Immovable security (group 4)
- 1. ABYB 2019 BATCH SUBMITTED TO :– Prof. R C BHATNAGAR - Head of Department (Banking) PRESENTED BY PAWAN SINGH CHANDEL ARPIT RASTOGI GAURAV BHARDWAJ ABHINAY RAGINI KUMARI SECTION B (GROUP 4)
- 2. CONTENTS CONCEPT OF SECURITY CHARACTERISTICS OF SECURITY TYPES OF SECURITIES MOVEABLE SECURITY MODES OF CHARGING MOVEABLE SECURITIES IMMOVABLE SECURITY MODES OF CHARGING OF IMMOVABLE SECURITIES CHARACTERISTICS OF MORTGAGE TYPES OF MORTGAGE REGISTERED MORTGAGE & EQUITABLE MORTGAGE PROCESS & PRECAUTIONS TO BE ADOPTED & EXERCISED BY BANK WHILE CREATING MORTGAGES
- 3. “Many times banks failed to take their money back because they don’t follow the laws(Rules & Regulations)”
- 4. CONCEPT OF SECURITY • Security is an asset which are charged to the bank and which the bank can take possession of and dispose of in the event of failure to repay the advances. Security gives to lender a legal right of access of the asset and to take their possession and title in case of default for a foreclosure sale. Security can be Tangible and Intangible. Security need to be charged in favor of the bank. Examples:- land, buildings, shares, car etc.
- 5. TYPES OF SECURITIES • Paper Securities: Bank Term Deposit, Receipts, Kisan Vikash Patra, LIC policies, Bonds etc. • Moveable Securities & Commodities: All types of goods which can moved or removed, Manufactured, Exported, Imported etc. • Immovable Securities: Embedded in ground and cannot be moved, ex. Land, Building, Plant & Machinery etc. • Debts: It includes account receivable, future rentals and future cash flows. • Bills and Documentary: Bill purchase and Bill discounting, Discounting of bills accepted under DALCs (Document against acceptance letter of credit) . • Assignment: Assignment of future cash Accruals ( Tripartite Agreement)
- 6. CHARACTERISTICS OF SECURITY Saleable Value Ascertainable Easily Marketable Easily Transferable Should have Shell life
- 7. MOVEABLE SECURITY Moveable security is a type of security which can be easily move from one place to another places when required. Examples:- Goods, Vehicle, Gold, Furniture , Fixtures
- 8. Modes of Charging Moveable Securities HYPOTHECATION PLEDGE SECURITIES Moveable item (Goods, Car) Moveable item (Goods, shares) CHARGES With the bank With the bank POSSESION With the borrower With the bank OWNERSHIP With the borrower With the borrower LIEN:- It is a right of banker to retain the possession of the goods/securities belonging to the debtor until the debt due by him is paid.
- 9. IMMOVABLE SECURITY Immovable property shall include land, benefits to arise out of the land, and things attach to the Earth, or permanently fastern to anything attach to the earth. • Immovable security can not easily be transported from one place to another. • If transported it will loose its original shape, capacity, quantity or quality. • Immovable security is the type of securities taken by the bank during the lending of money.
- 10. Land Building Apartments Factory Building Heavy Machinery Examples of Immovable Security
- 11. Loan Against Immovable Properties Banks usually do not prefer to advance money on the security of immovable Properties or real estates, e.g. land and building etc. on account of the following reasons: (i) Difficulty in ascertaining the title to the property: A banker has to spend sufficient time and money to verify the title of the borrower to the property he is offering as security. (ii) Not readily realizable: Banks insist on liquidity. A real estate is not easily realizable without much loss
- 12. Contd.. (iii) Restrictive laws: Immovable property is subject to various restrictive laws particularly with regard to agricultural land. (iv) Valuation problem: The value of an immovable property depends upon its location, type of construction etc. (v) Legal formalities: A lot of legal formalities such as preparation of the mortgage deed, its registration, payment of stamp duty etc. are to be completed.
- 13. MODES OF CHARGING OF IMMOVABLE SECURITIES MORTGAGE An agreement under which a person borrows money to buy property, and the lender may take possession of the property if the borrower fails to repay the money. A mortgage is a method of creating charge on immovable properties like land and building. Example:- Housing Loans / Home Loans SECURITY CHARGE POSSESSION OWNERSHIP Immoveable items ( Land, flat) With the bank With the borrower With the borrower
- 15. Contd… Parties to the mortgage of immovable property: • Mortgagor(borrower/guarantor who is the owner of the property to be mortgaged). • Mortgagee(The lender/Banker) • Registrar of Assurance(when registration of mortgage or registration of memorandum of mortgage takes place). • Registrar of Companies (In the case of Limited companies, for registration of charges).
