Home Finance Documentation/Mortgage Creation

1. Home Finance Documentation/Mortgage Creation

2. Documentation • Home Finance Agreement • Memorandum of Deposit of Title Deeds • Facility Offer Letter along with repayment schedule • Title deed & Title supporting documents

3. Essential Elements to form a Contract/Agreement • Parties & their Capacities • Intention to create a legal relationship • Offer and Acceptance • Agreement on terms & conditions

4. Home Finance Agreement • The duly executed document describes in detail the undertakings, declarations and agreements between the Bank and the Customer the breach of which gives right to them to go to the Court for remedy.

5. Memorandum of Deposit of Title Deeds • The Document serves as an instrument to create Equitable Mortgage by the customer with the Bank

6. Main Contents of the Document • Confirmation by the customer of depositing the title deeds of the property with the Bank • Intentions of the customer to create equitable mortgage • Giving reason of the mortgage as to secure the financial obligations under the finance agreements • List of title documents & specification of the property

7. Main Attributes of a Duly Executed Document • Correctly filled-in • All the pages of finance agreement signed by the customer obtaining finance (as per CNIC or bank a/c) • All the pages of MODTD signed by the mortgagor (as per CNIC or bank a/c) • Left Thumb Impressions from male and right Thumb Impression from female customer • Complete witnesses (as per Qanoon-e-Shahadat) • Signing of finance agreement (on behalf of the Bank) by an official holding bank’s attorney

8. Mortgage • Mortgage is a contract that should fulfill all the requirements of a valid contract i.e. • Mortgagor should not be a minor • Lawful purpose • Backed by consideration • Free consent

9. Definition It is the transfer of an interest in a specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of Loan, an existing or future debt or the performance of a financial obligation.

10. The transferor is the Mortgagor • The transferee is the Mortgagee • The Principal money and mark-up of which payment is secured are called the Mortgage Money • The (registered) instrument by which the transfer is effected is called Mortgage Deed

11. Legal or Registered Mortgage • The mortgagor binds himself personally to pay the mortgage money • Physical possession of property with the mortgagor • No power of sale out of court (only through court decree) • Effected through a registered document (even if the consideration is below Rs.100/-) • Attested by two witnesses

12. Equitable Mortgage • A mortgage by deposit of title deeds is called equitable mortgage • A title deed of a property is generally the document by which the property is acquired and if a document other than a title deed is deposited no valid mortgage can be created. There is a difference between a document of title and documents which are evidence of a title. A Sale Deed in favor of the owner is a title deed but not a copy of the Jamabandi/Fard An entry in the Jamabandi may be an evidence of title but it is not a document of title.

13. Mortgage by Deposit of Title Deeds • The document to be deposited should be an original one through which the title to the property in question was obtained. No equitable mortgage can be created by deposit of copy of the title document on the plea that the original has been lost or is not available for the purpose of deposit.

14. Sale Deeds and Transfer of Allotment Letters • Where the mortgagor holds original “Sale deed” of the land, he may create a mortgage by mere “deposit” of the title deed with the mortgagee bank. And if he does not hold sale deed, but possesses the allotment rights of the property, he may create a mortgage by a registered instrument i.e. “registered mortgage deed”.

15. The development authority, such as DHA, LDA, CDA and the cooperative housing societies etc. (“Authority”) issues allotments letters to an allottee. These documents constitute only evidence of “contractual obligations” between the Authority and the holder of the Allotment Letter. As long as the Authority has not transferred the property to the allottee by a registered sale deed, the title in the property continues to remain with the Authority.

16. Even where the allottee himself (without having obtained a registered sale deed from the Authority), transfers his allotment interest to another person by a registered deed, such deed cannot be a document of title to the relevant land for the simple reason that the transferring allottee himself holds no registered “Transfer Deed”.

17. An “allottee” cannot create an equitable mortgage by the simple deposit of the allotment letters, as the allotment letters/transfer letters are not title documents. Creation of security in favour of financial institution is concerned it can be created through a registered document i.e. the mortgage deed.

18. THANKSMuhammad KamranManager- Policy & Compliance (Home Finance) Bank Alfalah Ltd