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What Is Hypothecation?

Hypothecation in mortgages, hypothecation in investing, examples of hypothecation agreement, hypothecation in commercial real estate, what is rehypothecation, the bottom line.

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Hypothecation: Definition and How It Works, With Examples

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Ariel Courage is an experienced editor, researcher, and former fact-checker. She has performed editing and fact-checking work for several leading finance publications, including The Motley Fool and Passport to Wall Street.

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Hypothecation occurs when an asset is pledged as collateral to secure a loan. The owner of the asset does not give up title, possession, or ownership rights, such as income generated by the asset. However, the lender can seize the asset if the terms of the agreement are not met. Hypothecation is different from a mortgage, lien, or assignment.

Key Takeaways

• Hypothecation occurs when an asset is pledged as collateral to secure a loan. The owner of the asset does not give up title, possession, or ownership rights, such as income generated by the asset.
• Hypothecation occurs most commonly in mortgage lending, where the home serves as collateral but the bank does not have any claim on cash flows or income generated from it unless the borrower defaults.
• Margin lending in brokerage accounts is another common form of hypothecation found in securities trading and investing.

Hypothecation occurs most commonly in mortgage lending. A mortgage is a type of loan that's secured by an underlying property. The borrower technically owns the house, but because the house is pledged as collateral, the mortgage lender has the right to seize the house if the borrower cannot meet the repayment terms of the loan agreement —which occurred during the foreclosure crisis .

Auto loans are similarly secured by the underlying vehicle. Unsecured loans , on the other hand, do not work with hypothecation because there is no collateral to claim in the event of default. As hypothecation provides security to the lender because of the collateral pledged by the borrower, it is easier to secure a loan, and the lender may offer a lower interest rate than on an unsecured loan.

Though lenders cannot claim collateral for unsecured loans in default, they can pursue other debt collection actions, including a creditor lawsuit.

Margin lending in brokerage accounts is another common form of hypothecation. When an investor trades on margin, they're borrowing money from the brokerage to do so. This can allow them to leverage their existing account balances to make larger investments and potentially net larger profits on the sale of securities.

This type of hypothecation can be risky, however. When an investor chooses to buy on margin or sell short, they are agreeing that those securities can be sold if necessary if there is a margin call. The investor owns the securities in their account, but the broker can sell them if they issue a margin call that the investor cannot meet to cover the investor's losses.

This can be costly for the investor because it can amplify losses well beyond the initial investment made. For that reason, it's important to understand how margin trading works and what hypothecation could mean for you on a personal level.

Hypothecation in real estate is most often associated with mortgage loans. A rental property, for example, may undergo hypothecation as collateral against a mortgage issued by a bank. While the property remains collateral, the bank has no claim on rental income that comes in; however, if the landlord defaults on the loan, the bank may seize the property by initiating a foreclosure proceeding.

The use of hypothecation in real estate agreements can offer some reassurance to lenders who may want to mitigate risk when loaning money. If the borrower doesn't pay for any reason, the bank can potentially recoup some of its losses if it's able to foreclose and then resell the property later. In that sense, hypothecation aids in stabilizing the mortgage lending industry.

Hypothecation can also work in favor of borrowers. By entering into this type of agreement, borrowers may find it easier to obtain mortgage loans with a smaller down payment or lower credit score requirements. They may also be able to qualify for more favorable interest rates because the lender is assuming less risk.

Foreclosure can be exceptionally damaging to your credit scores, so if you're struggling with mortgage payments, it may be helpful to reach out to your lender to discuss possible solutions.

Hypothecation in commercial real estate is the same as it is in residential real estate lending. The borrower posts collateral in order to secure a loan. So again, an investor who's borrowing to purchase a rental property, such as an apartment building or duplex, would use the property itself as collateral for the loan.

Construction loans in commercial real estate work a little differently. Because the property that would otherwise serve as collateral has yet to be built, the borrower would need to provide other property as substitute collateral. The same rule, however, would apply with regard to default. If the borrower fails to pay the loan, the lender could claim ownership of the collateral.

When banks and brokers use hypothecated collateral as collateral to back their own transactions and trades with their client’s agreement, in order to secure a lower cost of borrowing or a rebate on fees, this is called rehypothecation . For example, the lender may use an apartment building offered as collateral for a commercial real estate loan as collateral for a new loan. This newly created debt is now a derivative.

Rehypothecation is regulated by the Securities and Exchange Commission. Banks and lenders must have permission from the owner of the property or assets to do this.

Rehypothecation by banks and financial institutions is a less common practice today due to the adverse impact this practice had during the financial crisis of 2008.

How Do Hypothecation and a Mortgage Differ?

Hypothecation is the pledging of an asset as collateral for a loan, without transferring the property's title to the lender. In a mortgage, the property purchased is used to secure the loan, but the lender holds the title.

Is Assignment the Same as Hypothecation?

Assignment is an arrangement involving contracts, in which one party assigns rights and responsibilities outlined in a contract to another party. Hypothecation allows a borrower to hold onto a property while using it as security for a loan.

What Is Hypothecation vs. a Lien?

With hypothecation, the borrower is allowed to hold the property used as collateral for the loan. The borrower agrees to repay the loan on the condition that if they don't, the lender can claim the property. A lien, however, requires a property owner to satisfy outstanding debts before an underlying property can be refinanced or sold.

What Is an Example of Hypothecation?

An example of hypothecation would be an investor who takes out a mortgage loan to purchase an investment property. The property serves as collateral for the loan. Meanwhile, the investor collects the rental income derived from it. But if the investor defaults, the lender can initiate a foreclosure proceeding to take ownership of the property.

Hypothecation often applies in real estate lending transactions, in which a property is used to secure a loan. But it can also be used in other types of loan situations as well as investing. If you're entering into a loan agreement that includes hypothecation, it's important to understand the potential consequences if you fail to uphold your financial obligation to the lender.

Federal Deposit Insurance Corporation. " Section 3-2 Loans. " Pg. 69.

Consumer Financial Protection Bureau. " What Is a Mortgage? "

Cornell Law School Legal Information Institute. " 17 CFR § 240.8c-1 - Hypothecation of customers' securities. "

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Real estate investors look for ways to earn a competitive return on investment while exposing themselves to minimal risk. One way to reduce investor or lender risk is through a hypothecation agreement. In this article, we’ll answer, “What is a hypothecation agreement?”

Then we show you an example hypothecation agreement form. We also discuss what you must know about hypothecation in real estate and elsewhere. Finally, we’ll discuss rehypothecation and answer a few frequently asked questions.

