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Related to Hypothecation: hypothecation agreement


In banking, refers to the commitment of property to secure a loan.

In securities, refers to the commitment of securities to serve as collateral for margin loans at the broker-dealer firm.


To pledge an asset as collateral on a loan without the lender taking possession of the collateral. It especially applies to mortgages: the borrower hypothecates when he/she pledges the house as collateral for payment of the mortgage, or he/she may hypothecate the mortgage in order to borrow against the value of the house. In both situations the borrower retains the house, but the lender has the right to take possession if the borrower does not service the debt. Hypothecation also occurs in trading: a broker will allow an investor to borrow money to purchase securities with those securities as collateral. The investor owns the securities but the broker may take them if the debt is not serviced, or if the value of the securities falls below a certain level. See also: Foreclosure, Margin account.


Hypothecation means pledging an asset as collateral for a loan.

If you use a margin account to buy on margin or sell short, for example, you pledge securities (stocks, bonds, or other financial instruments) as collateral for the debt. If the brokerage firm issues a margin call that you don't meet, it can sell those securities to cover its losses.

Similarly, if you arrange a mortgage on your home, you give the lender the right to sell your home if you fail to meet your obligation to make mortgage payments.

Hypothecation may make it easier for you to secure a loan, but you do run the risk of losing the asset if for some reason you default on your obligation to repay according the terms of the agreement.

References in periodicals archive ?
the common law [courts] can only proceed against the parties" as, for example, where the action is for enforcement of hypothecation.
To make sure that seller shall deliver the commodity on agreed date, the bank can demand a security in the form of mortgage or hypothecation.
The parties to the Agreement also entered into a Shareholders Agreement that includes, among other issues, certain restrictions on the transfer, pledge and hypothecation of shares of Dori Energy held by the parties, the grant of rights of first refusal and tag along subject to certain conditions, determinations with respect to the composition of the board of directors of Dori Energy (which shall be initially comprised of four members, two to be elected by each of Dori Energy and Ellomay Energy), provisions with respect to the acquisition of additional shares in Dorad and a policy with respect to the distribution of profits.
TV License Fee is a hypothecation tax to fund public broadcasting thus allowing public broadcasters to transmit Programmes without or with only supplemental funding (from TV commercials), the Spokesperson said.
The first surely must be hypothecation and additionality - long words for making sure that all the money raised by road charging goes into improving the transport system and that it is truly additional spend - not allowing the Government to reduce its existing commitment.
the caveats of hypothecation, additionality and a formal consultation mechanism between business and the local authorities).
She added: "While at first glance, the calls for the revenues from APD to be ring-fenced for environmental purposes appear attractive, this hypothecation reduces the efficiency of the tax system.
But there is no hypothecation of revenue from any source, not even to alleviate the consequences of the evil that the tax is intended to curb, or to provide alternative means: all revenue goes into an undifferentiated pot, out of which all government expenditure is allocated.
Economists generally, and with good reason, dislike hypothecation and splitting of the government budget into a range of different and ring-fenced funds.
Gotshalk and his affiliates' on-going sale and/or hypothecation of millions of shares of restricted common stock of the Company without registration under, and in violation of, the Securities Act of 1933.
Yet this is precisely what is happening to betting income and I'm not sure the Levy Board would withstand a legal challenge if Arena or Northern, rightly in my view, were to take the matter to court if the Levy Board does not switch to full hypothecation in future.