Order on Mortgage Credit Institutions' Lending Against Temporary Guarantee

Order on Mortgage Credit Institutions' Lending Against Temporary Guarantee and Other Matters

Pursuant to Section 8, Paragraph 7, and Section 39, Paragraph 3, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, cf. Consolidation Act No. 315 of 11 March 2022, the following is enacted:

Chapter 1
Scope of Application

Section 1. This Order sets out rules for the collateral that mortgage credit institutions may temporarily accept as security for loans granted on the basis of the issuance of mortgage bonds, covered mortgage bonds, and covered bonds in cases where the mortgage security assumed in Section 2, Paragraph 1, of the Act is not present.

Paragraph 2. The Order further sets out rules for the collateral that mortgage credit institutions receive pursuant to Section 2, Paragraph 3, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, and Article 129, Paragraph 1, points (a)-(c), and Paragraph 1a, point (a), (b), and (d), of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, with subsequent amendments, as security for loans granted on the basis of covered mortgage bonds when the mortgage deed has been reported for registration.

Chapter 2
Mortgage Bonds
Collateral

Section 2. For loans granted before the mortgage credit institution has received a final registered mortgage deed without prejudicial annotations, the collateral provided must guarantee the repayment of the loan and the costs associated therewith, including any arrears, if the assumed mortgage security is not obtained, cf. however Paragraph 5 and Section 6, Paragraph 2.

Paragraph 2. For loans granted before the borrower has obtained final title to the property, the collateral provided must guarantee the repayment of the loan and the costs associated therewith, including any arrears, if the borrower does not obtain final registered title to the property, cf. however Paragraph 4.

Paragraph 3. For loans granted before the document mentioned in Section 11, Paragraph 3, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters is produced, in the case of lending against an ideal share of a property, the collateral provided must guarantee the repayment of the loan and the costs associated therewith, including any arrears, if the document is not produced.

Paragraph 4. For loans granted on the basis of the expected value of the property (advance loans), the collateral provided must guarantee the repayment of the loan and the costs associated therewith, including any arrears, if the mortgage deed is not finally registered without prejudicial annotations within the deadline mentioned in Section 10, Paragraph 1, if the construction work has not been commenced and proven completed within the deadlines mentioned in Section 10, Paragraph 2, or if the property does not achieve the expected value after the completion of construction. If the mortgage credit institution divides a total mortgage loan for a project consisting of several properties built for sale into loans for each property, the collateral provided must be divided so that there is sufficient security for each loan.

Paragraph 5. Loans may be granted without temporary collateral before the production of a registered mortgage deed without prejudicial annotations, if the lending institution has received a registered mortgage deed with an annotation solely regarding the existing loans to be repaid with the new mortgage loan, and if it concerns the transmission of repayment amounts in accordance with binding repayment offers to institutions under the supervision of the Danish Financial Supervisory Authority, the State Administration, the State, municipalities, or Landsbyggefonden, and the transmission is conditional upon the relevant mortgage deeds being cancelled and delivered to the mortgage credit institution.

Section 3. As collateral that may temporarily replace security in real estate or missing registered title or collateral for the document mentioned in Section 2, Paragraph 3, only the following may be used:

1) Guarantee in the form of a joint and several liability guarantee provided by a credit institution that meets the requirements of Article 129, Paragraph 1, point (c), or a credit institution that meets the requirements for Class A according to Article 121, Paragraph 1, point (a), of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, with subsequent amendments;

2) Guarantee in the form of a joint and several liability guarantee provided by the State or a municipality;

3) Security in bonds admitted to trading on a regulated market in the EU; or

4) Security in cash holdings or deposits at credit institutions.

Section 4. The guarantee declaration or other collateral must be received by the mortgage credit institution no later than simultaneously with the disbursement of the loan. Documentation thereof must be kept in the loan file.

Guarantees

Section 5. In the case of providing guarantees, full guarantee must be used, cf. however Paragraph 2.