What Is a Hypothecation Agreement?

To answer “What is a hypothecation agreement?”, let’s first define hypothecation. It’s the pledging of collateral to secure a loan without relinquishing collateral ownership rights, possession, or title. A hypothecation agreement or hypothecation letter specifies the terms of the hypothecation arrangement.

Importantly, it states the legal recourse available to lenders in case of debtor default. Usually, recourse is through a lien on the collateral property. Indeed, if the debtor defaults on the loan, the lender can seize the collateral and sell it to make itself whole.

Here you can find a sample hypothecation agreement form from the SEC archives.

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What should i know about hypothecation.

There are many aspects of hypothecation, which we’ll explore now.

Hypothecation in Real Estate

Usually, hypothecation in real estate appears in a transaction like a mortgage on commercial or residential property. That is, a borrower pledges an asset as collateral to secure a real estate loan.

In doing so, the borrower does not give up ownership rights, title, or possession of the property. Nor does the borrower forgo any income that the property generates. On the contrary, the lender has no claim on the property’s cash flows.

Generally, a lender uses a hypothecation agreement when the owner of the collateral is not the obligor on the secured obligation. For instance, suppose Tom pledges his home as collateral for his fiancée Mary’s construction loan on her home.

Tom is the owner of the collateral (his home) but isn’t the obligor on the secured obligation (Mary’s home). Hence, the hypothecation agreement specifies that Tom’s home, but not Tom, secures Mary’s construction loan.

A hypothecation agreement may specify that a tenant cannot hypothecate its interest in a lease or premises without landlord consent. The example below shows this kind of hypothecation agreement.

Borrower Default

The situation changes if the borrower defaults on the loan. That’s because the borrower provides a lien to the lender as part of the loan agreement. When a borrower defaults, the lender can exercise the lien by foreclosing on the property.

Then it can sell the property to recoup any losses. If any sale proceeds remain, they go to the former owner of the property.

A second mortgage complicates the picture. If a lender forecloses and takes possession of the property, it becomes responsible for paying the second mortgage until it sells the property.

Typically, the first and second lien holders work out an agreement on how to handle this unfortunate occurrence.

Differences Between Mortgages and Hypothecation Agreements

Although similar, a mortgage deed and a hypothecation agreement are not the same:

• Title: In a mortgage, the title of the property passes from owner to lender as collateral for the loan. However, in a hypothecation agreement, title and possession remain with the borrower unless default occurs.
• Indications: A mortgage indicates that the borrower transfers its interest in the asset to the lender. Instead, a hypothecation agreement indicates that the borrower pledges the property as loan security.
• Tenure: Mortgage deeds are long-lived. Hypothecation agreements can be long-lived or short-lived, depending on the context.

Investment Hypothecation

Investment hypothecation occurs when a trader or investor pledges collateral for a margin loan to purchase or short securities. Specifically, broker/dealers (BDs) offer margin accounts that allow traders to borrow up to 50% of the securities’ value. The margin account agreement contains a hypothecation agreement for the collateral.

Typically, the hypothecation agreement specifies important items:

• Form of Collateral: Cash collateral is possible, however, in most cases, the trader’s position serves as collateral for the loan. That is, the trader hypothecates the securities in the position to guarantee the margin loan.
• Credit Payments: Naturally, margin loans charge interest that the trader has to periodically pay to the BD. Failure to meet these credit payments can cause the BD to sell collateral and call for its replacement. Alternatively, the BD can sell some of the trader’s position to collect its margin interest.
• Margin Call: In a margin call, the trader’s position loses value so that the margin loan covers more than 50% of the position. Accordingly, the BD can demand more collateral in the form of additional prepaid securities or cash to restore the balance. If the trader fails to meet the call in a short period, the BD can liquidate the position.
• Rehypothecation: The hypothecation agreement states whether or not to allow rehypothecation (see below) and if so, how much.

Rehypothecation

The definition of rehypothecation is when a BD reuses a trader’s pledged collateral as collateral for the BD’s own trades and borrowings. This provides the creditor with leverage since the creditor doesn’t have to tie up its own assets. In the U.S., laws limit the amount of rehypothecation to no more than 140% of the original debit balance.

Interestingly, the creditor doesn’t carry the non-cash collateral available from rehypothecation on its balance sheet. A trader can indicate that it doesn’t want the BD to rehypothecate the trader’s collateral. The BD must then decide whether to grant a margin account to the trader.

In some cases, the trader receives compensation for allowing the BD to rehypothecate the trader’s collateral. That compensation can take the form of lower interest rate on margin loans or a rebate of fees.

Video:  What Is Note Hypothecation And How It Can Work For You | Part 4

Risks of Investment Hypothecation Agreements

When a Broker/Dealer grants a margin account to a trader, it must be able to handle three important risks. Normally, standard reports reveal these risky practices and prevent them from occurring.

• Sometimes, traders use prepaid securities, such as Treasury bills, to collateralize a margin account. The risk is that the trader may sell this collateral even as the position remains in effect.
• Traders may “double-dip” on financing margin transactions by hypothecating the same collateral multiple times.
• If the BD must execute a margin call, it might be costly for the BD to realize the collateral’s full value.

Repos and Reverse Repos

Repurchase agreements , or repos, allow a party to sell securities to a second party and buy it back later. The first party pays less than the sale proceeds to buy back the security. The buyback discount is the seller’s source of profit on the repo agreement. Thus, repo agreements are actually loans in which the sold securities act as rehypothecated collateral.

Big banks and hedge funds use rehypothecated securities from their customers to undertake repo transactions. Most repos have an overnight term in which the buyback occurs the day after the sale. However, participants also use longer-term and open-ended repos.

A reverse repo is a repo transaction from the point of view of the borrower/buyer rather than the lender/seller.

Hypothecation Agreement Forms

The following language is for a real estate hypothecation agreement form and comes from Law Insider :

Hypothecation. Tenant shall not hypothecate, mortgage, or encumber Tenant’s interest in this Lease or in the Premises or otherwise use this Lease as a security device in any manner without the consent of Landlord, which consent Landlord may withhold in its sole and absolute discretion. Consent by Landlord to any such hypothecation or creation of a lien or mortgage shall not constitute consent to an assignment or other transfer of this Lease following foreclosure of any permitted lien or mortgage.

There are other types of hypothecation agreements, such as those for investments and repos. We leave it to the curious reader to ferret those out via appropriate Internet searches and their legal counsel.

If you’re interested, you can read this real-world example of a hypothecation agreement .

