Mortgage under transfer of property law

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Mortgage under transfer of property law

  1. 1. SOUTHEAST UNIVERSITY Dept. of LawJustice LLB(Hons)-Program. Course Title: Law of Transfer of Property Course Code: LLBH 2221 Submitted To: Submitted By: Date of Submission: 29-04-2013 1
  2. 2. Assignment on- Mortgage under Law of Transfer of Property 2
  3. 3. Introduction:Mortgage note is a legal document that offers a mortgage as proof of a debt anddescribes the terms under which the mortgage is to be repaid. It is a writtenpromise which obligates a borrower to repay a loan at a stated interest rateduring a specified period and secures the mortgage agreement in the publicrecords along with the deed.The borrowers may require producing the mortgage note as evidence to the trueowners of the debt during foreclosure proceedings. The most common mortgagenote purchase is called a partial purchase. A partial purchase is when a buyeroffers to purchase only a certain number of the remaining payments on themortgage, instead of the entire note. After the certain number of purchasedpayments is made by the borrower to the temporary note holder, the paymentsare returned to the original note holder.A mortgage is a security interest in real property held by a lender as a securityfor a debt, usually a loan of money. A mortgage in itself is not a debt, it is thelenders security for a debt. It is a transfer of an interest in land (or theequivalent) from the owner to the mortgage lender, on the condition that thisinterest will be returned to the owner when the terms of the mortgage have beensatisfied or performed. In other words, the mortgage is a security for the loanthat the lender makes to the borrower.Definition of Mortgage:The mortgage contract is a legally binding agreement between you and thelender. The mortgage identifies your home as collateral to back the loanbalance. From there, the agreement settles upon an interest rate structure formortgage repayment. Become familiar with terms of the legal mortgage, so thatyou may keep your home and build wealth.The legal mortgage is a secured loan, which is backed by your home ascollateral. The lender carries rights to foreclose on, or seize, the property to sellit off and make good on missed payments. During the mortgage applicationprocess, the bank has your future home appraised, in order to set a principalbalance for the proposed loan. The mortgage payment due date falls on the firstof the month, but your lender should also extend one 15-day grace period. Youwill be charged a late fee if the lender has not received your full mortgagepayment when the grace period expires. 3
  4. 4. A legal mortgage is one that fulfills all legal requirements for a mortgage, whilean equitable mortgage does not fulfill these requirements but still operates as amortgage. Those with specific mortgage questions should consult an attorney. ―Mortgage,‖ ―mortgagor,‖ ―mortgagee,‖ ―mortgage-money‖ and ―mortgage-deed ―defined under the Transfer of Property Act, 188258. (a) A mortgage is the transfer of an interest in specific immoveable propertyfor the purpose of securing the payment of money advanced or to be advancedby way of loan, an existing or future debt, or the performance of an engagementwhich may give rise to a pecuniary liability.The transferor is called a mortgagor,the transferee a mortgagee; the principal money and interest of which paymentis secured for the time being are called the mortgage-money, and the instrument(if any) by which the transfer is effected is called a mortgage-deed.Simple mortgage:(b) Where, without delivering possession of the mortgaged property, themortgagor binds himself personally to pay the mortgage-money, and agrees,expressly or impliedly, that, in the event of his failing to pay according to hiscontract, the mortgagee shall have a right to cause the mortgaged property to besold and the proceeds of sale to be applied, so far as may be necessary, inpayment of the mortgage-money, the transaction is called a simple mortgageand the mortgagee a simple mortgagee.Mortgage by conditional sale:(c) Where the mortgagor ostensibly sells the mortgaged property- on conditionthat on default of payment of the mortgage-money on a certain date the saleshall become absolute, or on condition that on such payment being made thesale shall become void, or on condition that on such payment being made thebuyer shall transfer the property to the seller, the transaction is called amortgage by conditional sale and the mortgagee a mortgagee by conditionalsale:Provided that no such transaction shall be deemed to be a mortgage, unless thecondition is embodied in the document which effects or purports to effect thesale; Usufructuary mortgage:(d) Where the mortgagor delivers possession or expressly or by implicationbinds himself to deliver possession of the mortgaged property to the mortgagee,and authorises him to retain such possession until payment of the mortgage- 4