Paragraph 2. In the case of refinancing loans, full guarantee may in certain cases, cf. Section 7, be replaced by a margin guarantee, a repayment guarantee, or a combination thereof.

Paragraph 3. In the case of repayment of a mortgage loan, the institution may issue the registered mortgage deed in cancelled form before the repayment of the loan has taken place, against a repayment guarantee for this purpose.

Section 6. By "full guarantee" is meant a guarantee that covers the repayment of the new loan plus the costs associated therewith and any arrears.

Paragraph 2. By "margin guarantee" provided in refinancing to a mortgage loan with a lower or same interest rate is meant a guarantee that covers the repayment of the part of the bond residual debt on the new loan that corresponds to the part of the mortgage deed principal that exceeds the mortgage deed residual debt on the existing loans, as well as the costs of repayment and any arrears. By "margin guarantee" provided in refinancing to a mortgage loan with a higher interest rate is meant a guarantee that covers the difference between the net proceeds from the re-establishment of the original loan and the repayment amount for the new loan plus the costs of repayment of the new loan and any arrears.

Paragraph 3. By "repayment guarantee" is meant a guarantee that covers the repayment of the existing loan and the costs associated therewith and any arrears.

Section 7. In the case of refinancing to a mortgage loan with a lower or same interest rate, full guarantee may be replaced by a margin guarantee, when the lending institution has not received a registered mortgage deed or has received a registered mortgage deed with prejudicial annotations regarding the existing loan from a creditor as mentioned in Section 2, Paragraph 5, and regarding subsequent mortgagees.

Paragraph 2. In the case of refinancing to a mortgage loan with a lower, same, or higher interest rate, full guarantee may be replaced by a repayment guarantee, when the lending institution has received a registered mortgage deed solely with prejudicial annotations regarding the existing loan from creditors not mentioned in Section 2, Paragraph 5.

Paragraph 3. In the case of refinancing to a mortgage loan with a lower or same interest rate, full guarantee may be replaced by a margin guarantee combined with a repayment guarantee, when the lending institution has not received a registered mortgage deed or has received a registered mortgage deed with prejudicial annotations regarding the existing loan from creditors not mentioned in Section 2, Paragraph 5, and regarding subsequent mortgagees.

Paragraph 4. In the case of refinancing to a mortgage loan with a higher interest rate, full guarantee may be replaced by a margin guarantee, when the lending institution has not received a registered mortgage deed or has received a registered mortgage deed with prejudicial annotations solely regarding existing loans within the same institution and regarding subsequent mortgagees.

Security in Bonds

Section 8. In the case of security in bonds, the bonds must have the same convertibility, indexing, and highest same duration as the bonds underlying the loan. The market value of the bonds at the time of loan disbursement must at least amount to a sum corresponding to the nominal value of the bonds underlying the loan. If the mortgage credit institution has security in bonds of the same series as the bonds underlying the loan, the pledged bonds may, however, be valued at nominal value.

Security in Cash Holdings etc.

Section 9. In the case of security in a cash holding or deposit at a credit institution, the cash holding or deposit at the credit institution must at least amount to a sum corresponding to the nominal value of the bonds underlying the loan, plus a sum corresponding to 1 year's interest and principal repayment on the loan granted.

Paragraph 2. Security may be provided in cash holdings or deposits at credit institutions in a currency other than the loan's nominal currency, if it concerns the euro or a currency originating from a country where the central government qualifies for credit quality step 1. The prerequisite for this is that there is a continuous overcollateralization of the security by 10 percent, and that the institution can demand repayment of the loan if the overcollateralization is no longer present.

Paragraph 3. When the bonds underlying the loan are non-convertible with a maturity of over 3 years, security in a cash holding or deposit at a credit institution may only be used if a guarantee is also provided for the repayment of the loan and the costs associated therewith.

Repayment

Section 10. The mortgage credit institution must demand repayment of the loan if the borrower has not obtained registered title to the property, or if the institution has not received a final registered mortgage deed without prejudicial annotations no later than 1 year after the disbursement of the loan.

