The purpose of this valuation is similar to the valuation for financial institutions’ credit purposes. Still, most consignment mortgages are person-to-person activities that are used to borrow money between parties. In Thailand, there are two methods for registration of rights and juristic acts in the land. The first is to register a mortgage act, which is to bring a collateral property to register a mortgage with a lender. When there is a default on payment, it will have to enter the court proceedings called enforcing the mortgage. Then, the collateral property will be brought into the auction process by the Legal Execution Department. When the property is sold, it will be repaid to the creditor while the rest will be given to the debtor. However, suppose the collateral property is sold but still unable to pay off all debts. In that case, the debtor must find money to cover the remaining amount, called the shortfall, returned to the creditor.
The second type of registration is called consignment. It will be more convenient for the creditor since the sale of receivables is like selling out of ownership. However, there is an option for the debtor to redeem; for example, selling with redemption is due for one year. On the registration date, the transfer of ownership will be paid in advance. If the expiration date of 1 year, the debtor does not come to redeem from the creditor, the ownership will be vested in the creditor by default without having to go through the court process of enforcing. Therefore, creditors usually prefer this option. Nevertheless, there is a disadvantage of selling with redemption, which is the high cost of lending. One of the obvious things is the transfer fee which must be paid on the registration date at the Land Department. Once the payment is made, there will be no refund, even with scheduled redemption. By comparing this transfer fee to the mortgage fee (1% of the loan amount), it will be hugely different in which the transfer fee will fall on the borrower, causing the borrower to have a lot of burdens.