  5. 5. money, and to receive the rents and profits accruing from the property or anypart of such rents and profits and to appropriate the same in lieu of interest, or inpayment of the mortgage-money, or partly in lieu of interest or partly inpayment of the mortgage-money, the transaction is called an usufructuarymortgage and the mortgagee an usufructuary mortgagee.English mortgage:(e) Where the mortgagor binds himself to re-pay the mortgage-money on acertain date, and transfers the mortgaged property absolutely to the mortgagee,but subject to a proviso that he will re-transfer it to the mortgagor upon paymentof the mortgage-money as agreed, the transaction is called an English mortgage.Mortgage by deposit of title-deeds :(f) Where a person in the town of Dhaka, Narayangonj and Chittagong] and inany other town which the Government may, by notification in the officialGazette, specify in this behalf, delivers to a creditor or his agent documents oftitle to immoveable property, with intent to create a security thereon, thetransaction is called a mortgage by deposit of title-deeds.Anomalous mortgage:(g) A mortgage which is not a simple mortgage, a mortgage by conditional sale,anusufructuary mortgage, an English mortgage or a mortgage by deposit of title-deeds within the meaning of this section is called an anomalous mortgage.Mortgage when to be by assurance:59. Where the principal money secured is one hundred taka or upwards, amortgage other than a mortgage by deposit of title-deeds can be effected only bya registered instrument signed by the mortgagor and attested by at least twowitnesses:Provided that a mortgage by deposit of title-deeds, where the mortgagee is theGovernment or a Scheduled Bank as defined in the Bangladesh Bank Order,1972 or a financial institution as defined in the Financial Institutions Act, 1993,shall also be effected only by a registered instrument in the aforesaid manner :Provided further that where in pursuance of a tripartite agreement between abuyer, a seller and a Scheduled Bank or financial institution, the buyerundertakes to buy a flat or floor space to be constructed or a plot of land to bedeveloped by the seller (a real estate owner, firm or company), and the sellerundertakes to transfer the flat or floor space or a plot of land, as the case maybe, to the buyer by registered instrument upon construction or development, asthe case may be, and the Scheduled Bank or financial institution undertakes to 5
  6. 6. pay the price, or part of the price, of the flat or floor space or plot of land to theseller on behalf of the buyer, on condition, among others, that the flat or floorspace to be constructed or the plot of land to be developed, and transferred tothe buyer, shall be mortgaged to the Scheduled Bank or financial institution bydeposit of title-deed as security against the money paid or to be paid to the selleron behalf of the buyer as loan, such mortgage by deposit of title-deed shall notbe required to be effected by a registered instrument as aforesaid.Where the principal money secured is less than one hundred taka, a mortgagemay be effected either by a registered instrument signed and attested asaforesaid, or (except in the case of a simple mortgage) by delivery of theproperty.References to mortgagors and mortgagees to include persons deriving titlefrom them:59A. unless otherwise expressly provided, references in this Chapter tomortgagors and mortgagees shall be deemed to include references to personsderiving title from them respectively.Rights and Liabilities of Mortgagor Right of mortgagor to redeem:60. At any time after the principal money has become due, the mortgagor has aright, on payment or tender, at a proper time and place, or the mortgage-money,to require the mortgagee (a) to deliver to the mortgagor the mortgage-deed andall documents relating to the mortgaged property which are in the possession orpower of the mortgagee, (b) where the mortgagee is in possession of themortgaged property, to deliver possession thereof to the mortgagor, and (c) atthe cost of the mortgagor either to re-transfer the mortgaged property to him orto such third person as he may direct, or to execute and (where the mortgage hasbeen effected by a registered instrument) to have registered anacknowledgement in writing that any right in derogation of his interesttransferred to the mortgagee has been extinguished:Provided that the right conferred by this section has not been extinguished bythe act of the parties or by decree of a Court. The right conferred by this sectionis called a right to redeem and a suit to enforce it is called a suit for redemption.Nothing in this section shall be deemed to render invalid any provision to theeffect that, if the time fixed for payment of the principal money has beenallowed to pass or no such time has been fixed, the mortgagee shall be entitledto reasonable notice before payment or tender of such money.Redemption of portion of mortgaged property. Nothing in this section shallentitle a person interested in a share only of the mortgaged property to redeem 6
