Security Interest .

December 30, 2020 By Swapnil Suryawanshi

security interest is a legal right granted by a debtor to a creditor over the debtor’s property (usually referred to as the collateral) which enables the creditor to have recourse to the property if the debtor defaults in making payment or otherwise performing the secured obligations. One of the most common examples of a security interest is a mortgage: a person borrows money from the bank to buy a house, and they grant a mortgage over the house so that if they default in repaying the loan, the bank can sell the house and apply the proceeds to the outstanding loan.

In the European Union, the Financial Collateral Arrangements Directive provides for appropriation as a remedy for securing financial collateral. In the United Kingdom, this has been introduced under the Financial Collateral Arrangements (No.2) Regulations 2003 where the assets subject to the mortgage are “financial collateral” and the mortgage instrument provides that the regulations apply. Appropriation is a means whereby the mortgagee can take title to the assets, but must account to the mortgagor for their fair market value (which must be specified in the mortgage instrument), but without the need to obtain any court order. In 2009, the Judicial Committee of the Privy Council ruled that as a matter of English law:

Understanding Security Interest – Michael Dugeri

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