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Firstly, we have to define what a mortgage is. A mortgage is simply a transaction whereby property, either land or personal property is given as a security for the repayment for the money borrowed

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Introduction

Security: Land, Stocks and Shares The UK is well known within the EU of having a high percentage of homeowners. With this, financial institutions have to cater for a widespread of people in order to provide mortgages. As this will involve large amounts of money, lenders have to access the risk and take the necessary precautions. These precautions tend to be taken in the form of a security. The two main forms of security that are generally taken are land, stocks and shares. Land being the most common within the UK. Firstly, we have to define what a mortgage is. A mortgage is simply a transaction whereby property, either land or personal property is given as a security for the repayment for the money borrowed. Normally the security used is real property, but it can also be personal property, such as a valuable piece of jewellery. This effectively gives the mortgagee the rights to the property, which can be claimed if the mortgagor defaults in repayment. The lender can force the sale of the property and recover the sum borrowed from the proceeds. With the creation of a legal mortgage before 1925 the mortgage of freehold land was created by conveying the fee simple estate to the lender. ...read more.

Middle

This basically means to create a mortgage the contract must be in writing. Before 1989 it would have been possible to accidentally create an equitable mortgage because they did not create a legal mortgage by deed or they failed to satisfy the formalities necessary for a deed, such as having the signatures witnessed. Secondly, an equitable mortgage can be created by the deposit of title deeds whereby, before 1989 it was possible to deposit title deeds in unregistered land with the lender and that would create a mortgage. This method had its merits as it was possible to create a short-term mortgage without having to comply with strict formalities. The case of United Bank of Kuwait v Sahib [1997] whereby, an attempt to create a mortgage by unwritten contract. The 2002 Act has removed any doubt in relation to registered land because land certificates will no longer be used, and without a certificate to deposit it would then be impossible to create mortgages in this way. Lastly, mortgages of equitable interests the borrower may only have an equitable estate in property because he is an equitable owner behind a trust. In each case he can only create an equitable mortgage. 'The mortgagor can mortgage that which he owns.' ...read more.

Conclusion

Both securities have an array of disadvantages, land requires a report on title, for unregistered land, which is relatively time consuming and costly. Fees are high when registering a full legal mortgage of registered land. Whereas, with shares, share certificates can be stolen and sold on, most money makers come with high risk and may mean that their share value may not be listed, so therefore hard to find a price of the shares. Land valuation is also difficult point to tackle, as there are many factors that can reduce the value of the homes such as, road widening and motorway construction. These tend to be out of the hands of the mortgagee's control. In conclusion, both securities can be seen as beneficial to lenders and borrowers. For lenders in terms of costs and less admin, stocks and shares seem to have the least, but would also be the least common. Lending has to be done responsible with regards to the financial institution. If they want to increase market share, they go into poor lending, which is high risk. Poor lending comes from badly trained, malicious or fraudulent employees subverting procedures and controls. This is where branch staff has a huge role in the discovery and prevention of mortgage fraud. Whereas, with land, homeowners have to make sure they have the necessary insurance for their houses and lenders clarify this as it is in their best interests. ...read more.

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