Frequently Asked Questions

What is hypothecation in commercial real estate.

Hypothecation in commercial real estate is the posting of collateral to secure a loan. Typically, a rental building operates as its own collateral. However, construction loans require other collateral since the borrower hasn’t built the underlying property yet.

Why is a mortgage like a hypothecation contract?

They aren’t really the same. In a mortgage, the borrower hold’s the property’s title until the borrower repays the loan. In a hypothecation agreement, the borrower keeps title to the property.

What’s the difference between hypothecation and pledges?

In a pledge, you intend to transfer the asset to another owner. In hypothecation, your intent is to collateralize the asset to guarantee a loan. Importantly, you plan to maintain title to the hypothecated asset after you repay the loan.

What is a hypothecation letter?

Hypothecation letter is another name for a hypothecation agreement. Sometimes, we call a hypothecation agreement a hypothecation deed. These are all synonyms for the same document that specifies the terms of a hypothecation arrangement.

When is a hypothecation agreement used?

Broker/dealers routinely use hypothecation agreements when setting up margin accounts. In real estate, a landlord uses a hypothecation agreement to prevent subleasing. Also, lenders use hypothecation in real estate when a different property secures a mortgage or building loan.

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Questionnaire

Hypothecation

• Hypothecation Meaning

Hypothecation means offering an asset as collateral security to the lender. The ownership lies with a lender, and the borrower enjoys the possession. In the case of default by the borrower, the lender can exercise his ownership rights to seize the asset.

It is usually done in movable assets to create the charge against collateral for the loan given. Under hypothecation, the possession of the security remains with the borrower itself. Hence, if the borrower defaults on payments, the lender would have to first take possession of the security (asset under hypothecation). And then sell the asset to recover dues. Sometimes a bank or financial institution puts the already pledged asset as collateral for borrowing from another bank is called rehypothecation .

Example of Hypothecation

Pledge v/s hypothecation, mortgage v/s hypothecation, alternate asset for hypothecation, documentation.

In the case of vehicle loans, the vehicle remains with the borrower, but the same is hypothecated to the bank/ financer. If the borrower defaults, the bank takes possession of the vehicle after giving notice and then sells the same. The loan account is credited with the sales proceeds of the asset to recover the dues towards the principal amount and interest amount. Any balance left after that shall be given back to the borrower. Apart from vehicles, It can be done for stocks and bills receivables.

Though pledge seems similar to hypothecation as both are types of charges created on movable assets. There lie some differences between pledge, hypothecation, and mortgage . Let us look at the differences to understand these terms better.

Also Read: Advantages & Disadvantages of Hypothecation

The possession of the asset remains with the lender in case of a pledge, while it remains with the borrower in case of hypothecation. Common examples include the gold loan in case of pledge and vehicle loan in case of hypothecation. Read a detailed article on Pledge vs Hypothecation vs Lien vs Mortgage vs Assignment .

The possession remains with the borrower in both these cases; however, mortgages are usually for non-movable assets while hypothecation is for movable assets. Common examples include the home loan in case of mortgage and vehicle loan in case of hypothecation. For more about differences:   Mortgage V/s Hypothecation .

It can also be done for investments/stocks. This is a common practice in stock trading, better known as margin lending. In such a case, the buyer, buying shares on margin, places his existing shares as collateral with the brokerage firm. The brokerage firm can sell these shares if the buyer faces a margin call. A margin call is received when the value of securities bought decreases more than a certain limit or the account value reduces beyond a certain limit.

This activity usually requires an agreement to be made and is known as the hypothecation deed.

The hypothecation deed is an agreement that contains standard features and rules; which usually cover the following points: Definitions, Insurance , Inspection rules , rights and remedies of each party , security details marked for hypothecation, sale realizations, insurance proceeds, the liability of each party, jurisdiction prevailing, marking of the assets, etc. This deed protects the rights of both parties to the contract.

Also Read: Pledge vs Hypothecation vs Lien vs Mortgage vs Assignment

To learn more, you can visit our Advantages & Disadvantages of Hypothecation .

Hypothecation is a way by which borrowers can raise funds by providing security (movable) as collateral. And still get to use it since the possession remains with the borrower. The bank/financer gives this source of a loan at a rate lower than the unsecured loan as it provides a sense of security to the lender.

The lender runs a risk as there may be instances where the borrower sells off the hypothecated asset without the lender’s knowledge. However, periodic checks and proper clauses in this deed can provide protection to a large extent to both the borrower and the lender.

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3 thoughts on “Hypothecation”

What is the next course of action in case of breach of contract, say the borrower sells the hypothecated collateral to use the funds for other purposes? What are the powers with the lender in such scenarios when the borrower defaults and the property is no longer existing with borrower?

Hi Mousumi, Thanks for writing in. At the time of lending money or buying an asset, if the bank has taken additional security apart from the asset that is hypothecated, the bank can seize that asset. Else, the banker can take the legal route. Happy Reading. Keep Commenting.

I am the dealer of three wheeler vehicle. I want to sell the vehicle on part payment and the rest dues money with interest to collected in EMI. can i give my firm name in hypo.

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Hypothecation Agreement

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ContractsCounsel has assisted 345 clients with hypothecation agreements and maintains a network of 155 financial lawyers available daily. These lawyers collectively have 31 reviews to help you choose the best lawyer for your needs.

A hypothecation agreement is a binding financial contract providing an asset as collateral to secure a loan without transferring ownership to the lender. The borrower keeps the asset for possession and use, which the lender will sell if the borrower fails to pay. This agreement is prominent in margin trading and mortgages and allows borrowers to use funds on debt while the lenders face reduced risk. It's widespread across different financial transactions, allowing for more flexibility for borrowers and security for lenders. Let’s learn more about the hypothecation agreement.