Paragraph 2. In the case of collateral for advance loans, the mortgage credit institution must, in addition to the cases mentioned in Section 31, Paragraph 5, of the Order on Valuation of Security and Loans in Real Estate as Security for the Issuance of Covered Bonds, demand repayment of the loan if construction has not commenced no later than 6 months from the disbursement of the loan, or if it is not proven within 2 years from the disbursement of the loan that the construction work has been completed legally.

Paragraph 3. The deadline for completion of construction mentioned in Paragraph 2 may exceptionally be extended by up to 6 months if there is a justified presumption that the construction can be completed within the extended deadline. Documentation thereof must be kept in the loan file.

Paragraph 4. The deadlines mentioned in Paragraphs 1-3 may exceptionally be extended if the deadline breach is due neither to the borrower nor to the mortgage credit institution. Documentation thereof must be kept in the loan file.

Paragraph 5. In the case of collateral in cash holdings or deposits at credit institutions in a currency other than the loan's nominal currency, the mortgage credit institution must demand repayment of the loan if the overcollateralization assumed in Section 9, Paragraph 2, is no longer present.

Release of Collateral

Section 11. The mortgage credit institution may release the collateral earliest when the borrower has obtained final registered title to the property, and when the institution has received a final registered mortgage deed without prejudicial annotations. In the case of lending against ideal shares, the collateral may be released earliest when the mortgage credit institution has also received the registered co-ownership agreement.

Section 12. The collateral for advance loans may only be released when the deadlines mentioned in Section 10, Paragraph 2, have been observed, and when the mortgage credit institution has established that the loan does not need to be reduced in accordance with Section 31, Paragraph 5, of the Order on Valuation of Security and Loans in Real Estate as Security for the Issuance of Covered Bonds.

Paragraph 2. The collateral may be released proportionally in step with the completion of the property, when the property is functional, and the remaining completion work amounts to at most 5 percent of the loan value. The same applies to the individual units in the case of loans granted to projects consisting of several properties. Paragraph 1 also applies in the case of proportional release of collateral.

Chapter 3
Covered Mortgage Bonds
Collateral

Section 13. For loans granted before the mortgage credit institution has received a final registered mortgage deed without prejudicial annotations, the collateral provided must guarantee the repayment of the loan and the costs associated therewith, including any arrears, if the assumed mortgage security is not obtained, cf. however Paragraph 5.

Paragraph 2. For loans granted before the borrower has obtained final title to the property, the collateral provided must guarantee the repayment of the loan and the costs associated therewith, including any arrears, if the borrower does not obtain final registered title to the property, cf. however Paragraph 4.

Paragraph 3. For loans granted before the document mentioned in Section 11, Paragraph 3, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters is produced, in the case of lending against an ideal share of a property, the collateral provided must guarantee the repayment of the loan and the costs associated therewith, including any arrears, if the document is not produced.

Paragraph 4. For loans granted on the basis of the expected value of the property (advance loans), the collateral provided must guarantee the repayment of the loan and the costs associated therewith, including any arrears, if the mortgage deed is not finally registered without prejudicial annotations within the deadline mentioned in Section 20, Paragraph 1, if the construction work has not been commenced and proven completed within the deadlines mentioned in Section 20, Paragraph 2, or if the property does not achieve the expected value after the completion of construction. If the mortgage credit institution divides a total mortgage loan for a project consisting of several properties built for sale into loans for each property, the collateral provided must be divided so that there is sufficient security for each loan.

Paragraph 5. For loans granted on the basis of mortgage deeds that have been reported for registration, cf. Section 2, Paragraph 3, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, the collateral provided must guarantee the repayment of the loan and the costs associated therewith, including any arrears, if the mortgage deed is not finally registered with the assumed priority position.

