Credit risk in the formal mortgage contract

Abstract

The official mortgage is a concrete right created under a formal contract as a guarantee of debt repayment. It is decided on a real estate owned by the debtor or another person according to which he has to follow the property in whichever hand it is and to fulfill his right in preference to the ordinary creditors and mortgagees following him in rank. The official mortgage is one of the most important and most common means of credit because it reconciles the conflicting interests of the mortgagor and the mortgagee and also protects others who deal with the mortgaged property. However, the official mortgage contract may not always be considered as a special guarantee that protects the mortgagee creditor in fulfilling his right of priority. The mortgagee creditor may be exposed to legal situations that weaken or terminate his right to priority, including those related to the rights of the mortgagor such as exploitation, use, or disposal of the mortgaged property; all these actions may harm the mortgagee creditor, including what is related to the rights of the mortgagee creditor vis-à-vis others as a registration procedure after the mortgage is validly held, because the delay in the registration procedure exposes him to the risk that others will precede him in the registration procedure. Furthermore, there are cases where the registration cannot be carried out if it occurred before the registration of the mortgage.