How to Write a Hypothecation Agreement

Here are the elements with the corresponding steps to draft a hypothecation agreement:

• Title and Parties: Start by composing the agreement title, for example, " Hypothecation Agreement ," and mention the relevant date and the names and addresses of the involved parties(the lender and the borrower).
• Recitals: Add a section that provides context for the agreement by telling about the purpose of the loan and the item being offered as a security.
• Definitions: Describe the core terms used in the document and thus used by all concerned parties to clear up the matter. Examples of words that could be in the glossary could be "collateral," "loan amount," "interest rate," " maturity date ," and "default."
• Grant of Security Interest : This should be clearly stated that the lender is given a security interest in the collateral which is made as a security for the loan. Explain the collateral in detail with the type, name, make, or mark as it may appear in documents, but exclude any information that may be used to identify it.
• Representations and Warranties : Include a part in which the borrower promises the lender that he/she has true ownership, is free of further obligations, and that he /she has the authority to pledge the collateral.
• Covenants: Summarize any liabilities or responsibilities of the borrower during the contract period regarding the guarantee, for example, to maintain insurance on the collateral or to inform the lender about any changes in ownership.
• Default and Remedies: Be concrete about what is termed default in the contract, for instance, not settling the payment in full or breaching other terms in the agreement. In case of the borrower's default, summarize the tools available to the lender, including the realization and disposal of the collateral for debt repayment.
• Indemnification: Insert a clause under which the borrower may be obliged to indemnify the lender against any loss, damages, or expenses incurred by the lender in case the borrower does not comply with the agreement.
• Governing Law and Jurisdiction: State the procedural law to which the agreement will be subject and the court where any dispute will be settled.
• Signatures: Finally, have the agreement signed and dated by both parties, along with any witnesses or notaries required by applicable law.

You can also view this YouTube video to gain additional knowledge about hypothecation: https://www.youtube.com/watch?v=F8rDYp6sYoE .

Difference Between Mortgage, Pledge, and Hypothecation Agreements

What Every Investor Should Know About Rehypothecation

Rehypothecation is a banking and credit term where a bank or credit institution uses assets that a borrower has given as security to them to secure the bank’s or credit institution’s own borrowing or trading activities. In essence, this is the practice of the financial organization borrowing money from its clients, which could be used for other purposes. Such activity helps financial institutions obtain additional leverage, earn money, and secure their deals by using the property of the clients as collateral. The rehypothecation process may also introduce risks as one collateral is pledged several times which may result in disputes about the ownership and increase the systemic vulnerability in the financial system.

Let's say that you deposit $100,000 in securities as collateral for margin trading. The brokerage rehypothecates them to get a loan for trading purposes. This boosts the brokerage's leverage, but it also raises the chance of default. Rehypothecation can be controlled to safeguard clients and keep finances stable.

Key Terms for Hypothecation Agreements

• Notices: Procedures for giving official notices or correspondence among the parties involved.
• Acceleration: Conditions that determine the lender's right to demand repayment of the loan at any time.
• Substitution of Collateral: The provisions that allow the borrower to pledge another security of the same or even higher value.
• Insurance: Requirement for keeping insurance coverage on the property, e.g., the lender as the loss payee.
• Indemnification: The agreement by the borrower to reimburse the lender if any losses or damages occur due to the borrower's actions or inactions.
• Default Interest Rate: The interest rate, which applies upon default, that may be above the standard interest rate.
• Force Majeure : Provisions for unexpected events or conditions that cannot be foreseen by either party and might interfere with the agreement fulfillment.

Final Thoughts on Hypothecation Agreements

A hypothetical agreement is one of the most important tools of secured lending, which allows borrowers to use assets as collateral whilst owning the property. This provides a route through which financing can be accessed on more favorable terms, such as lower interest rates. For lenders, it reduced the risk of assets defaulting by securing recourse assets. Also, these contracts provide for legality by defining rights and benefits as well as providing for flexible terms of loans. Finally, hypothecation agreements provide the channel for capital flow, thereby triggering the growth of economies by taking into consideration both borrower and lender interests.

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All you need to know about hypothecation

This article has been written by Pooja Wagh, pursuing a Diploma Course in Advanced Contract Drafting, Negotiation, and Dispute resolution from LawSikho . This article has been edited by Aatima Bhatia (Associate, Lawsikho), and Arundhati Das (Intern at Lawsikho). 

This article has been published by Shoronya Banerjee .

Table of Contents

Introduction

Goods financed by banks in India are often hypothecated to the bank as security/ collateral till the loan covering it is repaid by the borrower. Hypothecation is used when a debtor wants to obtain a loan and use a certain property or asset as a security or collateral. It can help reduce mortgage fees and interest and help those who may not look their best on paper to obtain a loan. This article deals with everything you need to know about hypothecation. If you are someone who wonders if hypothecation is the best route for you to secure financing, this article is for you!

What is hypothecation?

Hypothecation generally means a fixed or floating charge on certain types of immovable properties and tangible movable properties, whether existing or future, which is created by a security provider in favour of a lender without actual delivery of possession of the underlying asset to the lender. Hypothecation comes into the picture when an asset is pledged as collateral to secure a loan. Income generated by the asset such as title, possession or ownership rights, etc is not given up by the owner of the asset. However, if the terms of the agreement are not met, the lender can seize the asset.

For example, a rental property may undergo hypothecation as collateral against a mortgage issued by a bank. The bank has no claim on rental income that comes in while the property remains collateral. However, the bank may seize the property if the landlord defaults on the loan.

You can ease your lender’s concerns and receive mortgage approval by offering other assets as collateral. You do entertain the risk of losing your piece of collateral when you are entering into a hypothecation agreement, whether it is for commercial or residential investments. Therefore, you need to be prepared to lose the asset if you are unable to repay your lender.

When are hypothecation agreements used?

The hypothecation agreement between the borrower and the lender isn’t a verbal agreement. Rather it is done through a document called hypothecation deed. A hypothecation agreement or hypothecation letter specifies the terms of the hypothecation and conclusively determines the rights and liabilities of parties to the agreement. The most common use of hypothecation is in the financing of cars and motorcycles in India as well, as while purchasing commercial real estate property. Often, hypothecation is used when a debt is to be secured and the creditor asks for collateral or security of sorts to help mitigate his risk. Hypothecation is also widely used in consumer and business finance, in the financial industry as well as in the investment market. 

Hypothecation in investing

Hypothecation is most commonly used for real estate investments. Lenders often require additional collateral with commercial real estate investments. These types of investments and properties can pose a higher risk because the loan payment relies on the success of a commercial business. The lender may request collateral of higher monetary value depending on the perceived value of the investment location or type of property. There are several reasons why you will want to make a hypothecation agreement instead of other agreements. The reasons include the following:

1. Reduction of down payment

The amount of down payment that a borrower owes can be reduced by hypothecating an asset because the borrower is pledging a high-value asset to guarantee his loan, rather than in a traditional mortgage, which uses loan-to-value ratios and credit score to vet a borrower. Hence, borrowers choosing to hypothecate an asset to secure a loan may be eligible for reduced down payments and this can make it easy to secure financing.

2. Retain the title

Borrowers can retain the title, i.e. total ownership rights of their hypothecated assets. If you are sure that you will be able to pay off your loan, you don’t need to worry about the possibility of a third party holding the title to your asset.

