Mortgage

One possible solution was suggested by the Chairman of the First International Capital Group, who proposed the establishment of a single international register in which all legal charges would have to be registered. Ships would nevertheless be permitted to operate under any national identification but subject to port state controls to monitor standards required by the international registry body. A shipowner may wish to raise finance on the security of his ship; this can be effected through a mortgage. A mortgage is the creation of a charge or encumbrance in favour of a lender of money (the mortgagee) by the person wishing to borrow (the mortgagor). In the international shipping market purchases of ships are usually effected by means of large loans from banks and other financial institutions. The bank advances to one or more shipowning companies a large sum of money and it takes a mortgage on the ship for that security. If the ship is about to be time chartered then the bank will take an assignment of the time charter in order that the bank as assignee can benefit from the time charter and thus reduce the mortgage debt. The mortgagor or owner is free to continue operating and trading the vessel as a profit making possession provided he does not act in any way as to put at risk the ship and thus prejudice the mortgagee’s position.