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Loan Documentation (II) (Disadvantages of property as security…

- - - - All documents are properly drawn, legal requirements are met
      - Most secure and comprehensive type of security interest
      - All monies owing by borrowers to bank from time to time are covered by mortgage
    - - Lender take possession of original title deeds of property which serves as a security for the mortgage
      - If documents were not drawn up/executed correctly, the security is not perfected and equitable interest ranks below legal mortgage
  - - - Gives notice of bank's interests/rights over property
      - Owner of property cannot sell off/re-mortgage the property on his own without seeking the bank's consent
      - Conveyance of property whereby legal title/ownership is transferred from borrower to lender
    - - Investigation of title
        
        Make searches at Land Titles Registry to check that customer has good title and the property has no prior legal charge
      - Legal Requisitions
        
        Requisitions are made to Authorities (LTA, IRAs) to ensure property title is in good order, which complies with government regulations and value is not affected by provisions in the Drainage Interpretation Act etc
      - Lodgement of caveat
        
        To protect bank's position, it is a notice of the lender's interest in the property and prohibits the registration of any instrument affecting the land without lender's consent
      - Execution of Mortgage
        
        Deeds to be executed
        
        Mortgage to be signed by mortgagor and witnessed by lawyer
        
        All mortgagors are to execute the mortgage document
        
        Original title deeds are safekept by bank
        
        Register the mortgage with ACRA if mortgagor is a company
      - Valuation of property
        
        Value depends on: Market sentiments and economic environment, Demand and Supply, Size, maintenance and condition, Location and surroundings
        
        Valuation report on property has to be professional an updated on annual basis/when there's major changes in market condition
        
        Bank has to consider property's sustainability as security and its market value
        
        There are 3 types of values: Open Market Value, Forced sale value and fire reinstatement value
      - Insurance
        
        Policy to be assigned to bank which is endorsed as mortgagee
        
        Premiums are borne by customer
        
        Insured by reputable insurance company
        
        Amounts insured should increase every year due to increase in building costs
        
        Adequate insurance against fire