Mortgage Abbreviations

What is a mortgage?

Mortgage is the right given to the creditor to receive immovable property (or property that is difficult to move) as a guarantee for the payment of a debt by the debtor.

As a rule, mortgages are made on immovable property (houses, apartments and land), but in some cases it is also possible to mortgage goods that are difficult to move, such as ships and planes, for example.

In the mortgage, the right given to the creditor is over the value of the mortgaged asset and not over its substance. For this reason, in the case of a mortgage, the property remains in the possession of the debtor, and he can normally enjoy this good.

The release of the mortgage occurs when the debtor settles its debt with the mortgage, otherwise the property is put up for sale and the amount obtained is delivered to the creditor as payment.

Types of mortgages

There are different types of mortgage, according to the law provided for in civil law. Brazilian law considers three types of mortgages to be valid: conventional, legal and judicial (or legal).

Conventional mortgage: in this case, the debtor is the one who requests the mortgage on the property. This model is common when an individual wants to apply for a loan from a credit provider and makes their property available as collateral for the full payment of the debt.

Legal mortgage: provided for in article 1,489 of the Brazilian Civil Code of 2002. This is a special model of the mortgage, granted to guarantee the benefit of specific creditors, such as: the Public Treasury, to the children (as determined in article 1,523, item I, of the Penal Code), to the ward, among others.

Art. 1,489. The law grants mortgage:

I – to persons of internal public law (art. 41) on the properties belonging to those in charge of the collection, custody or administration of the respective funds and rents;

II – to the children, on the property of the father or mother who passes to other marriages, before making the inventory of the previous couple;

III – to the offended party, or to his heirs, on the delinquent’s real estate, for the satisfaction of the damage caused by the crime and payment of legal expenses;

IV – to the co-heir, to guarantee his share or share, over the property awarded to the heir replacement;

V – to the creditor on the auctioned property, to guarantee payment of the remainder of the auction price.

Legal mortgage: it is the result of a condemnatory sentence, where the debtor (accused) must submit a certain property in his domain to a mortgage, as an alternative to paying a debt.

Mortgage and Fiduciary Alienation

The main difference between these two models of property guarantee consists of the following fact: in the mortgage, the debtor continues to enjoy the mortgaged asset, and the value of the property remains in the possession of the creditor. If the debtor fails to pay the debt within the specified period, the mortgaged asset is sold and the amount corresponding to the debt is delivered to the creditor.

In the Fiduciary Alienation (this model is more common in Brazil), the asset (movable or immovable) is transferred to the creditor as payment of the debtor’s debt, based on an agreement previously signed between both parties.

List of Acronyms Related to Mortgage