Bank Alfalah Limited Home Finance Risks involved in Home Finance Documentation

Risks Risk in documentation Whether the bank has created legally enforceable security or not? Security can be transferable and mortgage.

Documentation Facility Offer Letter (FOL) Finance Agreement Memorandum of Deposit of Title Deeds Other Agreements / Undertaking (if advised by Legal Counsel) Title documents along with ancillary documents

Essential Elements of a Valid Contractual Agreement Offer and Acceptance Legal objective Consideration Mutual agreement / consent on terms and conditions Legal competency

Facility Offer Letter Reference of application for finance Amount sanction Facility / product Type Security Pricing Terms and conditions Acceptance

Home Finance Agreement The duly executed document describes in detail the following Agreement between bank and customer (s) Consideration Undertakings Declarations Terms & conditions Breach of which gives right to them to go to the Court for remedy (ies)

Memorandum of Deposit of Title Deeds (MODTD) The Document serves as an instrument to create Equitable Mortgage by the customer (s) with the Bank.

Main Contents of the MODTD Confirmation of depositing the title deed (s) 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 agreement List of title document (s) Specification of the property

Other Agreements / Undertaking (if advised by Legal Counsel) Agreement to Create mortgage Undertaking to provide the documents (Purchase cases) Lady mortgagor iqrar nama Mortgage deed

Main Features of a Duly Executed Document and risk Stamp duty For Punjab / Baluchistan / KPK – Rs.100/= Sindh - depend on the amount of finance Properly filled Signature of customer (s) on all pages of Finance agreement and MODTD (as per CNIC or bank a/c) Left Thumb Impressions for male and right Thumb Impression for female customer (s) Complete witnesses (as per Qanoon-e-Shahadat) Signing of finance agreement (on behalf of the Bank) by an authorized person of the bank

Mortgage Transfer of an interest In specific immovable property Purpose of securing the payment of mortgage money or performance of an obligation Which may give rise to financial liability

Mortgage (Cont.) Mortgagor Mortgagee Mortgage Money Mortgage Deed The property deposited by the owner is called transferor or mortgagor Mortgagee The property deposited in favor transferee (Bank) by the transferor is called a mortgagee Mortgage Money The principal money and mark-up of which payment is secured for the time being is called the mortgage money Mortgage Deed The instrument by which the transfer of mortgage is affected is called mortgage deed.

SBP REGULATIONS FOR HOUSING FINANCE REGULATION R-18 The house financed by the bank/DFI shall be mortgaged in bank’s/DFI’s favour by way of equitable or registered mortgage.

Equitable Mortgage A mortgage by deposit of title deed (s) is called equitable mortgage. A title deed of a property is generally the document by which the property is acquired. If a document other than a title deed is deposited no valid mortgage can be created. 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 A copy of Jamabandi/Fard (an entry in Jamabandi) may be an evidence of title but it is not a document of title. The title document to be deposited should be an original one. No equitable mortgage can be created by deposit of copy of the title document. Instrument – Memorandum of Deposit of Title Deeds (MODTD) Muhammad Waqar Aslam

Registered / legal Mortgage Instrument – Mortgage Deed 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/-) If the person does not have title deeds but he is owner of the property, he must create a mortgage by a registered instrument Concessional rate of stamp duty and registration fee for home loan mortgages Maximum Rs.1,500/- stamp duty Maximum Rs.1,500/- registration fee

Other Kinds of Mortgages Simple Mortgage: The essentials of a simple mortgage are as:- The mortgagor undertakes personal liability. No physical possession of the property is delivered to the mortgagee. No power of sale out of the property given to the mortgagee, but a decree for the sale of mortgaged property must be obtained by the mortgagee. It must be affected by a registered document even if the consideration is below Rs. 100. In simple mortgage two remedies are open to mortgagee; A suit for a money decree. A suit for the sale of the mortgaged property.

Other Kinds of Mortgages (Cont.) English Mortgage The mortgagor binds himself to repay the mortgage money on certain date. The property mortgaged is transferred absolutely to the mortgagee and is followed by delivery of possession. Such absolute transfer is made subject to this condition that the mortgagee upon repayment of the mortgage money on the fixed date will re-convey the property to the mortgagor.

Other Kinds of Mortgages (Cont.) Usufructuary mortgage Delivery of possession of the mortgaged property to the mortgagee. The mortgagee is to retain the possession until repayment of the money and to receive rents and profits. The mortgage is redeemed when the amount due is personally paid or is discharged by rents and profits received. No foreclosure and not allowed to sale When the mortgage is for Rs. 100 /- or upwards , the instrument must be registered . If the mortgage is for below Rs. 100 /- the instrument may not be registered and the mortgage may be created by delivery of the property .

