Exchange rate mortgage

hipoteca cambiaria

Exchange rate mortgage is a mortgage as collateral security constituted the obligation under the bill of exchange, It is having an autonomous regime with respect to the underlying contract

 

 

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In this post we review the concept, operational, and the advantages and disadvantages of currency mortgages.

Currency mortgage concept

As reflected in the resolution 26 November 2013, the Directorate General of Registries and Notaries, of which it has echoed the jurisprudence (for example, Order of the Provincial Court of Madrid 15 November 2017):

Exchange rate mortgage is a mortgage collateral security constituted the obligation under the bill of exchange, It is having an autonomous regime with respect to the underlying contract”.

ROCA SASTRE added to that concept, “exchange rate mortgage is incorporated in an exchange guarantee obligation, the letter itself, rather than an underlying causal relationship, creditor or holder which is determined by a clause endorsement”.

Operation of exchange rate mortgage

Issuing a mortgage exchange rate implies that, we tax a building of our property to secure payment of a bill of exchange or promissory note. Namely, the difference from an ordinary mortgage would be the transcendent document and identifier of debt that is guaranteed is the bill of exchange or promissory note and the specialty that they can be endorsed or transmitted.

Accordingly, if our creditor, (those who subscribe to the exchange rate mortgage), It has a debt to a third party outside the legal relationship,  you can pass the title value. This endorsee third would be positioned as our new creditor (very unique and different in this type of mortgage feature that discussed below).

Features of the exchange mortgage

These types of mortgages classified as special exhibit particular characteristics and differentiating from the rest of mortgages. Specifically:

They are mortgage security

Exchange rate mortgages are also called “mortgage security” for guarantee constitute one or more bills of exchange.

In this sense determines judgment No 725/2017, Section 4 of the Superior Court of Madrid, Contentious, que “the mortgage is constituted as a mortgage security, by which an exchange obligation guaranteed, It is the mortgagor the acceptor letter, and the mortgagee the drawer- taker, but also any holder subsequent ".

unilateral constitution

The mortgage will be constituted for whoever holder or holder of the bill of exchange or promissory note at the time and must be sufficiently identified.

It should also contain the constitution in favor of holders or potential future legitimate indorsees.

It is constituted for an undetermined creditor

As noted by the recent resolution 24 August 2018, the Directorate General of Registries and Notaries, currency mortgages are made in transferable securities guaranteed by endorsements (bills of exchange) and guarantee the fulfillment of obligations whose creditor is undetermined.

So, The peculiarity of this special type of mortgage the rest is the relative indeterminacy of the final holder of the mortgage. About, notes the resolution 24 January 1997 Directorate General of Registries and Notaries that, “in these mortgages, unlike what happens in an ordinary mortgage, is a registration indeterminacy as to the mortgage holder, because it is not determined by enrollment, but it will at all times whoever is legitimized as title holder, following a chain of endorsements or simple tradition of the document, without it I give to the debtor or to record the transfer in the register.

The resolution 6 August 2014, the Directorate General of Registries and Notaries, confirmed that "The endorsement of the letter involves the transfer of ownership of the mortgage without the debtor is notified or recording the transfer in the Register. So, the legitimate holder according cambial chain endorsements is entitled to promote both exchange action as mortgage (…) Although the right mortgage enjoys the protection of public faith registration pursuant to art. 34 of the Mortgage Law, the same can not be said about the existence and vitality of credit exchange, whose owner can not rely on what publish the Register, but should stick to those resulting from the cambial life.

The resolution 2 February 2012, the Directorate General of Registries and Notaries,  He adds "Exchange rate mortgage is a mortgage as collateral security constituted an exchange obligation, in which the creditor is identified by the fact that legitimate holder of the cambial. Mortgages on bills of exchange, the secured loan is the derivative of the letter, not the causal, and mortgage resents the vicissitudes of cambial, so that any assignee of this may be based on the registration content to assert their right, who must rely solely on the wording of the letter itself.”

Endorsements and transfers of appropriate bills of exchange formalities do not need it as stated in the judgment of Supreme Court, Civil Division, of 7 June 1988: “…without needed for assignment, public or registration formalities, but ordinary corporate law.

With a currency exchange mortgage lender in case of default may exercise, your choice, the exchange action or foreclosure action, the latter without being the registered owner, just as the legitimate holder of the cambial whose payment was guaranteed by mortgage exchange (SAP Girona, of 1 March 2019, No resolution 147/2019).

Therefore, indeterminacy of the creditor is the main characteristic note of currency mortgages and also has a special significance for cancellation thereof.

So, our Mortgage Law does not regulate the cancellation of exchange rate mortgage. However, the Directorate General of Registries and Notaries has accepted the analogous application of some rules provided for in Article. 156 of the Mortgage Law to meet the cancellation of transferable securities by endorsement or bearer, and Articles 211 and 212 Mortgage Regulation.

Cancellation of exchange mortgage analogous application of art. 156 LH is not without difficulties as it will be necessary:

1.- The debt payment is credited

2.- Disablement must contain the title of the exchange as, This can not continue to run after cancellation of the mortgage. This was credited the resolution 2 February 2012 and the 31 January 2013, the Directorate General of Registries and Notaries, so that: “…Article 211 of the Mortgage Regulations requires the collection and disablement of titles.”

The above requirements mortgagee collaboration necessitate.

However, if this partnership is not achieved,  It is also possible cancellation of exchange rate mortgage through a judicial procedure.

In writing up the mortgage must be met, by analogy, requirements article 154.2 of the Mortgage Law:

  • Number and value of letters guaranteed by mortgage; in case of plurality should be the distribution of the mortgage liability in terms seen.
  • Series or series to corresponding.
  • Date or dates of issue.

Similarly, they must meet the requirements Art. 1 of Act 19/1985, of 16 July, Exchange and Checks for which the bill of exchange must contain:

  • The name change letter inserted in the text title expressed in the language used for writing.
  • Pure and simple mandate to pay a certain sum in pesetas or foreign currency convertible admitted to official listing.
  • The name of the person who has to pay, called drawee.
  • The indication of maturity.
  • The place to be making payment.
  • The name of the person who has to make the payment or whose order is to be performed.
  • The date and place where the bill is drawn.
  • The signing of issuing the letter, called drawer.

Last,  the bill of exchange shall reflect, under the Arts. 154 of the Mortgage Law and 247 del Reglamento:

  • Date and authorizing Notary writing
  • The number, folio, Book and date of registration in the r.P.

Advantages and disadvantages of the currency mortgage

Regarding advantage of exchange rate mortgage:

1.- The holder of the letter is creditor.

Indeterminacy supposed creditor who will enjoy the rights inherent in the status of creditor and therefore of the payment will be in possession who holds the bill of exchange or promissory note:  transmissions or endorsements are not registrable in the Land Registry so no assignee can access the entries of this to assert their rights against the rest.

The creditor is identified as the legitimate holder of the bill of exchange or promissory note.  Therefore, tenure bill of exchange or promissory note will be the key issue to execute or cancel credit, and no registration of ownership in the Land Registry.

2.- Execution by default.

The holder of a bill of exchange or promissory note issued because of constitution of a currency mortgage can, for the simple fact of being the holder of that, exercise enforcement action for non-payment without being the registered holder thereof.

El principal inconveniente de esta especialidad hipotecaria es lo costoso de la cancelación: As already we indicated, cancellation of mortgages exchange needs to meet a number of requirements that may hinder the same, they require the cooperation of the mortgagee:  we need to prove the disablement of the bill of exchange or promissory note.

So, in case of missing this cooperation would be necessary to resort to legal proceedings that would delay the cancellation in time.

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