Mortgage deeds

A mortgage is a contract whereby one party, called the lender (usually a bank), transfers a certain amount of money in favour of the other, called the borrower, so that the latter may enjoy it for a fixed period of time against payment to the former of a consideration represented by interest.

Having thus sketched out the essential structure and function of the contract, it must immediately be emphasised that a mortgage in concrete terms is enriched with various clauses not always immediately comprehensible, but necessary to regulate all the relationships between the parties for the envisaged duration: the modalities of disbursement of the loan, fixing the terms of repayment of the principal and payment of interest, determination of other expenses for the contract's administration charges, discipline and costs of early extinction, provision and maintenance of guarantees, consequences of relative (delays) and absolute (non-payment) defaults. Each of these aspects is in turn characterised by a considerable wealth of possibilities and nuances, the result of both modern practices and rules and doctrinal meditation that can rightly be defined as thousands of years old (the mortgage is contemplated in classical Roman law and has been the subject of study by Byzantine jurists, medieval common law jurists, and jurists of the codifications of the modern age). Currently, the subject is further enriched by suggestions and innovations from foreign countries and the European Union's discipline. All this gives an idea of the actual complexity of the figure: the loan contract, a typical product of an intellectual performance, lends itself well to being conceived as a composition of legal engineering, in which the work of construction, sizing and coordination of the various clauses characterises the result as a whole, and makes it possible to evaluate it in terms of better (or worse) quality and convenience.

Mortgage contracts are generally prepared by banks; the notary, if instructed in good time by the borrower, may exercise control over them in order to make them clearer and more comprehensible, to identify and suggest solutions better suited to the contracting parties, and to eliminate clauses that may generate an unjustified contractual imbalance.

If the basic structure of the contract is as indicated, it may occur, quite frequently, that the mortgage is stipulated according to a special discipline, that of "land credit". Today, these rules differ very little from those of an "ordinary" mortgage loan, and there is even debate among experts as to whether this is the case; however, there are significant differences, some of which will be highlighted in the following illustrative sheets. On the other hand, the so-called unilateral mortgage, which has become widespread in recent practice, does not constitute a special species. The difference lies solely in the fact that it is only the borrower who goes to the notary (as is indispensable for the granting of the mortgage guarantee): this method of completion may reduce, de facto and depending on the case, the notary's scope for exercising his guidance and advisory function.

Attention should already be drawn to an essential point. The stipulation of the mortgage is not always immediately followed by the material availability of the money: sometimes the banks withhold the sum until the actual acquisition of the mortgage guarantee, i.e., in practice (depending on the various models), even for a fortnight (or more) after the stipulation. The point is of considerable importance since, often, the borrower needs to dispose of the money immediately, in order to pay the seller for the house that he simultaneously grants as collateral to the bank! One possible remedy is to obtain 'bridge' (or 'pre-financing') financing from the bank, covering the period between the conclusion of the mortgage and the time needed to consolidate the guarantee; but not all banks are willing to do this. With the notary's assistance, one can, depending on the case, try to reconcile the opposing requirements as far as possible.

Another caveat concerns a possible aspect: it may be that the borrower foresees that the property purchased, and mortgaged, will soon have to be resold due to various requirements (transfer of residence, increase in family members with the need for a larger house, etc.); consequently, he considers being able to pass on, as a consideration, to the future new purchaser of the property the portion of the mortgage remaining to be paid. Now, apart from the fact that (1) the purchaser must also agree to the assumption, and that (2) banks sometimes place some obstacles in the way of the operation, it must above all be borne in mind that, as a general rule, (3) the assumption is not "liberating", but "cumulative": This means that by taking over the remaining loan, the bank does not change the debtor, but acquires an additional one; therefore, if the new buyer by chance fails to pay the bank, the latter can still make claims against the original borrower. For these reasons, current practice shows less recourse to assumption: in essence, the seller extinguishes his mortgage, while the buyer, if necessary, takes out a new one on his own. On this aspect too, the notary can be of assistance, pointing out the concrete alternatives and the relevant costs.