Meaning
The process of converting a pledged asset into cash allows a creditor to satisfy an unpaid debt. A formal mortgage security realization begins when a debtor defaults and the creditor seeks to sell the collateral. Under the PRC Civil Code, this procedure can happen through a private sale agreement or a court-ordered auction.
Enforcement Procedure
Filing a lawsuit or applying for a special auction order is the first step when a borrower stops making payments. Mortgage security realization requires a court to verify the existence of the debt and the validity of the registration. If the debtor does not dispute the claim, the court may fast-track the sale of the property.
Electronic auction platforms now handle most of these sales to ensure transparency and market-based pricing.
Liquidation Priority
Funds from the sale go first to cover the costs of the auction and then to the primary mortgage holder. During mortgage security realization, any surplus remaining after paying all secured creditors returns to the original owner. Unsecured creditors only receive payment if the proceeds exceed the total amount of the registered mortgages.
Valuation Adjustment
Appraisers determine the starting price for the auction based on current market conditions.