Section 14. As collateral that may temporarily replace security in real estate, collateral for the document mentioned in Section 13, Paragraph 3, or collateral for the final registration of the mortgage deed, cf. Section 13, Paragraph 5, only the assets specified in Article 129, Paragraph 1, points (a)-(c), Paragraph 1, last paragraph, and Paragraph 1a, points (a), (b), and (d), of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, with subsequent amendments, may be used.

Paragraph 2. Security for loan processing in the form of exposures to credit institutions that meet the requirements for Class A in Article 121, Paragraph 1, point (a), of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, with subsequent amendments, may not replace security as mentioned in Paragraph 1.

Section 15. In the case of providing guarantees, full guarantee must be used, cf. however Paragraph 2.

Paragraph 2. In the case of refinancing loans, full guarantee may be replaced by a margin guarantee if the conditions in Section 17 are met.

Section 16. By "full guarantee" is meant a guarantee that covers the repayment of the new loan plus the costs associated therewith and any arrears.

Paragraph 2. By "margin guarantee" provided in refinancing to a mortgage loan with a lower or same interest rate is meant a guarantee that covers the repayment of the part of the bond residual debt on the new loan that corresponds to the part of the mortgage deed principal that exceeds the mortgage deed residual debt on the existing loans, as well as the costs of repayment and any arrears. By "margin guarantee" provided in refinancing to a mortgage loan with a higher interest rate is meant a guarantee that covers the difference between the net proceeds from the re-establishment of the original loan and the repayment amount for the new loan plus the costs of repayment of the new loan and any arrears.

Section 17. In the case of refinancing to a mortgage loan with a lower, same, or higher interest rate, full guarantee may be replaced by a margin guarantee, when the lending institution has received a registered mortgage deed with prejudicial annotations solely regarding the existing loan within the same institution and regarding subsequent mortgagees. This applies only if the old loan is repaid no later than simultaneously with the lending institution's disbursement of the new loan, and if the old mortgage deed is cancelled only when there is security that the new mortgage deed can be registered without annotations.

Paragraph 2. The institution must organize its business so that the conditions for using margin guarantees are met at all times. If the conditions are no longer met, a full guarantee must be provided. The institution must also organize its business so that the guarantees, to the extent they are subject to the 15 percent or 10 percent limit, cf. Section 8, Paragraphs 6 and 8, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, comply with this limit at all times.

Section 18. The guarantee declaration or other collateral must be received by the mortgage credit institution no later than simultaneously with the disbursement of the loan. Documentation thereof must be kept in the loan file.

Section 19. The value of the collateral, cf. Section 14, provided temporarily for the loan, must at all times correspond at least to the value of the issued covered mortgage bonds.

Deadline and Repayment

Section 20. The mortgage credit institution must demand repayment of the loan if the borrower has not obtained registered title to the property, or if the institution has not received a final registered mortgage deed without prejudicial annotations no later than 1 year after the disbursement of the loan.

Paragraph 2. In the case of collateral for advance loans, the mortgage credit institution must, in addition to the cases mentioned in Section 31, Paragraph 5, of the Order on Valuation of Security and Loans in Real Estate as Security for the Issuance of Covered Bonds, demand repayment of the loan if construction has not commenced no later than 6 months from the disbursement of the loan, or if it is not proven within 2 years from the disbursement of the loan that the construction work has been completed legally.

Paragraph 3. The deadline for completion of construction mentioned in Paragraph 2 may exceptionally be extended by up to 6 months if there is a justified presumption that the construction can be completed within the extended deadline. Documentation thereof must be kept in the loan file.

Paragraph 4. The deadlines mentioned in Paragraphs 1-3 may exceptionally be extended if the deadline breach is due neither to the borrower nor to the mortgage credit institution. Documentation thereof must be kept in the loan file.

Paragraph 5. In the case mentioned in Section 13, Paragraph 5, the mortgage credit institution must, regardless of Paragraph 1, without undue delay produce a final registered mortgage deed.

