Perfect Guide To Mortgage Transaction.

Mortgage transaction is  legal relationship or security transaction by which rights in land are
transferred to secure payment of money or the discharge of some other
obligations, subject to redemption upon repayment of the loan or discharge
of the obligation. We don’t just post jobs, we publish articles that will help our viewers/readers to

Transactions In Mortgage

Understanding the concept of mortgage

Mortgage transactions works by many people take out a mortgage to fund the purchase of a house or business building. To be able to limit its risk from the investment, the creditor in the transaction produces a priority lawful interest in the value of this home, considerably decreasing the likelihood it, the mortgagee, won’t be reimbursed in full if the borrower defaults on the loan. This is achieved via a perfected lien and name ownership.

A mortgagee reflects the interests of the lending financial institution in a mortgage agreement. Lending institutions may provide an assortment of products to borrowers, representing a considerable part of loan resources for both lenders and the credit marketplace all around

PARTIES IN A MORTGAGE transaction
Generally, there two parties to a mortgage transaction
 The mortgagor (Borrower) THOSE WITH INTEREST
 The mortgagee (Lender) DERIVING INTEREST

 Three parties and a tripartite Deed of Mortgage.

SIMILAR TRANSACTIONS
 PLEDGES: transfer of possession as security
 LIEN : detention of property until liquidation of debt without the property
being used initially as security
 CHARGES: appropriation of property without transfer of interest therein to
satisfy a debt
 CONDITIONAL SALE: reservation of right in a vendor to repurchase the
property upon occurrence of certain stated conditions

Protections for Mortgagees

In a mortgage loan, the mortgagee has rights to the real estate collateral associated with the loan. This provides the lender with protections against default. However, it also requires certain provisions to be made for the seizing of collateral assets if default occurs. For this reason, mortgagees include  a perfected lien and integrate title rights into a mortgage lending contract.

A perfected lien is drafted by a lender’s legal counsel to allow for a mortgagee to easily obtain the real estate associated with a mortgage loan if the mortgagor defaults. A perfected lien is a lien that has been filed and recorded with the appropriate agency giving the mortgagee rights to more easily obtain the real estate collateral. In a secured mortgage loan, the mortgagee is also the named real estate property owner on the property’s title. With the lien and property title, a mortgagee can easily obtain legal rights and institute specific procedures for vacating a property to be taken over in foreclosure

ROLES OF SOLICITORS IN MORTGAGE TRANSACTIONS IN ANY WHERE IN THE WORLD
 Advising on law, sources and negotiating for the loan.
 Investigating the title of the property sought to be mortgaged
 Advising on the modes and drafting of the mortgage instrument
 Perfecting the mortgage instrument and obtaining relevant consent.
 Discharge of the mortgage and drafting the discharge instrument.

APPLICABLE LAWS TO MORTGAGE
 Constitution of States E.g Nigeria and United States
 Land Use Act
 Mortgage Institutions Act
 Legal Practitioners Act
 Rules of Professional Conduct for Legal Practitioners
 Stamp Duties Act
 CAMA Land Instrument Registration Law
 Land Instrument Preparation Law
 Illiterate Protection Act
 CA/PCL/LRL/
 MPL, 2010

MORTGAGE INSTITUTIONS IN NIGERIA
 Federal Mortgage Bank
 Housing Corporations e.g FHA, LSPDC KLS
 Private Property Developers
 Commercial Banks
 Life Endowment Policy (Insurance)
 Employer’s Housing Schemes
INVESTIGATION OF TITLE AND WRITING OF SEARCH REPORT
 REASONS FOR INVESTIGATION of the mortgagor’s title:
1. To ascertain that the mortgagor is the owner of the property,
2. To know whether the property is encumbered or not

PLACES TO VISIT FOR INVESTIGATION
1. Land itself
2. Lands Registry
3. Probate Registry
4. Corporate Affairs Registry
5. Court Registry

