Law On Mortgage (Pledge of Real Estate) in 2021

General provisions

The first chapter of the Federal Law on mortgage collateral of real estate consists of 7 articles. The first describes under what circumstances and on what conditions a mortgage arises, as well as legislative methods of regulation. The same chapter states that property pledged for mortgage lending remains for the use of the borrower and is not transferred to the lender. And not only the owner, but also other persons who have the appropriate documents and permits for this can provide property as collateral.

The text of the law clearly states that the amount for the mortgaged property that the client receives from the lender cannot exceed its value. The loan may be equal to or less than the collateral. Special situations are also prescribed when the lender bears the costs of maintaining the mortgaged property. In this case, the credit institution has the right to compensate for its own costs by selling the collateral.

Article 5 of Federal Law 102 clearly defines the property categories that can be used as collateral:

plots of land, except for those that belong to the state or municipal, there are separate rules for such plots;
buildings, enterprises, individual structures;
apartments in high-rise buildings and private houses or parts thereof, which can be separately allocated;
garages, outbuildings, garden houses;
parking spaces;
water and air transport.

Article 6 stipulates the right to transfer real estate as collateral. And the 7th talks about living space that is in common or joint ownership. If such real estate is pledged, then it is necessary to collect papers on the consent of all shareholders. But if it is possible to allocate a share of the common property to a potential borrower, then he has the right to independently dispose of personal property.

The owner of the share has the right to use it as collateral, but it is rare that a creditor will agree to such conditions. Such property is difficult to sell; it is considered an illiquid option. But such property can be used for additional collateral for a loan. In this case, the lender will pay more attention to the borrower’s solvency and credit history. Such data can better inform the client’s financial discipline, income and performance.

A mortgage is a pledge of real estate, issued as security under a credit agreement, loan agreement or other obligation. A Mortgage Agreement (i.e., an agreement to pledge real estate) provides the right to the creditor-mortgagee, in the event of failure by the debtor to fulfill his obligations under the agreement, to repay the debt by selling the real estate pledged under this obligation.

Real estate that can be mortgaged under a Mortgage agreement are: - land plots; -enterprises, as well as buildings, structures and other real estate used in business activities; - residential buildings, apartments and parts of residential buildings and apartments, consisting of one or more isolated rooms; -dachas, garden houses, garages and other consumer buildings; -aircraft and sea vessels, inland navigation vessels and space objects. A mortgage under a credit agreement (loan agreement) must ensure repayment of the principal amount of the loan, the amount of interest due to the lender for using the credit (loan), as well as: - penalties (fines, penalties) due to non-fulfillment, late fulfillment or other improper fulfillment of the obligation secured by the mortgage ; - interest for unlawful use of other people's funds; legal costs and other expenses caused by foreclosure of the mortgaged property; expenses for the sale of pledged property; expenses associated with the storage of the pledged property, if the Mortgage Agreement establishes the obligation of the mortgagee to ensure the safety, maintenance and security of such property. A mortgage presupposes that the mortgaged real estate remains with the mortgagor in his possession and use during the term of the agreement. The mortgagor of a mortgage can be either the debtor under the obligation or another person who is not a party to this obligation. If real estate is jointly owned (without determining the share of each owner in the right of ownership), then a mortgage on such property can only be established with the written consent of all owners. If the real estate is in common shared ownership (the shares of the participants are allocated), then the consent of the other owners to mortgage the allocated share of one of the participants is not required. Rights under the Mortgage agreement may be certified by the Mortgage. In the Russian Federation, a mortgage can arise by force of law or by force of contract. A mortgage by force of law is a situation directly established by law when real estate is considered to be pledged to the lender under a credit agreement, loan agreement or other obligation, automatically, without concluding additional contracts and mortgage agreements. State registration of such a mortgage is carried out on the basis of the original agreement (credit, loan, etc.), which entailed the emergence of a mortgage by force of law, simultaneously with the state registration of the property rights of the person whose rights are encumbered by the mortgage, unless otherwise provided by law. The state fee for state registration of a mortgage is not charged by law. A mortgage by virtue of a contract arises in cases that do not imply the emergence of a Mortgage by virtue of law. A mortgage by virtue of an agreement is based on the conclusion of a separate agreement (agreement) on the mortgage, which is security for a credit agreement (loan agreement, etc.). The mortgage agreement comes into force from the moment of its state registration. State registration of a mortgage agreement is carried out on the basis of a joint application by the mortgagor and the mortgagee. For example, a Mortgage by virtue of an agreement will take place if the borrower takes out a targeted loan for the purchase of real estate secured by existing housing. If real estate is purchased using a Mortgage, it becomes the property of the borrower. In this case, the following should be taken into account: -Selling, donating, exchanging such real estate or contributing it to the authorized capital is permitted only with the consent of the creditor or pledgee. If a Mortgage is issued, then only if such a right is provided for in the Mortgage (Article 37 of Federal Law No. 102-FZ “On Mortgage (Pledge of Real Estate)”). - Such real estate can be leased out for temporary free use without the consent of the creditor or mortgagee, unless the Mortgage Agreement directly prohibits this. In this case, the property must be used for its intended purpose and the period for which the property is provided for use must not exceed the term of the mortgage loan. The provision of property for use on other terms is carried out only with the consent of the creditor or mortgagee (Article 40 of Federal Law No. 102-FZ “On Mortgage (Pledge of Real Estate)”). -In residential premises, the borrower (as the owner) has the right, without the consent of the lender, to register himself and register his family members (Article 288 of the Civil Code of the Russian Federation).

