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Statutory Mortgage

A mortgage can be depicted as the act of transferring an interest in property, or anything equivalent to a property in law (a charge) to a creditor as collateral for a debt. Important to understand is that a mortgage isn’t a debt but security for the debt whereby the property owner transfers the interest to the mortgage lender on condition that the interest remains the full property of the borrower unless the borrower defaults part or full terms of the mortgage.


Statutory in this case is something related to statutes or created by statutes. It’s something enforceable, prescribed, and punishable under an act of parliament. A lot of jurisdictions today allow certain assets to be mortgaged without having to transfer the title of the assets to the mortgage lender or mortgagee. Statutory mortgages predominantly relate to registered ships, registered aircrafts and of course land. A statutory mortgage is nothing different from a true legal mortgage, only that the manner of enforcement differs since in statutory mortgage, enforcement is regulated by the statute law.

A ship mortgage for example can be defined as a charge by way of lien on a ship for securing money, or its worth. Mortgage in this case has 3 major concepts – the mortgage document, otherwise known as the deed, the mortgage loan, and the rights from the mortgage deed transferable to the money lender. By extending to the mortgage lender an interest in the ship as collateral for a loan, the borrower could remain as title owner of the ship. Statutory law mandates the mortgagor to carry out business with the ship as usual without putting at risk the lender’s position in the ship or putting the ship itself at risk.

How do Statutory Mortgages work?

When a financial institution or a bank extends a loan say for a real estate, a mortgage interest is created and the loan is secured by an interest in the real estate. The Statutory law interprets mortgages differently hence there would be varying consequences if the debtor defaults to pay back the loan. A mortgage can be fixed rate meaning the rates of interest and monthly remittances are constant throughout the duration of the loan or they can be adjustable meaning the rates of interest and monthly payments can fluctuate depending on the economic changes. Any mortgage interest can be foreclosed if the property owner doesn’t meet the financial obligations of the loan.

What happens in a statutory mortgage foreclosure?

Incase a property owner fails to honor his end of the deal i.e. default to pay his/her mortgage payments, the lender is mandated by a statutory law to foreclose on the property. Depending on a particular state law, and the terms and conditions of the mortgage contract, the creditor can do a judicial foreclosure by going to court or do a statutory foreclosure whereby no court proceedings will be required. However, various state laws provide very strict regulations when it comes to appropriate notices and opportunities given to the property owner to pay before the property is foreclosed and sold.

Tags: bank, collateral, credit, law, Legal, loan, money, mortgage, risk

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