Release of Collateral

Section 21. The mortgage credit institution may release the collateral earliest when the borrower has obtained final registered title to the property, and when the institution has received a final registered mortgage deed without prejudicial annotations. In the case of lending against ideal shares, the collateral may be released earliest when the mortgage credit institution has also received the registered co-ownership agreement.

Section 22. The collateral for advance loans may only be released when the deadlines mentioned in Section 20, Paragraph 2, have been observed, and when the mortgage credit institution has established that the loan does not need to be reduced in accordance with Section 31, Paragraph 5, of the Order on Valuation of Security and Loans in Real Estate as Security for the Issuance of Covered Bonds.

Paragraph 2. The collateral may be released proportionally in step with the completion of the property, when the property is functional, and the remaining completion work amounts to at most 5 percent of the loan value. The same applies to the individual units in the case of loans granted to projects consisting of several properties. Paragraph 1 also applies in the case of proportional release of collateral.

Chapter 4
Covered Bonds
Collateral

Section 23. For loans granted on the basis of mortgage deeds that have been reported for registration, the collateral provided must guarantee the repayment of the loan and the costs associated therewith, including any arrears, if the mortgage deed is not finally registered with the assumed priority position.

Section 24. As collateral, only the assets specified in Article 129, Paragraph 1, points (a)-(c), Paragraph 1, last paragraph, and Paragraph 1a, points (a), (b), and (d), of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, with subsequent amendments, may be used.

Paragraph 2. Security for loan processing in the form of exposures to credit institutions that meet the requirements for Class A in Article 121, Paragraph 1, point (a), of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, with subsequent amendments, may not replace security as mentioned in Paragraph 1.

Section 25. In the case of providing guarantees, full guarantee must be used, cf. however Paragraph 2.

Paragraph 2. In the case of refinancing loans, full guarantee may, if the conditions in Section 27 are met, be replaced by a margin guarantee.

Section 26. By "full guarantee" is meant a guarantee that covers the repayment of the new loan plus the costs associated therewith and any arrears.

Paragraph 2. By "margin guarantee" provided in refinancing to a mortgage loan with a lower or same interest rate is meant a guarantee that covers the repayment of the part of the bond residual debt on the new loan that corresponds to the part of the mortgage deed principal that exceeds the mortgage deed residual debt on the existing loans, as well as the costs of repayment and any arrears. By "margin guarantee" provided in refinancing to a mortgage loan with a higher interest rate is meant a guarantee that covers the difference between the net proceeds from the re-establishment of the original loan and the repayment amount for the new loan plus the costs of repayment of the new loan and any arrears.

Section 27. In the case of refinancing to a mortgage loan with a lower, same, or higher interest rate, full guarantee may be replaced by a margin guarantee, when the lending institution has received a registered mortgage deed with prejudicial annotations solely regarding the existing loan within the same institution and regarding subsequent mortgagees. This applies only if the old loan is repaid no later than simultaneously with the lending institution's disbursement of the new loan, and if the old mortgage deed is cancelled only when there is security that the new mortgage deed can be registered without annotations.

Paragraph 2. The institution must organize its business so that the conditions for using margin guarantees are met at all times. If the conditions are no longer met, a full guarantee must be provided. The institution must further organize its business so that the guarantees, to the extent they are subject to the 15 percent or 10 percent limit, cf. Section 8, Paragraphs 6 and 8, of the Act on Mortgage Loans and Mortgage Bonds and Other Matters, comply with this limit at all times.

Section 28. The guarantee declaration or other collateral must be received by the mortgage credit institution no later than simultaneously with the disbursement of the loan. Documentation thereof must be kept in the loan file.

Section 29. The value of the collateral, cf. Section 24, provided temporarily for the loan, must at all times correspond at least to the value of the issued covered bonds.

Deadline

Section 30. The mortgage credit institution must without undue delay produce a final registered mortgage deed.

Release of Collateral

Section 31. The mortgage credit institution may release the collateral earliest when the institution has received a final registered mortgage deed without prejudicial annotations.