The main legislative act regulating the provisions on Mortgage: Federal Law of July 16, 1998 No. 102-FZ (as amended on December 6, 2011) “On Mortgage (Pledge of Real Estate).”

About the mortgage and state registration of mortgages

A description of the mortgage is given in the third chapter of Federal Law-102. This section describes the basic provisions, conditions of registration and work with the electronic version of the document.

Essentially, a mortgage is a registered security. But its registration is not necessary for a mortgage. No one obliges you to draw up such paper for this type of lending. If a mortgage is issued, then the right to it can be assigned. A separate article is devoted to how to do this.

When the borrower repays the loan, the lender returns the mortgage. The owner independently removes the encumbrance on the property from the government agency.

The fourth chapter describes the stages of state registration of collateral. Here it is indicated how the mortgage record is entered, edited, corrected, corrected or removed from the state register. The articles also talk about the actions of the property owner during the liquidation of the mortgagee. For example, in case of bankruptcy of a creditor.

The same chapter states that the state fee for state registration is paid when making an entry or when making adjustments. The tax is:

Content	Individuals	Legal entities
Making an entry	1,000 rubles	4,000 rubles
Correcting a record	200 rubles	600 rubles

When drawing up an agreement between an individual and a legal entity, the amount of payment is established as for an individual. Taxes and fees are not constant. They depend on the legislation currently in force, so the current cost should be looked at on the day of state registration.

In Art. 25 of the Federal Law “On Mortgage” describes the procedure for repaying an entry in the State Register about the pledge of property. It also indicates which persons and in what composition can submit an application for repayment and a list of securities.

Preservation of real estate

The pledged property must be properly used and preserved. This is included in the text of the agreement. And from the fifth chapter of Law 102 on mortgages, you can learn in more detail the nuances about the duties and responsibilities of the parties in relation to the collateral:

How can a property owner use the mortgaged property? The lender has no right to set any restrictions. Moreover, the homeowner can even derive additional income from personal property registered as collateral. For example, renting out to tenants daily or for a longer period.
Who carries out repairs of mortgaged real estate. All costs for home repairs are borne by the owner, unless otherwise specified in additional agreements. In addition, the lender has the right to demand early repayment of the loan if the pledged property loses its original value due to the owner’s negligence.
How is the insurance of the property provided as collateral carried out? Housing insurance is a mandatory condition for mortgage lending. It is paid by the borrower. However, it cannot be less than 10% of the value of the property, but cannot exceed 50% of the principal amount of the debt. Some credit institutions offer their borrowers to also pay for personal insurance. But banks do not have the right to force the client to purchase such a policy. Refusal of personal insurance may serve as a reason for revising the interest rate on the loan upward.
What measures are permissible to use to protect collateral from damage and loss. And also from the actions of third parties. If a real threat arises, the owner is obliged to notify the bank of everything that he knows that may lead to the loss of the collateral.
On the rights of the creditor to inspect the property registered as collateral.
What are the consequences of loss or damage to mortgaged real estate for the owner and the lender?