3. Greater security for lenders

Hypothecation provides security for lenders on high-risk loans, especially for commercial mortgages where the loan payment relies on the success of a commercial business.

Difference between hypothecation, pledges, and mortgage

Hypothecation is creating a charge against the security of movable assets. The possession of the security remains with the borrower. In case of default by the borrower, the lender (i.e. to whom the goods/security has been hypothecated) will have to first take possession of the security and then sell the same. For example, cars/vehicles remain with the borrower but the same is hypothecated to the bank or financer. In case, the borrower defaults, the bank takes repossession of the vehicle after following due process of law. Generally, hypothecation also covers loans against stock and debtors. Sometimes, borrowers may, without authorisation, sell goods hypothecated to a bank in which case a bank may convert the goods to a pledge.

Pledge is used when the lender (pledgee) takes actual possession of assets (i.e. certificate, goods). Pledge is movable security and the possession of the security remains with the lender (i.e. the pledgee). In this case, the pledgee retains the possession of the goods until the pledgor (i.e. the borrower) repays the entire debt amount. In case there is default by the borrower, the pledgee has a right to sell the goods in his possession and recover outstanding dues. Some examples of pledging are gold/jewellery loans, advance against goods/ stock, advances against National Saving Certificates, etc.

A mortgage is immovable security, which may include land, buildings, factory premises, godown/ warehouse, or anything that is attached to the earth or something permanently fastened to anything that is attached to the earth. The possession of the security in the mortgage usually remains with the borrower. Hypothecation is movable security (e.g. stocks, accounts receivables, small machines, etc) and the possession of the security remains with the borrower. The tenure of hypothecation is generally shorter than the tenure of home mortgage loans, like in the case of the tenure of a vehicle, and it is renewable after a year or half-year. In a mortgage, loans are of longer tenure as compared to loans against hypothecation and the tenure varies from 10 to 20 years.

Indian laws covering hypothecation

Previously, hypothecation was not defined for a long time under Indian law and it was more on the basis of practice and usage. However, now under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act (SARFAESI) , hypothecation is defined as “a charge in or upon any movable property, existing or future, created by a borrower in favour of a secured creditor without delivery of possession of the movable property to such creditor, as a security for financial assistance, and includes floating charge and crystallization into fixed charge on movable property.”

Formalities for creation of hypothecation

In hypothecation, a “deed of hypothecation” is executed by the security provider in favour of the lender. The charge created under the deed of hypothecation is governed by the terms of the document, which provides in detail the powers and provisions safeguarding the interest of the lender. Hypothecation over a motor vehicle must be noted on the registration certificate of the motor vehicle.

The other formalities for hypothecation include payment of appropriate Stamp Duties as per rates in each state and in case of companies, filing with ROC will be required. After 2016 and the formation of CERSAI (under SARFAESI) Central Registry of Securitisation and Asset Construction and Security Interest of India, a government body set up for such purpose, it is mandatory to file creation, modification, or satisfaction of security interest in hypothecation of plant and machinery, stocks, book debts, and receivables.

How is hypothecation removed?

You can remove the hypothecation by paying off the entire loan amount. The bank will issue a No Objection Certificate (NOC) to you. This document will state that no dues are pending. You can submit the copies to the Regional Transport Authority and the insurance company so that the registration and insurance can be converted in your name instead of the bank’s name.

Hypothecation is a way in which the borrower can raise funds by providing movable security as collateral. The borrower still gets to use it since the possession usually remains with the borrower himself. This loan (hypothecation) is provided by either the bank or the financer at a rate lower than the unsecured loan as it provides a sense of security to the lender. However, the lender takes a risk as there may be instances where the borrower sells off the hypothecated asset without the knowledge of the lender. To provide protection to a large extent to both, i.e., the borrower and the lender, the lender shall conduct periodic checks and the parties shall add proper clauses in the hypothecation agreement.

• https://www.investopedia.com/terms/h/hypothecation.asp
• https://www.upnest.com/1/post/hypothecation-agreement/
• https://www.masterclass.com/articles/hypothecation-real-estate-explained#3-advantages-of-hypothecation-agreements

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What is hypothecation?

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Key takeaways

• Hypothecation means offering an asset as collateral, or as backing for a loan.If you default on the loan, the lender can take the asset to recoup their money.
• Common uses for hypothecation include real estate mortgages, auto loans and investment margin accounts.
• It's crucial to prioritize payments on any hypothecated loans and, if you can't make payments, to contact the lender to avoid losing your asset.

The home buying and financing world includes lots of terms you’ve probably never heard before. As you explore loan options and consider signing contracts, you might come across “hypothecation,” an important concept when obtaining a secured loan.

So, what is hypothecation? Let’s explore its meaning and how hypothecation impacts you.

Hypothecation refers to the process of using an asset as collateral for a loan. With hypothecation, you agree to let that asset be used to secure, or back the loan. But it only provides backing: You don’t sign any ownership rights over to the lender. You maintain full possession and use of the asset. The lender has a right to the asset only if you default on the debt or fail to live up to the loan terms in some other major way.

In short, hypothecation is the way the lender protects itself if the borrower doesn’t repay the loan or violates the loan agreement.

Often, the asset in question is the thing you’re borrowing the money for. With an auto loan , for example, you agree that your car is used as collateral for the money to buy the car. You get possession of the car, but if you can’t repay the loan, your lender can repossess it.

Hypothecation isn’t part of every type of financing: It only applies to secured loans . For instance, you won’t see it with most personal loans since they’re usually unsecured. When you get a new credit card , there’s no hypothecation either, since these lines of credit aren’t secured.

What are the benefits of hypothecation?

Although hypothecation requires you to pledge an asset in return for a loan, it does have its uses. Some of the advantages of hypothecation include:

• Ease of obtaining financing: Hypothecation reduces a lender’s risk, making the institution more likely to offer financing. Loans for large amounts, like six-figure mortgages, probably wouldn’t be feasible without hypothecation.
• Cheaper loans: Interest rates on hypothecated loans tend to be lower than those on unsecured loans. Since the lender has collateral for the loan — and a chance to recoup its money if you default — it can make the cost of borrowing cheaper.
• Ownership/possession of the asset: The borrower keeps ownership of the asset; no title change or transfer is required.

What are the disadvantages of hypothecation?