  7. 7. his own share only, on payment of a proportionate part of the amount remainingdue on the mortgage, except only where a mortgagee, or, if there are moremortgagees than one, all such mortgagees, has or have acquired, in whole or inpart, the share of a mortgagor.Obligation to transfer to third party instead of re-transference tomortgagor: 60A. (1) Where a mortgagor is entitled to redemption, then, on the fulfillmentof any conditions on the fulfillment ofwhich he would be entitled to require are-transfer, he may require the mortgagee, instead of re-transferring theproperty, to assign the mortgage-debt and transfer the mortgaged property tosuch third person as the mortgagor may direct; and the mortgagee shall bebound to assign and transfer accordingly.(2) The rights conferred by this section belong to and may be enforced by themortgagor or by any in cumbrances notwithstanding an intermediateencumbrance; but the requisition of any encumbrances shall prevail over arequisition of the mortgagor and, as between encumbrances, the requisition of aprior encumbrances shall prevail over that of a subsequent encumbrances.(3) The provisions of this section do not apply in the case of a mortgagee who isor has been in possession.Right to inspection and production of documents:60B. A mortgagor, as long as his right of redemption subsists, shall be entitledat all reasonable times, at his request and at his own cost, and on payment of themortgagees costs and expenses in this behalf, to inspect and make copies orabstracts or, extracts from, documents of title relating to the mortgaged propertywhich are in the custody or power of the mortgagee.Right to redeem separately or simultaneously:61. A mortgagor who has executed two or more mortgages in favour of thesame mortgagee shall, in the absence of a contract to the contrary, when theprincipal money of any two or more of the mortgagees has become due, beentitled to redeem any one such mortgage separately, or any two or more ofsuch mortgages together. Right of usufructuary mortgagor to recover possession:62. In the case of a usufructuary mortgage, the mortgagor has a right to recoverpossession of the property together with the mortgage-deed and all documentsrelating to the mortgaged property which are in the possession or power of themortgage,- 7
  8. 8. (a) where the mortgagee is authorized to pay himself the mortgage-money fromthe rents and profits of the property, - when such money is paid;(b) where the mortgagee is authorized to pay himself from such rents and profitsor any part thereof a part only of the mortgage-money – when the term, if any,prescribed for the payment of the mortgage-money has expired and themortgagor pays or tenders to the mortgagee the mortgage-money or the balancethereof or deposits it in Court as hereinafter provided.Accession to mortgaged property:63. Where mortgaged property in possession of the mortgagee has, during thecontinuance of the mortgage, received any accession, the mortgagor, uponredemption, shall, in the absence of a contract to the contrary, be entitled asagainst the mortgagee to such accession.Accession acquired in virtue of transferred ownership :Where such accession has been acquired at the expense of the mortgagee, and iscapable of separate possession or enjoy-ment without detriment to the principalproperty, the mortgagor desiring to take the accession must pay to themortgagee the expense of acquiring it. If such separate possession or enjoymentis not possible, the accession must be delivered with the property; the mortgagorbeing liable, in the case of an acquisition necessary to preserve the propertyfrom destruction, forfeiture or sale, or made with his assent, to pay the propercost thereof, as an addition to the principal money, with interest at the same rateas is payable on the principal, or, where no such rate is fixed, at the rate of ninepercent. per annum.In the case last mentioned the profits, if any, arising fromthe accession shall be credited to the mortgagor.Where the mortgage isusufructuary and the accession has been acquired at the expense of themortgagee, the profits, if any, arising from the accession shall, in the absence ofa contract to the contrary, be set off against interest, if any, payable on themoney so expended.Improvements to mortgaged property:63A.(1) Where mortgaged property in possession of the mortgagee has, duringthe continuance of the mortgage, been improved, the mortgagor, uponredemption, shall, in the absenceof a contract to the contrary, be entitled to theimprovement; and the mortgagor shall not, save only in cases provided for insub-section (2), be liable to pay the cost thereof.(2) Where any such improvement was effected at the cost of the mortgagee andwas necessary to preserve the property from destruction or deterioration or wasnecessary to prevent the security from becoming insufficient, or was made in 8
  9. 9. compliance with the lawful order of any public servant or public authority, themortgagor shall, in the absence of a contract to the contrary, be liable to pay theproper cost thereof as an addition to the principal money with interest at thesame rate as is payable on the principal, or, where no such rate is fixed, at therate of nine per cent. per annum, and the profits if any, accruing by reason of theimprovement shall be credited to the mortgagor.Renewal of mortgaged lease:64. Where the mortgaged property is a lease, and the mortgagee obtains arenewal of the lease, the mortgagor, upon redemption, shall, in the absence of acontract by him to the contrary, have the benefit of the new lease. Implied contracts by mortgagor:65. In the absence of a contract to the contrary, the mortgagor shall be deemedto contract with the mortgagee-(a) that the interest which the mortgagor professes to transfer to the mortgageesubsists, and that the mortgagor has power to transfer the same;(b) that the mortgagor will defend, or if the mortgagee be in possession of themortgaged property, enable him to defend, the mortgagors