If the property owner neglects responsibilities, untimely repairs or intentional damage, the lender may ask to close the loan agreement early.

The main tenets of the law on mortgages. Mortgage Law: current edition 2021

Reducing the mortgage rate to 6% under the new law

The Russian government is trying in every possible way to improve the demographic situation in the country. A new program to help young families will begin in 2021, the goal of which is to help families with children pay off their mortgage by reducing the cost of a home loan.

The program to assist young families wishing to purchase housing has been in effect since 2021 and is designed for those families in which a second and subsequent children were born after January 1, 2021. Under the new law, borrowers in whose families children were born between 01/01/2018 and 12/31/2022 can take advantage of this offer under the new law in 2021.

New mortgage program for 2021

This program includes several innovations:

Transition to electronic document management when applying for a mortgage loan.
Tightening the work of developers.
Reducing the mortgage rate from 9% to 8% and below.
The introduction into force of a preferential assistance program for families with children, according to which the benefit should be provided not for 3 or 5 years until the child reaches a certain age, but for the entire term of the mortgage loan.

What postulates will remain in the new 2021 law in the field of mortgage lending?

The government leaves citizens the opportunity to repay their mortgage (in part or in full) with maternity capital. Social types of mortgages, such as housing for young families and military personnel, are also preserved. The proposal for mortgage restructuring is also relevant in 2021.

See the same topic: How to correctly calculate the overpayment on a mortgage?

Changes in mortgage risk ratio since the beginning of 2021

Many young people seek to take out a mortgage with a minimum down payment. And it’s clear why - they want to get their own housing, but have not yet managed to save money. But don’t rush to apply for a loan with a minimum down payment.

The fact is that such a mortgage loan is characterized by great risks for the borrower, so the government decided to limit the issuance of such loans. To this end, it decided to increase the risk ratio for loans with a down payment below 20% of the property value from 150 to 200%.

Why is the government increasing the mortgage risk ratio? As this value increases, many banks will be forced to reconsider the terms of their mortgage programs. As a result, they will have to increase the minimum contribution or raise rates on programs that are unfavorable for them.

Transfer of property rights

The sixth chapter of Federal Law-102 “On Pledge” describes the transfer of rights to real estate in a mortgage. The articles in this section describe:

procedure for alienation of real estate;
preservation of the mortgage when transferring rights to real estate as collateral to a third party;
consequences of violation of the procedure for alienation of property rights;
consequences of seizure of mortgaged property by the state, including under renovation programs.

The same section specifies the lender’s right to demand repayment of the loan funds ahead of schedule in a situation where the collateral housing is seized through vindication. That is, when the real owner is another citizen, and not the mortgagor. The procedure takes place when a court decision on the seizure of housing has been made, which has entered into force.

Subsequent mortgages

The seventh chapter introduces the concept of subsequent mortgage and the situation when it is allowed to be used. The articles explain under what conditions the same collateral can be used as security for different loans of the same citizen or different individuals. If the text of the first mortgage prohibits the property from being re-mortgaged, then no subsequent mortgages can arise.

This section also describes the state registration procedure when registering property as collateral for the second or third time. And in what sequence will debts be collected from borrowers in case of non-payment of loans.

Assignment of rights and foreclosure

The creditor may transfer his rights to the pledge unless this is prohibited by the terms of the contract. At the same time, the obligation to repay the loan may or may not be transferred. Such details can be specified separately when drawing up the agreement. Rights can also be transferred to a mortgage. An entry about the new copyright holder is made on the security.

Law 102 expressly prohibits the making of inscriptions that would indicate that the mortgage is prohibited from transferring the mortgage to other creditors. If such inscriptions were made, they have no legal force and are invalid.

Some clients do not fulfill their obligations on time, then the lender may sue the borrower. This is stated in Chapter 9 of Federal Law-102. Under such circumstances, the credit institution has the right to sell the collateral. The bank uses funds received from the sale of real estate to compensate for its own costs.