Some of the downsides of hypothecation include:

• Asset at risk: Yes, you still own and control the asset — but hypothecation gives the lender a claim to it. If you are not able to pay your loan back or if you do not meet its terms and conditions, the lender has the right to seize your asset and sell it.
• Finances at risk: Under hypothecation, you may face legal action if the lender cannot fully recover its funds even after taking your asset.
• More interest paid: Hypothecated loans often have longer terms. So while the interest rate may be lower, you’ll be paying more in interest overall. And of course, your total cost for the asset will be more than if you had paid cash for it.

Hypothecation in mortgages

Hypothecation is a common feature of home loans. When you buy your home using a mortgage — instead of paying cash — your home serves as collateral for the debt. Even though you’re buying the home, your lender is the one loaning you the cash for the transaction. And they want recourse if you don’t repay them. As a result, the loan comes with hypothecation, meaning if you don’t hold up your end of the contract, your lender could take your home.

The hypothecation definition we’ve laid out usually applies to other sorts of home-related financing too. Hypothecation plays a role in second mortgages like home equity lines of credit (HELOCs) or home equity loans . You’re borrowing money based on the equity you have in the property and agreeing to use the home as collateral to access the funds.

Hypothecation in commercial real estate

It’s also quite common to see hypothecation in commercial real estate. When you’re buying a commercial property, your lender might ask you to put your home or this property up as collateral.

Similarly, hypothecation can be involved in real estate loans for investment properties . In some cases, lenders might not give you a loan unless you put up several pieces of collateral, such as a rental property or a car, in addition to your primary residence.

Hypothecation in investing

The hypothecation concept can also apply to investing.

Here, it’s a little different than it is in mortgages and other types of lending. If you’re buying on margin or selling short, your broker gets hypothecations when you acknowledge that your investments can be sold if there’s a margin call . A margin call happens when you borrow money from a broker to invest in securities, and the value of those securities falls below a certain required amount. When your margin account dwindles below the minimum, you agree to sell those securities — or let the broker sell them — in order to make up the difference.

In other words, when you borrow from a broker for a short sale or buying on margin, they hypothecate (secure) the funds they lend you with the agreement to sell if the account drops below their limit. The securities are acting as collateral for the loaned money.

Hypothecation in other loans

While mortgages and home equity loans are the most common places you’ll see hypothecation, it can apply with other types of loans as well, like:

• Auto loans: You agree to use your car, motorcycle, RV or other vehicle as collateral to secure your loan.
• Business loans: If you take out a loan to pay for equipment for your company, you could agree to use that equipment (or perhaps other corporate assets) as collateral for your loan.

Why does hypothecation matter?

Hypothecation matters because it’s your formal agreement that if you fail to meet the conditions of the loan — such as making payments on your car or home — your property could get taken to cover those missed payments.

Knowing the definition of hypothecation particularly matters when you become a homeowner. Mortgages are a hypothecation loan: Several consecutive missed mortgage payments can give rights to the lender to foreclose on the home, leaving you with no place to live.

It’s essential to recognize the instances in which your property can get seized. If you’re ever in a financial bind and can’t make payments on all your bills, consider prioritizing them by which ones are hypothecated. For instance, you might want to make home and car payments before credit card payments so you don’t lose those assets. While failing to make credit card payments can ruin your credit score and possible lending opportunities in the future, there’s no hypothecation agreement to put anything up as collateral in these contracts.

Hypothecation FAQ

What is rehypothecation, is hypothecation the same as assignment, what is hypothecation vs. lien, hypothecation vs. pledged assets: what’s the difference, bottom line on hypothecation.

Any time you borrow money to make a purchase — whether a home or an investment — there are risks involved. Using assets and property to secure a loan through hypothecation has big consequences if you fail to make payments.

If you ever find yourself in a situation where you can’t make payments on a loan with collateral, talk to your lender about alternative repayment options or modifications as soon as possible. Negotiating early alleviates the need to borrow extra money, like through a payday loan, which would only increase the financial strain.

Related Articles

What is collateral for a mortgage, and how does it work?

What is a home equity loan?

What is a HELOC?

Assumable mortgage: What is it and how does it work?

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Hypothecation: meaning, risks, and examples.

Hypothecation is the practice of pledging collateral in order to secure debt. This comes up most often in mortgage lending, but it can apply to any kind of debt. It shows up in investing, but hypothecation and riskier rehypothecation can have consequences for homeowners.

Learn the basics of hypothecation and how it works .

Hypothecation: The Basics 

As mentioned earlier, hypothecation is the practice of using collateral to secure debt. But did you know it can apply to anything from your home’s mortgage to your car loan ?

For example, when you take out a mortgage on a home, you technically own the home.  But the bank actually uses it as collateral in case you deault on your payments .  Or when you take out a loan when buying a car, that loan is based on the collateral provided. In short, your car. That means that though you technically own your car or home, the bank or loan holder can seize it should you fall behind on your payments. 

Anytime you pledge collateral as a means to secure a loan, it involves hypothecation. This is unlike an unsecured loan, which lenders issue based primarily on your creditworthiness, among other factors

Hypothecation in Investing 

For different reasons, hypothecation can also pertain to your investment portfolio. Hypothecation investing occurs when an investor takes part in margin lending in brokerage accounts . That’s because when an investor buys stocks or other securities on margin, they are actually borrowing funds from a broker to do so .  They automatically agree to sell these securities in the event of a margin call. 

Remember, a margin call is when an investor borrows money from a broker to make an investment (i.e. margin lending) and the investor’s ownership falls below a certain threshold, also called a maintenance margin. 

But where does collateral come in? The other assets within the brokerage account that the investor fully owns serve as collateral and can be sold to cover losses. 

Keep in mind that sometimes lenders can use an investor’s collateral as collateral for one of their own obligations, also called rehypothecation. This can sometimes create market risk, depending on how many times the assets have been rehypothecated.

Why Hypothecation Matters 

First, we’ll talk about why hypothecation matters for those using it to secure debt. Putting it simply, hypothecation matters to a borrower because it involves collateral. In other words, if you borrow funds with collateral and default on that debt, whatever you used as collateral is at risk. 

For example, if you fail to pay your mortgage, even though you technically own your home, your bank or lender can still seize it. This is called foreclosure. The same goes for your car loan. If you engaged in hypothecation, i.e. using collateral to obtain better financing for your vehicle, you can still lose your car is you fail to make payments.  So hypothecation matters to borrowers because it indicates which of their assets a lender can repossess in the event of default or financial distress. 

It also matters in the investing world. Remember, hypothecation in investing is when an investor purchases securities on margin. In that agreement, they can sell these securities in the event of a margin call. Also, they can cover losses by selling other assets in the brokerage account. That means that with hypothecation in investing comes a certain amount of risk.