Other relevant concepts Token Registered Mortgage A combination of equitable and registered mortgage is called Token Registered Mortgage. Lien A right given to another (bank) by the owner of property (mortgagor) to secure a debt. A lien is an encumbrance on one person's property to secure a debt. Transfer Deeds and Transfer of Allotment Letters Where the mortgagor holds original “transfer deed” regarding the land, he may create a mortgage by mere “deposit” of the title deed with the mortgagee bank. And if he does not hold transfer deed, but he has the allotment rights of the property, he must create a mortgage by a registered instrument i.e. “registered mortgage deed”. Local Commission for registered documents execution

Property documents contents Documents required in different areas and authorities with respect to nature of product Transfer process & risks involve in different areas / authorities (in Home / Plot purchase cases) Procedure of retrieval of title documents and permission to mortgage Mortgage and Lien creation / intimation process in different areas and authorities Agreement to sell required only in Home / Plot purchase cases

Properties having record of Revenue Certified copy of oral mutation in favour of Customer. Fresh Fard for loan duly countersigned by concerned Tehsildar. (In case of Home construction/renovation case) Fresh Fard for sale duly countersigned by concerned Tehsildar. (In case of Home / plot purchase case) Aks Shajra / Naqsha Mouqa Approved Building Plan from the Town Planner. Non Encumbrance Certificate from Sub Registrar Sale deed to be executed favoring our customer (s) in case of home / plot purchase cases

Properties having Registered Sale Deeds /Gift Deeds / Transfer deeds etc Original title document in favor of customer Certified copy of title document from Sub Registrar Original title documents of previous owner as a chain document Certified copy of mutation in favour of customer Fresh Fard for loan / sale duly countersigned by concerned Tehsildar Non Encumbrance Certificate from Sub Registrar Aks Shajra / Naqsha Mouqa Approved Building Plan from the Town Planner Fresh PT-1 along with Clearance Certificate (In case of excise and taxation property)

Properties having allotment letters of LDA/CDA/GDA. Original transfer letter in favor of customer All original transfer letters of previous owners as a chain documents Original allotment letter in favor of first allottee as a chain document Original Possession letter issued by the authority Clearance certificate NOC/Permission to mortgage from authority Completion Certificates or extension in building period Approved building plan from the authority. LDA Placement letter (in case of dual record of LDA and Excise & Taxation) Muhammad Waqar Aslam

Properties having allotment letters of DHA Original transfer letter in favor of customer Site Plan No Demand Certificate (NDC) apply receipt Approved building plan from the authority Tax Clearance certificate from Cantonment Board. NOC/Permission to mortgage from authority. Completion Certificate

Properties having allotment letters of Cooperative Housing Societies etc. Original transfer of allotment letter in favor of customer All original transfer letters of previous owners as a chain documents (if Society has not cancelled the same in the record) Original Possession letter issued by the Society Approved building plan from the competent authority Clearance certificate regarding the dues of Society NOC/Permission to mortgage from Society Copy of bye laws of the society

Lease Holds Rights (Property falls under the jurisdiction of Cantonment Board). Original sale deed of lease hold rights in favor of customer Certified copy of sale deed of lease hold rights Original lease deed made between Government of Pakistan and lessee Mutation letter along with original GLR (General Land Record) Approved Building Plan from Cantonment Board Completion Certificate Permission to mortgage Tax Clearance Certificate from Cantonment Board NOC for sale from GHQ and/or MEO (if required)

Documents required under Army Officer’s Housing Scheme Original allotment letter issued by Directorate of Army Officer’s Housing Scheme, GHQ Rawalpindi in favor of customer Clearance Certificate for dues / NOC for sale from the authority NOC/Permission to mortgage from the authority Approved Building Plan from authority. Completion Certificate.

Property documents required in Privately developed Housing Schemes Transfer / allotment letter of privately developed housing societies is not a title document and should not be accepted as security The developers who executed / will execute sale deed favoring our customer (s) can be accepted as security In case the developer is a private limited company then search report analysis is required Other documents are some about same as required in sale deed / revenue properties

Documents required in BTF cases Attested copies of documents / list of documents held by the bank. Certified copy of title document from Sub Registrar Approved Building Plan No Objection Certificate regarding the outstanding liability Redemption deed (in case of registered mortgage) Cancellation of GPA (in case of GPA) Fresh Fard for loan duly countersigned by concerned Tehsildar NOC / permission to mortgages

Issues of Enforcement under the Banking law Gift deed in purchase transaction Property acquired/awarded by the Operation of Law Property purchased through registered General Power of Attorney Minor’s Property Under the Guardian and Wards Act minor’s property cannot be transferred without the permission of Guardian Court.

Thanks MUHAMMAD WAQAR ASLAM Bank Alfalah Limited End of Presentation Manager Credit Administration – Mortgages Bank Alfalah Limited Credit Administration Centre LDA Plaza Branch Lahore Muhammad Waqar Aslam