CONTENTS OF A SEARCH REPORT

A good Search Report should contain the following:
1. Date of Search:
2. Place of Search:
3. Name of Borrower:
4. Owner of the property, if different from the borrower:
5. Description of the property:
6. Nature of the interest: Statutory Right of Occupancy with a C of O, etc.
7. Whether there is any encumbrance, and if any, the nature thereof:
8.Conclusion: i.e. the solicitor’s advice (whether the security is viable or not)
9. Name of the solicitor who conducted the search
10. Signature of the solicitor

Where the mortgagor is a company

 Date of search
 Name of company
 Date of incorporation & RC No.
 Names & addresses of shareholders
 Names & addresses of directors
 Borrowing powers (limit & procedure)
 Any registered charge against the company’s assets
 Last annual report filed Conclusion, name & signature of the solicitor.
Capacity & Mortgage Transactions
1. Infant
2. Company in liquidation
3. Unsound mind
4. Undischarged bankrupt

TYPES OF MORTGAGE: LEGAL mortgage
1. LEGAL MORTGAGE: This is the transfer of a legal title in land from the
mortgagor to the mortgagee, subject to the mortgagor’s right of redemption
in proper form. It is the the most secure and comprehensive form of security interest as it transfers legal tittle to the Mortgagee and prevents the mortgagor from dealing with the mortgaged assets while it is subject to the mortgage. The involvement of legal interest in creation of legal mortgage necessitates the mandatory requirement for the document of creation to be under seal.

 DEED/CONSENT/STAMPING/ REGISTRATION/FILING AT CAC &
Board for Lagos. ss. 22/23 STA/ s. 53 MPL, ss. 197 & 205 CAMA
Savannah Bank v Ajilo (1989) 1 NWLR (Pt. 97) 305
 Effect of unregistered Legal mortgage under CAMA

EQUITABLE MORTGAGE
 This is the transfer of an equitable interest in land from the mortgagor to
the mortgagee; or an agreement to enter into a legal mortgage. It involves the transfer of the borrower’s beneficial interest in an asset to the lender by way of security for the performance of particular obligations, on the express or implied condition that such beneficial interest will be retransferred when the secured obligations are discharged. As only the beneficial interest in an asset is transferred, an equitable (rather than a legal) security interest is created
 Use of equitable interest -nemo dat quo non habet Usually without deed
and perfection

Generation/Creation of Equitable Mortgage
It only transfers valuable interest in the asset to the Bank (mortgagee) with complete legal ownership staying with the mortgagor. Listed below are ways a equitable mortgage could be created:

Deposit of title deed 

There has to be an intention that the deposit has to function as collateral for your mortgage. Therefore, when the delivery of name deed is accompanied with a transparent intention that the title deed ought to be retained or taken as collateral; it will amount to the development of equitable mortgage. The custom is the mortgagor implements a memorandum of deposit which includes the conditions of the loan (in other words, the sum, interest, date of repayment, character of the collateral, etc).

The memorandum of deposit could be granted under hand as a deed, however as a deed is better since it has the advantage of conferring about the lender (the lender ) the statutory power of sale of the mortgaged property considers the lender remains an equitable mortgagee supplied the memorandum comprises either the power of attorney clause or the trust apparatus or both

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EQUITABLE MORTGAGE
ADVANTAGES OF EQUITABLE MORTGAGE
 Equitable mortgage is better than legal mortgage, where:
1. The amount of the loan is small;
2. The repayment period is short;
3. the mortgagor needs the money urgently.
EQUITABLE MORTGAGE
 USE OF EQUITABLE INTEREST. S. 18(2) MPL
 Agreement to Create a Legal Mortgage Ogundaini v Araba (1978) ILRN
280
 Deposit of Title Documents
– NB: INTENTION TO CREATE EQUITABLE MORTGAGE.A kintoye v BON
(1999) 12 NWLR (Pt. 392) 403. s. 18 MPL
 Memorandum of Deposit Made by Deed and Confers Right of Safe
Charge

ADVANTAGES OF A LEGAL MORTGAGE
1. Easier to enforce than equitable mortgage;
2. A subsequent legal mortgage or purchaser for value without notice of
equitable mortgage takes priority over the equitable mortgage;
3. It is more difficult to commit fraud in the case of legal mortgage than in a
equitable mortgage

