HISTORY OF MORTGAGE

The 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.

MORTGAGE
Mortgage 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 the condition 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 a mortgage deed.

KINDS OF MORTGAGE
There 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 to 122 and 463 which property has been acquired Form 16 Particulars of modification of 129(3) and 463 mortgage, charge, etc. Form 17 Memorandum of complete 132 and 463 satisfaction of mortgage, charge, etc.

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 RIGHT
OF

REDEMPTION: 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. RE-TRANSFER CASE: He being, the natural owner of the property has the inherent right to retransfer his property to anybody else irrespective of the person in whose favor he has firstly transferred the property for the sake of money. RIGHT 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. RIGHT 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. RIGHT OF REASONABLE 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. RIGHT 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 youve gathered. To complete your application, youll also need to submit your supporting documents.

PROVIDE SUPPORTING DOCUMENTS

Your home mortgage consultant will: Request any additional documents that well 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 associated with making and closing the loan, including your finance charges.

FINANCIAL AND PROPERTY REVIEW

Your home mortgage consultant will submit your application for review. Next, well: 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 homes 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, well 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
Well 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 DOCUMENTS
There 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) b) c) d) e) f) g) h) i) Agreement for financing Promissory Note Personal Guarantee Letter of installments Debit authority. Undertaking to comply with the SBP rules & regulations Letter of continuity. Mortgage Deed 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 WITHOUT INTERVENTION 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: ______________ MR. ___________________ ______________________ Dated:____________

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. The Customer 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 markup 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 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. 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: ______________ MR. ___________________ ______________________ THROUGH COURIER Subject: Second Demand Notice for the Payment of Mortgage Money under Section 15(2) of the Financial Institutions (Recovery of Finances) Ordinance, 2001. 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, 10B, 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). 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. The Customer 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 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. 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 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. 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. Dated:____________

ATTORNEY-AT-LAW

3.IF
FOR

CONTINUOUS TO DEFAULT IN PAYMENT THAN FINAL NOTICE TO BE SERVED

30
Dated:____________

DAYS

3. FINAL DEMAND NOTICE Ref: ______________ MR. ___________________ ______________________ THROUGH COURIER Subject: Final Demand Notice for the Payment of Mortgage Money under Section 15(2) of the Financial Institutions (Recovery of Finances) Ordinance, 2001. 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, 10B, 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). 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. The Customer 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 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. 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 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. 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

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.

CONCLUSION
Mortgage 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 is default 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.

BIBLIOGRAPHY
http://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