hypothecation agreement

Hypothecation Agreement

An agreement between a borrower and a lender where by the borrower pledges 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 possession of the house, but the lender has the right to take possession if the borrower does not service the debt. Hypothecation agreements also occur in trading; a broker will allow an investor to borrow money in order 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 agreement

A written agreement between a customer opening a margin account and a brokerage firm that pledges stock in the account as collateral for margin loans. The brokerage firm is permitted to sell the stock in the event that equity in the account falls below a stipulated level.
References in periodicals archive ?
As security for repayment of its advances under the Agreement, on receipt of the cash payment, AVO Media will provide or cause to be provided to Armada, share certificates for the AVO Shares, in transferable form, together with a share pledge and hypothecation agreement executed by AVO Media.
If AVO Media breaches a material term of the Agreement, Armada will have the right to terminate its obligations under the Agreement, and on notice of such termination, all amounts advanced by Armada to AVO Media will become immediately due and payable, and if unpaid, Armada will be entitled to execute on its security over the AVO Shares on the terms of the share pledge and hypothecation agreement.