Now, mortgage facility is mainly provided by the banks as defined by the Bangladesh Bank Orders 1972. Also, in recent years the non-banking financial institutions created under the Financial Institutions Act 1993. have started playing their part in this market. Mostly, mortgaged properties include immoveable properties such as land, house or flats, shops etc. The idea behind it is of course if the mortgagor is unable to pay back the money with interest, the mortgagee will have the option of taking over that property or auctioning it off to recoup their invested funds. This also depends on the contractual understanding between the parties.
The leading law in Bangladesh regarding mortgage is the Transfer of Property Act (1882). This act defines what mortgage is along with mortgagor and mortgagee and how this transaction would be governed. The different kinds of mortgages are also defined in the act under Sections 58 (a-f) namely simple mortgage, a mortgage by conditional sale, an usufructuary mortgage, an English mortgage or a mortgage by deposit of title-deeds. Fundamentally, the idea is the same however, these transactions take place in different orders in terms of transfer of interest of intended property.
The practical approach to mortgage is slightly different in Bangladesh. In countries like USA, the credit score is something which is considered when someone is willing to secure a mortgage. Bangladesh deals with it in a more archaic manner. All the documents are submitted to the banks, where the banks take clearance from the Bangladesh Bank on pending loans which is called a Credit Information Report or CIB which details out any loans the person has or any default the person has made in terms of loan payments. Also, another matter that is investigated is whether the property that is to be mortgaged has been mortgaged previously for other loans, which has still not been paid off.