESSARY STEPS TO BE TAKEN.

1. Publication in one English Newspaper and one Urdu Newspaper specifying particulars of

the mortgage property including name and address of the mortgagor, details of mortgage

property, amount of outstanding and reserve price.

2. Send such notices to all persons who to the knowledge of the financial institutions have

an interest in the mortgage property as mortgagors.



CONCLUSIONMortgage in basically use to help in home financing and for that purpose any immovable

property will be plugged and loan will be provided according to the value of that immovable

property. Different kinds of mortgages are used for financing. Rates are different it might be

fixed, floating or both. Different types of forms are used for home financing. If borrower isdefault in paying back the loan bank or any other institution that provide loans will arrange

auction and sell that property after 3 notices and get their money back.



BIBLIOGRAPHYhttp://en.wikipedia.org/wiki/Mortgage_loan

http://www.investopedia.com/terms/m/mortgage.asp

http://www.homeloanlearningcenter.com/mortgagebasics/mortgagetypes.htm

http://www.usa.gov/topics/family/homeowners/buyingselling/mortgages/types.shtml

http://www.nidirect.gov.uk/mortgage-application-process

http://www.halifax.co.uk/mortgages/help-and-advice/guides/mortgage-process/

http://www.wintrustmortgage.com/mortgage-guide.html

https://www.google.com.pk

https://www.google.com.pk/imghp?hl=en&tab=wi

http://en.wikipedia.org/wiki/Mortgage_loan














https://www.google.com.pk/













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