In case of home loans, banks are entitled to mortgage of the property. The mortgage is normally either in the form of equitable mortgage or deposit of title deeds. The mortgage deed is not registered or noted in the records of any revenue authority. As such, the mortgage details are not reflected in revenue records. As a result, the encumbrance certificate issued by a subregistrar will not be able to highlight an existing mortgage. Moreover, the search certificate issued by an advocate won't be able to include this either.
One of the major reasons behind bad loans in mortgages is cases where a borrower takes a loan from more than one lender using duplicate documents. Sometimes, loans are taken for the same property from different sources, using duplicate documents.
The National Housing Bank (NHB) and the Credit Information Bureau of India Ltd (CIBIL) have joined hands to set up a central registry of mortgaged houses. Home loan defaults are expected to drop sharply with this move.
The repository was set up with a database of around six lakhs borrowal accounts compiled from 25 entities commercial banks and housing finance companies - and is expected to help lenders take an informed lending decision. The database accounts for a significant chunk of loan accounts in the country. Presently, the CIBIL database is accessible to only member organisations.
According to the Reserve Bank of India (RBI) database, there were around 5.7 million borrowal accounts with commercial banks in the country as on March 2009. With the increase in defaults in the housing sector due to duplicate sales deeds etc, CIBIL's mortgage check will enable more informed decisions while assessing new mortgage loan applications as well as better portfolio management. The comprehensive reference database will contain information on properties that owners have availed loans on, summaries of those loans, and open and close dates. The move is a part of the initiative to improve infrastructure in the housing finance market. As the home loan market evolves, there is a need to create appropriate infrastructure.
The NHB is also pushing for mandatory registration of equitable mortgages. This would increase the cost of home loans as lenders would have to pay a stamp duty which is related to the property value. The stamp duty is in turn recovered from the borrower. The NHB is also working with 10 major banks in the country to set up a central mortgage repository which will have electronic registration of mortgages, and will be mandatory for everybody.
Now, CIBIL has introduced mortgage check, in association with NHB. The mortgage check will contain information on property mortgaged to various banks, and details of existing loans and comprehensive information on such property. Mortgage check is an electronic database posted on the website of CIBIL.
Authorised persons from member organisations (banks) will be able to access the database to check a property for which loan is applied for. This will help lenders share and access mortgage information and contain bad transactions. In case the details of the property match with the database, the loan application will be declined.
This will help both the buyer and the lender as it would enable detection of fraudulent transactions.