- 16. Characteristics of a Mortgage: o Mortgage can be effected only on immovable property. Immovable property includes land, benefits that arise out of land and things attached to earth like trees, buildings and machinery. o A mortgage is the transfer of an interest in the specific immovable property. This means the owner transfers some of his rights only to the mortgagee. For example, the right to redeem the property mortgaged. o The property to be mortgaged must be a specific one, i.e., it can be identified by its size, location, boundaries etc. o In case, the mortgager fails to repay the loan, the mortgagee gets the right to recover the debt out of the sale proceeds of the mortgaged property.
- 17. TYPES OF MORTGAGE Simple/Registered Mortgage:-In a simple mortgage, the possession of the mortgaged property is not transferred from mortgagor to the mortgagee. Mortgage by conditional sale:-In this mortgagor sales the property to the mortgagee with a condition that on default, the sale of property shall become absolute and on full settlement of dues. Usufructuary mortgage:- In this possession of the mortgaged property is transferred to the mortgagee. The mortgagee receives the income from the property(rent, profit, interest etc) until the repayment of loan. English mortgage:- The mortgagor binds himself to repay the borrowed money on a certain date. The mortgagor transfers the property absolutely to the mortgagee. Anomalous mortgage:- A mortgage which does not belong to any of the five types is called anomalous mortgage. It possesses a mixed character of any two or more types of mortgages.
- 18. EQUITABLE MORTAGE A mortgage by deposit of ‘title deeds’ is called equitable mortgage. • In this type of mortgage, mortgager(borrower) hands over the original title deed to the mortgagee(bank/lender) with intent to create security thereon. • Mortgagee have original title deed with him/her and if someone wish to verify he/she can verify the property. • So equitable mortgage is created simply by deposit of original title deeds along with other required documents.
- 19. Contd… In an equitable mortgage, the owner has to transfer his title deed to the lender, thereby creating a charge on the property. The owner also orally confirms the intent of creating a charges on the property. An equitable mortgage is also known as an implied or constructive mortgage no legal procedure is involved in an equitable mortgage but it is considered mortgage in the interest of justice(under equity).
- 20. REGISTERED MORTGAGE In case of registered mortgage charge is created on the property which the sub registrar through a formal, written process as a proof of transfer of interest to the lender as security for the loan. In case of borrower failure to repay the loan lender/bank will have the right to take the possession of the property. When the borrower repays the loan to lender/bank, The title of the property is given back to the borrower.
- 21. Contd… In registered mortgage, the borrower has to create a charge on the property with the sub-registrar through a formal, written process, as a proof of transfer of interest to the lender as security for the loan. Registered mortgage is also known as 'Deed of Trust'.
- 22. • Pre-Qualification :Pre-qualification starts the loan process. Once a lender has gathered information about a borrower's income and debts, a determination can be made as to how much the borrower can pay for a house. • Mortgage Programs and Rates: To properly analyze a mortgage program, the borrower needs to think about how long he plans to keep the loan. • The Application: The application is the true start of the loan process and usually occurs between days one to five of the start of the loan process. • The Loan Estimate: A Loan Estimate is a three-page form that you receive after applying for a mortgage. The Loan Estimate tells you important details about the loan you have requested. PROCESS WHILE CREATING MORTGAGE
- 23. • The Intent to Proceed: After you receive your Loan Estimate, it is up to you to decide whether to move forward with us or not. • Processing: Once the application has been submitted, the processing of the mortgage begins. The Processor orders the Credit Report, Appraisal, and Title Report. Required Documents • Credit Reports • Appraisal Basics: An appraisal of real estate is the valuation of the rights of ownership. The appraiser must define the rights to be appraised. The appraiser does not create value, the appraiser interprets the market to arrive at a value estimate. Contd..
- 24. Contd.. • Underwriting: Once the processor has put together a complete package with all verifications and documentation, the file is sent to the lender. • Closing Disclosure: The Closing Disclosure is a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs). • Closing: Once the loan is approved, the file is transferred to the closing and funding department. • Summation: A typical "A" mortgage transaction takes between 14-21 business days to complete. With new automated underwriting, this process speeds up greatly.
- 25. PRECAUTIONS WHILE CREATING MORTGAGE The borrower should be financially sound and the business for which money is borrowed should be economically viable. The borrower should have a clear title over the property to be given as security. It should be free from all sorts of encumbrances. In order to ascertain that there is no other charge on the property, banker should see the Register of Charges. The property should be properly valued. The value depends upon several factors such as :(a) ownership right i.e. whether it is a freehold property or a leasehold property.(b) the location of the property,(c) the type of construction,(d) the size, structure and layout, ,(e) the rental value.
- 26. Contd.. Proper margin should be kept. Generally the margin is about 50% of the value of the property. The property should be fully insured. In case of a legal mortgage, the mortgage deed should be registered. In case the borrower happens to be a joint stock company, all mortgages must be registered within 30 days of the date of their creation
- 27. For any query contact- PAWAN SINGH CHANDEL ARPIT RASTOGI ABHINAY GAURAV RAGINI pawansingh.rjit@gmail.com