Rehypothecation

This is when lenders meet obligations by using your collateral as collateral. Other lenders use that collateral to meet their owns obligations, and so on. Meanwhile, lenders don’t have to notify you if they are engaging in rehypothecation with your collateral. 

That means that risk compounds across the market when rehypothecation occurs. A lender uses collateral from one borrower, then another lender uses that rehypotecated collateral, and so forth. However, if one borrower defaults, it can start a chain reaction of security sales. This can negatively impact the market. 

The Bottom Line

Hypothecation is the practice of securing debt by pledging collateral. It occurs most often in mortgage lending. For example, when you secure a mortgage, you technically own your home. But it is also collateral for that loan. That means lenders can reposses it if you default on payments.

Rehypothecation is when a lender uses an investor’s collateral as collateral for one of their own obligations. It can negatively affect the market. Hypothecation tells borrowers which of their assets a lender can repossess in the event of default.

Hypothecation Tips 

If you aren’t sure how hypothecation affects your home or investments, a financial advisor may be able to help. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now .

Hypothecation can affect just about any secured loan , including home equity loans . If you want to consider more options or different stakes before taking out a personal loan, consider consulting SmartAsset’s personal loans guide for costs and comparisons.

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The post Hypothecation: Meaning, Risks, and Examples  appeared first on SmartAsset Blog .

Pledge Vs Hypothecation Vs Mortgage Vs Assignment

Sooner or later, majority of people require loan in order to meet their financial requirement to purchase any asset or good. There are many financial institutions like banks, NBFCs, etc. which offer loans to the customers. From the point of view of the lender, it is always good to keep a security against given loan in order to safeguard it in case of any default by the borrower.

Whenever an Individual or a Non-Individual applies for a loan, the bank or the lender asks for any security for this purpose. Pledge, Hypothecation and Mortgage are different terms that are used to create a charge on the assets which is given by the borrower to the lender.

When an applicant wants to avail any loan, the bank or the lender always keeps a security in the form of some assets. The purpose behind keeping a security by the bank is that it has the right to sell that asset, in case the borrower defaults in repayment of the loan and realise the amount.

Pledge is used when the lender (Pledgee) takes actual possession of the asset pledged. In case of Hypothecation, possession of the asset remains with the borrower. Loan is given on security of immovable property, in case of Mortgage. Assignment is used when the owner of a contract (Assignor) handovers a contract to another party (Assignee). Assignment gives the assignee, right of all the responsibilities and all the benefits of the contract assigned.

What is Pledge?

Definition: As per Section 172 of the Indian Contract Act, 1872, Pledge is the bailment of goods as a security for the payment of a debt or performance of a promise. The bailor in case of Pledge is known as Pawnor and the bailee is known as Pawnee.

Borrower needs to provide the bank any asset or good that is worth the same amount or more than the loan which he is taking from the bank.

All about Pledge

• Pledge is a kind of Special Contract
• Pledge is a part of Bailment
• Pledge is a contract by which possession of goods or assets is transferred as a security
• Pledger or Pawnor is the person who gives goods as a security. He is the borrower
• Pledgee or Pawnee is the person who receives goods as a security. He is the lender
• Pledgee is bound to return pledged goods on the successful repayment of loan
• A pledgee has no right to use the goods pledged
• A Pledgee has the right to sell the goods pledged, on default after giving a notice to the Pledger

Essentials of Contract of Pledge

• There must be a Lawful Purpose
• The pledged goods must be long lasting
• Delivery of Goods/ Security
• Return of Goods

Duties of Pawnor (Pledger)

• Duty to repay the loan
• Duty to pay expenses in case of default

Right of Pawnor (Pledger)

• Right to redeem the goods pledged
• Right to receive the increase

Duties of Pawnee (Pledgee)

• Duty not to use pledged goods
• Duty to return the goods on the successful repayment of loan

Right of Pawnee (Pledgee)

• Right to retain the pledged goods
• Right to extraordinary expenses
• Right to sell the goods in case of default by the Pawnor

Interested to know Reasons to use Debit Card

What is Hypothecation?

Definition: As per Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, hypothecation is defined as "a charge in or upon any movable property, existing or future, created by a borrower in favour of a secured creditor without delivery of possession of the movable property to such creditor, as a security for financial assistance, and includes floating charge and crystallization into fixed charge on movable property".

Hypothecation is used as a security of movable assets while taking a loan from the bank. Here the possession of the security remains with the borrower instead of the lender. When the borrower is not able to repay the loan and its interest, then the bank has the right to sell the hypothecated asset such as car, two wheeler, etc. and recover the outstanding loan amount along with accrued interest.

All about Hypothecation

• Hypothecation is a charge created on movable assets
• Under Hypothecation, possession of the asset remain with the borrower
• Loan Period is smaller
• Loan amount is comparatively lesser
• The bank should verify that the party has a good reputation. It can check the property regularly. It can even ask the hypothecator to submit periodic report of the property
• There may be some incidents wherein the borrowers may cheat the banker by either partly selling goods hypothecated to the bank or not keeping the required stock of goods. Here, if bank finds that borrower is trying to mischief, it can insist upon or can convert hypothecation to pledge and takes over possession of the goods and keeps the same under its own custody

Interested to know Small Finance Bank Vs Payments Bank Vs Commercial Bank

What is Mortgage?

Definition: As per Section 58 of the Transfer of Property Act, 1882, Mortgage is the transfer of an interest in specific immovable property for the purpose of securing payment of money advanced by way of loan, existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.

All about Mortgage

• Mortgage is a charge created on immovable assets
• Immovable Assets include land, building, or anything attached to earth
• The transferor is called a mortgagor
• The transferee a mortgagee
• The principal money and interest of which payment is secured for the time being is called the Mortgage Money
• The instrument (if any) by which the transfer is effected is called a Mortgage Deed
• Possession of the asset remain with the borrower
• Loan Period is longer
• Loan amount is comparatively higher

Essentials of Mortgage

• Transfer of Interest
• Specific Immovable Property
• To Secure the Payment of a Loan
• Return of interest of Property

Types of Mortgage

• Simple Mortgage
• English Mortgage
• Anomalous Mortgage
• Usufructuary Mortgage
• Mortgage by Conditional Sale
• Mortgage by deposit of title of deeds

Interested to know You can invest as low as Rs. 100 in a Mutual Fund

What is Assignment?

Assignment is an agreement between two parties wherein one party transfers some or all his ownership rights on a particular property owned by him to the other party. After Assignment, the property is transferred to the person receiving the property rights.

