What Is Overcollateralization?

Excess mortgage refers to the situation where the mortgagor sets up a mortgage for one or several claims with the same mortgage, the claims secured by these mortgages exceed the value of the mortgage.

Excess mortgage

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Excess mortgage refers to the situation where the mortgagor sets up a mortgage for one or several claims with the same mortgage, the claims secured by these mortgages exceed the value of the mortgage.

Excess mortgage is another commonly used form of credit enhancement. The over-collateralized credit enhancement structure makes use of additional spreads to pay the principal of the bond, which is the amount after all fees and bond coupon costs have been paid. This payment structure is also called a turbo structure because it accelerates the repayment of the principal of the bond and thus creates a buffer for excess mortgages for losses.

Relevant regulations on excess mortgages

Article 199 of the Property Law of the People's Republic of China stipulates that "when the same property is mortgaged to two or more creditors, the proceeds from the auction and sale of the mortgaged property shall be paid in accordance with the following provisions:

This article changes the provisions of the "Guarantee Law of the People's Republic of China" that do not allow duplicate mortgages and excessive mortgages. Whether to set up several mortgages on the same property shall be judged and determined by the parties according to the actual situation.