DATABANK OF HOME LOANS AND MORTGAGED PROPERTIES
Ashish Gupta explains how this institution helps ensure a property is mortgaged with one lender only
The Finance Minister, in his budget speech for 2011-12, had elaborated on the establishment of a Central Registry. The objective of setting up the Central Registry is to prevent more than one loan being taken from different banks for the same property. This Registry became operational on March 31, 2011.
The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), a government company, has been incorporated for the purpose of operating and maintaining the Central Registry under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI Act).
Initially, transactions relating to securitisation and reconstruction of financial assets and those relating to mortgage by deposit of title deeds to secure a loan granted by a bank or financial institution will be registered in the Central Registry. The records maintained by the Central Registry will be available for scrutiny to any lender or any other person wanting to deal in property. Availability of such records will prevent more than one loan being lent against the security of a property, as well as fraudulent sale of property without disclosing security interest over it.
Under the provisions of the SARFAESI Act, details of any charge creating security interest in a property are required to be filed with the Registry within 30 days from the date of creation. A Central Register will be kept for the purpose of maintaining records of registration of transactions relating to securitisation, reconstruction of financial assets and security interest created over properties. All electronic documents, required to be signed by the Central Registrar, will be authenticated through his digital signature.
If there is a security interest being created in favour of two or more lenders, the details of inter se priority among them and whether they hold it on a pari passu or subordinate basis is to be specified. All details of transactions maintained in the Central Registry are open for inspection through its website, and during business hours at the Central Registry on payment of a fee.
Banks obtain a mortgage of the property to be funded as the prime security. The mortgage is usually in the form of equitable mortgage or deposit of title deeds which is very simple, convenient, inexpensive and borrower-friendly. One disadvantage of this kind of mortgage is that the mortgage deed is not registered with any revenue authority. Hence, the mortgage details are not depicted in the revenue records. Neither the encumbrance certificate issued by the sub-registrar nor the search certificate issued by an advocate will be able to detect such mortgage details.
Credit Information Bureau of India Ltd (CIBIL) has already introduced 'Mortgage Check', in association with the National Housing Bank (NHB), the home finance regulator. The 'Mortgage Check' will contain information on properties mortgaged to various banks, details of existing loans and comprehensive information on such properties. It will help lenders share and access mortgage information. The 'CIBIL Mortgage Check' is a database of over six million mortgage records collected from member organisations - banks and housing finance companies. Authorised persons can access the database to check details of a property for which a loan is applied.
- THE CENTRAL REGISTRY WILL ENSURE THAT A PROPERTY ONCE MORTGAGED WILL NOT BE PUT UP AS SECURITY FOR ANOTHER LOAN
- CIBIL HAS A DATABASE OF OVER SIX MILLION MORTGAGE RECORDS COLLECTED FROM MEMBER ORGANISATIONS – BANKS AND HOUSING FINANCE COMPANIES. AUTHORISED PERSONS CAN ACCESS THE DATABASE TO CHECK DETAILS OF A PROPERTY
- THIS MOVE MAKES IT SAFER FOR BUYERS OF PROPERTY