All about Assignment

• Assignment is an agreement between two parties
• The property owner transferring the ownership right is called Assignor
• The person receiving the property right is called Assignee
• Assignor can transfer the rights either partly or fully
• Assignment is irrevocable
• Assignment is used generally in case of insurance policy or annuity
• Assignment can either be made by endorsement on the insurance policy or by some separate instrument
• After Assignment, the property is transferred to the Assignee
• Assignee gets all the rights of the assigned item
• Assignee can deal with the assigned item in any manner as per his wish
• If the insured person dies, the insurance company pays the outstanding amount of debt of the insured person (assignor) to the assignee and then pays the rest of the amount to the beneficiaries of the insurance policy

Types of Assignment

• Absolute Assignment: In it, Assignor transfer all ownership rights to the Assignee
• Collateral Assignment: In it, Assignor transfers a part of his ownership rights to the assignee which is limited upto to outstanding loan value and the remaining ownership rights with the assignor (insured person)

Benefits of Assignment

• Assignor gets loan more easily
• Assignee is more secured in case of demise of the borrower or default by the borrower

Find below major differences among Pledge, Hypothecation, Mortgage and Assignment:

Important Points to note

• Term "Mortgage" must only be used in connection with immovable assets.
• Terms "Pledge" and "Hypothecation" may generally be used in case of movable assets.
• Where a mortgage of movable is created by delivery of possession of goods, it is known as Pledge.
• Where a mortgage of movable is created without delivery of possession, it is called Hypothecation.
• Loans given under hypothecation are not so secured from point of view of lender's safety.

Personal Finance Blogs

This is a site about the books and other writing by James Rodgers, author of Assignment Moscow: Reporting on Russia From Lenin to Putin ( new edition 2023 ; first published July 2020); Headlines from the Holy Land (2015 and 2017); No Road Home: Fighting for Land and Faith in Gaza (2013); Reporting Conflict (2012). My work looks at how stories of international affairs, especially armed conflict, are told to the world.

I am an author and journalist. During two decades of covering international news, I reported on the end of the Soviet Union; the wars in Chechnya; the coming to power of Vladimir Putin; 9/11; the Israeli-Palestinian conflict; the 2003 war in Iraq; Russia’s war with Georgia in 2008. I completed correspondent postings for the BBC in Moscow, Brussels, and Gaza. I now teach in the Journalism Department at City, University of London.

Now Out: Assignment Moscow ‘Beautifully written, fascinating throughout’

MY NEW BOOK , Assignment Moscow: Reporting on Russia from Lenin to Putin has now been published in the U.S. and the U.K.

You can order copies, and read more about the book, here for the U.K, edition ( here for the U.S. edition).

These are the reviews so far

“Reporting from Russia has never been easy; Rodgers vividly captures the changing fortunes of Moscow correspondents over the past hundred years, as they penetrated the mysteries of life in Russia and brought them to our newspapers and screens. Some were duped, some were fellow-travellers or spies; most battled against censors and blank-faced politicians; all have helped to shape our understanding of the world’s biggest country.” –  Angus Roxburgh, former Moscow correspondent for the BBC, Sunday Times and Economist

“Writing about journalism in Russia since the revolution, James Rodgers rightly emphasises that to understand Russia you have to talk to people of all kinds. But he argues that even correspondents who knew the language and the history found it hard to report dispassionately because of official obstruction and their own emotional involvement.” –  Rodric Braithwaite

“A highly original, engrossing and accessible book, Assignment Moscow stands out among journalistic accounts of Russia for its subtlety, humility and historic scope. It tells the story of British and American journalists who aimed to throw light on Russia from Lenin to Putin, and in the process illuminated the West itself.” –  Arkady Ostrovsky, Author of The Invention of Russia: The Rise of Putin and the age of Fake News, Winner of the 2016 Orwell Prize

“It is hard to believe that in the torrent of books published on Russia each year, that one could come along as original and valuable as Assignment Moscow. One comes to appreciate the service of our reporting men and women in Moscow. For all their fallibilities, without their dedication, we wouldn’t have half the understanding of Russia that we have today, imperfect as it will always be. We therefore owe them – and especially Rodgers as journalist, teacher, analyst and cataloguer – a huge debt.” –  James Nixey, Chatham House

I was also delighted to get this endorsement on Twitter from Peter Frankopan, Professor of Global History at the University of Oxford, and author of The Silk Roads and The New Silk Roads .

Beautifully written, fascinating throughout – and very timely. Happy publication day ⁦ @jmacrodgers ⁩ ! #AssignmentMoscow pic.twitter.com/WY4xlYL6ZR — Peter Frankopan (@peterfrankopan) July 23, 2020

I will be talking about the book at a number of events planned for September onwards. I will share details here when they are available.

I am very happy to talk at book festivals, to universities, think tanks, conferences etc. Please get in touch if you are interested–contact details below, or via the publisher, I.B. Tauris, part of Bloomsbury .

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Assignment Moscow: Reporting on Russia From Lenin to Putin

Reviewed by maria lipman, by james rodgers.

Rodgers, a British journalist who has worked in Russia at various times since the 1990s, writes about the plight of the English-speaking correspondents who have covered Russia, going all the way back to the Russian Revolution in 1917. That their task was not easy is hardly surprising, yet Rodgers repeatedly emphasizes the difficulties they faced (the word “difficult” is used to describe their job at least two dozen times): strict censorship (foreign journalists were forced to clear their dispatches with Soviet authorities until 1961), travel restrictions, limited access to senior officials and ordinary people alike, and the government’s suspicion that Anglo-American correspondents were spies in disguise. Even Rodgers’s discussion of the American journalist Hedrick Smith—who, despite the restrictions, famously managed to produce exceptionally rich and insightful coverage of the Soviet Union and its people in the 1970s—is reduced to Smith’s reflections on how difficult his work was. Rodgers’s narrative rests on an enormous number of articles in Anglo-American media, books by and about journalists, and his own interviews with many Moscow correspondents. He quotes some of them as saying that journalists knew and understood Russia better than diplomats or policymakers did. This may or may not be true. Unfortunately, Rodgers doesn’t give the diplomats and policymakers a chance to respond.

• More By Maria Lipman

More from Eastern Europe and Former Soviet Republics

Nested Nationalism: Making and Unmaking Nations in the Soviet Caucasus

By krista a. goff, a short history of russia: from the pagans to putin, by mark galeotti, weak strongman: the limits of power in putin’s russia, by timothy frye.