MODES OF CREATING A LEGAL MORTGAGE
1. By an assignment (or conveyance of a deemed grant, as the case may
be);
2. By a sub-demise;
3. By a legal or statutory charge or charge by deed expressed to be by way
of legal mortgage; and
4. By a charge of registered title The application of any of these modes
depends on the location of the land/nature of interest/quantum/applicable
law. CA/PCL/MPL

CREATION OF LEGAL MORTGAGE 1:

1.BY ASSIGNMENT OR CONVEYANCE (LUA):

 This entails the assignment of the entire interest of the mortgagor i.e. the
unexpired residue of his leasehold interest under the Land Use Act if it is in Nigeria
subject to a provision for cesser upon redemption. .
2. BY A SUB-DEMISE/SUB-LEASE
 Here the grantee or holder of a Statutory Right of Occupancy mortgages
part of his leasehold interest under the LUA with a proviso for redemption
when the loan is repaid, subject to the Governor’s consent or LG approval.
 It is like sub-letting part of his interest. Even if it is a day shorter than the
term of the original lease.
The difference between assignment and sub-demise
 The difference between assignment and sub-demise is that in assignment
there is no reversionary interest in the mortgagor whereas in a sub-demise
the mortgagor has a reversionary interest.

3. STATUTORY MORTGAGE
 Mortgage by Deed expressed to be by way of Statutory Mortgage – s.
26(1) CA
 A leasehold holder may create a legal mortgage by deed expressed to be
made by way of statutory mortgage.
 Adopting the form in Part 1, 3rd Schedule of the Act.
 The form may be modified

CREATION OF LEGAL MORTGAGE
1. BY A SUB-DEMISE (SOME AUTHORS CALLED IT SUB LEASE):
 The grantee or holder of a Statutory Right of Occupancy mortgages his
leasehold interest under the Land Use Act for a term of years absolute,
less at least one day than the term vested in the mortgagor, subject to a
proviso for cesser upon redemption- s.109 PCL
3. LEGAL CHARGE:
This is a charge by deed (not mere writing) expressed to be by way of a legal
mortgage.

The chargee is not vested with the interest in the property, but he enjoys all
the rights/ power of a legal mortgagee like the right to sell the property to
realise the security – s. 110 PCL.
 Must be by deed and states that it is a mortgage
 Chargor/chargee

EXTRA
4. Mortgage by Deed expressed to be made by way of Statutory Mortgage in
Form 1 – s. 137(1) PCL.
 See 4th Schedule to PCL, with such variations and addition, if any as
circumstance may require
Mortgages under mPL – See Sections 15, 16, 18, 49 & 53
 MPL Repealed the CA – section 68 MPL
 Ii depends on the nature of interest
– Right of Occupancy, or
– Leasehold, or
– Equitable Interest.
 Use of Equitable Interest is under s. 18(2) MPL

RIGHT OF OCCUPANCY- S. 15 MPL
 Demise for a term of years absolute
 Charge by deed expressed to be by way of legal mortgage
 Charge by deed expressed to be by way of statutory mortgage.
 Use of Form 1 in 2 ND Schedule. s. 4 MPL

LEASEHOLD –
 Sub-demise for a term of years absolute less by at lease one day
 Charge by deed expressed to be by way of legal mortgage
 Charge by deed expressed to be by way of statutory mortgage.
 Use of Form 1 in 2 ND Schedule. s. 4 MPL

DOCUMENTS REQUIRED TO OBTAIN GOVERNOR’S CONSENT
 Application for consent in the prescribed form
 Covering letter of application for consent
 Tax clearance certificate (mortgagor) for preceding three years
 Receipts of payment of all rates & taxes in respect of the property
– E.g. tenement rates (for developed property), ground rent, development levy
where applicable, etc.
 Title deeds of the land
 A duly executed Deed of Mortgage
 Building plan approval (for developed property)
 Evidence of payment of inspection, charting and consent fees

 

 

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