It happens that the money received from the sale of collateral may not be enough to compensate for all losses incurred. Then the lender can legally demand compensation from the borrower for the remaining difference.

Requirements secured by a mortgage specified in the law

These requirements are specified in Art. 3 of the Federal Law “On Mortgage”:

If the borrower fails to fulfill the obligation to repay the mortgage, the bank has the right to demand compensation from him for losses in the form of penalties and fines.
If the borrower does not use the bank’s money for its intended purpose (the money is not used to pay off the mortgage debt), then the bank may demand a penalty in the form of interest.
If the bank goes to court to foreclose on the pledged property, it has the right to demand reimbursement of legal costs from the defendant.

Sale of mortgaged real estate

Chapter 10 of the Law “On Mortgage” describes the procedure for the sale of mortgaged property. When the lender has the right to sell the property, he can obtain the consent of the borrower, or he can start the process without it. When choosing the first option, the parties can come to an amicable agreement and sell the collateral on the most favorable terms for all participants. If the bank initiates the sale of real estate without the client’s consent, then it goes through an auction.

At an auction, the collateral is assigned the minimum acceptable value. If the object is not sold, the auction is declared invalid. At the next auction, the price of the collateral is set even lower. The lender publishes information about the auction in official publications. Participants who want to take part in the auction make a deposit of up to 5% of the value of the lot. The one who gives the highest price buys the property. The remaining participants will receive their deposits immediately back.

The buyer is required to pay the balance of the price for the purchased property within 5 days after the auction. And over the next 5 days they conclude a deal with him to sell the property.

In Art. 61 describes the conditions for how funds received from the sale of collateral will be distributed. Who is entitled to them and in what order the debts of all creditors are compensated. If the proceeds are greater than the debts owed to all creditors, then the remainder is returned to the former owner of the property.

Requirements for drawing up a mortgage agreement

Each bank, when drawing up a mortgage agreement, must be guided by laws and regulations in the field of the civil code and the Federal Law “On Mortgage”. When drawing up a mortgage agreement, the following conditions must be met:

Correct drafting of a mortgage agreement. The text of the contract must include the subject of the transaction, its estimated value, and the delivery date.
Mandatory registration of the agreement with Rosreestr. If the parties do not complete the registration procedure, then their mortgage transaction will be considered void.
Informing the mortgagee about the rights of other persons to the subject of mortgage. If the mortgagor does not inform the mortgagee about the possible rights of third parties to the subject of the mortgage, then the bank has the right to change the terms of the transaction or initiate early fulfillment of the borrower’s obligations.

Look at the same topic: What documents are needed to evaluate an apartment for a mortgage? List of required documents [y] year

Features of mortgages with land plots

Owners have the right to mortgage land that exceeds the minimum established size in a given subject of the Russian Federation. In this case, it is possible to mortgage land from municipal property if:

the site is allocated for individual construction within the framework of social programs;
the loan is taken out for the improvement of this site;
The decision on whether a given plot can be mortgaged is made by the municipality.

The owner of the land does not have to have permission from the lender to develop it. The principle of indivisibility comes into play: buildings on earth cannot exist separately from it.

Two features with this type of collateral:

When registering a private house as collateral, the land plot underneath it is always registered along with the real estate.
When a foreclosure occurs on the mortgage of agricultural land, they do not have the right to put the fields up for auction until the crop is harvested and sold.

If the land is used under a lease agreement, the tenant has the right to mortgage it for a period that is shorter than the lease itself. In this case, the permission of the land owner is not necessary for the lender.

Features of collateral of non-residential property

Chapter 12 spells out the specifics when pledging non-residential premises:

the enterprise is registered as collateral with all the property and land on which it is located;
a non-residential building standing on a separate plot is also pledged along with a plot of land under it;
the creditor does not prevent the owner of the property from using it, unless otherwise specified in the pledge agreement.

An exception to the transfer of land with buildings and structures along with the land arises if it is transferred to the owner on a lease basis. It is possible to collect mortgage debts from enterprises only after a court decision has been made.