title thereto;(c) that the mortgagor will, so long as the mortgagee is not in possession of themortgaged property, pay all public charge accruing due in respect of theproperty;(d) and, where the mortgaged property is a lease, that the rent payable under thelease, the conditions contained therein, and the contracts binding on the lesseehave been paid, performed and observed down to the commencement of themortgage; and that the mortgagor will, so long as the security exists and themortgagee is not in possession of the mortgaged property, pay the rent reservedby the lease, or, if the lease be renewed, the renewed lease, perform theconditions contained therein and observe the contracts binding on the lessee,and indemnify the mortgagee against all claims sustained by reason of the non-payment of the said rent or the non-performance or non-observance of the saidconditions and contracts;(e) and, where the mortgage is a second or subsequent in-cumbrance on theproperty, that the mortgagor will pay the interest from time to time accruing due 9
  10. 10. on each prior encumbrance as and when it becomes due, and will at the propertime discharge the principal money due on such prior in cumbrance.The benefit of the contracts mentioned in this section shall be annexed to andshall go with the interest of the mortgagee as such, and may be enforced byevery person in whom that interest is for the whole or any part thereof from timeto time vested.Conclusion:Alegal document by which the owner (i.e., the buyer) transfers to the lender aninterest in real estate to secure the repayment of a debt, evidenced by amortgage note. When the debt is repaid, the mortgage is discharged, and asatisfaction of mortgage is recorded with the register or recorder of deeds in thecounty where the mortgage was recorded. Because most people cannot afford tobuy real estate with cash, nearly every real estate transaction involves amortgage.The party who borrows the money and gives the mortgage (the debtor) is themortgagor; the party who pays the money and receives the mortgage (thelender) is the mortgagee. Under early English and U.S. law, the mortgage wastreated as a complete transfer of title from the borrower to the lender. The lenderwas entitled not only to payments of interest on the debt but also to the rents andprofits of the real estate. This meant that as far as the borrower was concerned,the real estate was of no value, that is, "dead," until the debt was paid in full—hence the Norman-English name "mort" (dead),(pledge).The mortgage must beexecuted according to the formalities required by the laws of the state where theproperty is located. It must describe the real estate and must be signed by allowners, including non-owner spouses if the property is a homestead. Somestates require witnesses as well as acknowledgement before a Notary Public.The mortgage note, in which the borrower promises to repay the debt, sets outthe terms of the transaction: the amount of the debt, the mortgage due date, therate of interest, the amount of monthly payments, whether the lender requiresmonthly payments to build a tax and insurance reserve, whether the loan may berepaid with larger or more frequent payments without a prepayment penalty,and whether failing to make a payment or selling the property will entitle thelender to call the entire debt due.State courts have devised varying theories ofthe legal effect of mortgages: Some treat the mortgage as a conveyance of thetitle, which can be defeated on payment of the debt; others regard it as a lien,entitling the borrower to all of the rights of ownership, as long as the terms of 10
  11. 11. the mortgage are observed. In California a deed of trust to a trustee who holdstitle for the lender is the preferred security instrument.At Common Law, if the borrower failed to pay the debt in full at the appointedtime, the borrower suffered a complete loss of title, however long and faithfullythe payments had been made.Courts of Equity, which were originally ecclesiastical courts, had the authorityto decide cases on the basis of moral obligation, fairness, or justice, asdistinguished from the law courts, which were bound to decide strictlyaccording to the common law. Equity courts softened the harshness of thecommon law by ruling that the debtor could regain title even after default, butbefore it was declared forfeited, by paying the debt with interest and costs. Thisform of relief is known as the equity of redemption.Nowadays, nearly all stateshave enacted statutes incorporating the equity of redemption, and many alsohave enacted periods of redemption, specifying lengths of time within which theborrower may redeem. Although some debtors, or mortgagors, are able to avoid foreclosure throughthe equity of redemption, many are not, because redeeming means coming upwith the balance of the mortgage plus interest and costs, something that afinancially troubled debtor might not be able to accomplish. However, becauseforeclosure upends the agreement between mortgagor and mortgagee andcreates burdens for both parties, lenders are often willing to work with debtorsto help them through a period of temporary difficulty. Debtors who run intoproblems meeting their mortgage obligations should speak to their lender aboutdeveloping a plan to avert foreclosure. 11

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