Changes in the mortgage law 2017-2018

During 2017-2018, several changes were made to Law No. 102-FZ. Let's look at their main features:

Changes within the framework of the adopted law No. 141-FZ of July 1, 2017 affected the registration of a mortgage simultaneously with the execution of a purchase and sale agreement, which facilitated the lending option in which the same real estate that would be pledged was provided as collateral. A separate article also appeared related to the renovation program in Moscow.

On November 25, 2017, another law No. 328-FZ was adopted, according to which the parties were able to enter into pledge agreements even if the fact of the pledge itself arose on the basis of other documents. Other changes

Article 4 of the law specifies who exactly bears the costs and for whom.
It is no longer possible to pledge space objects.
Art.6. It is clarified what kind of property can be pledged.
Art.9. Minor changes have been made to improve understanding of the text.

Special conditions for pledging apartments and houses

There are also special requirements for the borrower’s living space, since not only the debtor himself, but also other persons can live on its territory. At the same time, it is prohibited to accept objects owned by the state or city as collateral. The following requirements are put forward for other apartments and residential buildings:

when mortgaging housing where family members who have not reached the age of majority are registered, it is important to obtain permission from the guardianship authorities;
during the period of self-construction, a pledge can be issued for materials and equipment, but after completion of construction, the residential building is pledged;
housing purchased with a mortgage is registered as collateral simultaneously with the registration of the borrower’s right to the property;
When using the mortgage program for military personnel, the living space is simultaneously pledged to the bank and to the government agency that makes payments to repay the loan.

When a mortgage arises by force of law

We have already mentioned above one of the options for the emergence of a mortgage by force of law. However, the legislation describes several more options for its occurrence. Moreover, they concern not only real estate, but also other material assets.

Recommended article: How to sell an apartment with a mortgage and buy another

So, let’s look at the main cases when a mortgage arises by force of law:

If you took out a targeted loan for the purchase or construction of real estate, it automatically becomes collateral for the bank. Encumbrance is possible only if the requirement is specified in the loan agreement.
Construction of buildings on a plot of land that is already mortgaged. For example, you bought land with a mortgage loan, and then built a country house on it. When registering ownership of it, a mortgage is automatically registered by force of law.
Purchase of an apartment or office space in a building under construction using mortgage funds. When it is completed and the owner goes to register ownership of the property, Rosreestr will immediately register the mortgage by force of law.
For any other purchase on credit, the item of the transaction may be pledged to the seller until the buyer pays for it in full. The same rule applies when applying for installments.
The mortgage of property by force of law is provided for in a rent agreement, that is, the lifelong maintenance of the owner of the property. The right of encumbrance arises with the rentee, and in case of failure to fulfill obligations, he has the right to cancel the transaction.
Mortgage by virtue of the law on maternity capital. After registering ownership using certificate funds, the property is subject to a legal mortgage. The pledge is issued in favor of the seller of the property, because he has not yet received the money for it in full. The process of agreeing on payment with the Pension Fund takes place within 1.5 months, during which period an encumbrance is imposed in favor of the former owner. After the money is transferred, the restriction is lifted.

If we talk about bank lending, then a mortgage by law on real estate arises upon registration of ownership. Restrictions imposed later - mortgage by virtue of the contract.

A mortgage on an apartment or other property is an important condition for bank loans for large amounts. This way, the financial institution can be confident that the money issued will be returned even if the borrower refuses to repay the debt. The property is sold through the court, and the funds received are used to close the loan.

Final part

Federal Law 102 was adopted in the Russian Federation in 1998. It applies in the current edition, which was carried out on August 2, 2021. In this case, a single rule is taken into account. All agreements executed with the pledge of real estate are drawn up taking into account the current edition. After additions and changes are made to the Federal Law, previously concluded agreements are not revised unless this is necessary for the parties.

All mortgage loans in the Russian Federation are concluded taking into account this federal law. What types of mortgages are common in Russia and other useful materials about mortgages can be found on the Brobank portal.

about the author

Klavdiya Treskova - higher education with qualification “Economist”, with specializations “Economics and Management” and “Computer Technologies” at PSU. She worked in a bank in positions from operator to acting. Head of the Department for servicing private and corporate clients. Every year she successfully passed certifications, education and training in banking services. Total work experience in the bank is more than 15 years. [email protected]

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Author of the article: Klavdiya Treskova

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