Risk of Losing Collateral in a Transfer

The planned new Hungarian Civil Code is expected to bring significant changes to the Hungarian collateral system. The changes will hopefully eliminate certain deficiencies in the current legislation pertaining to the maximum sum mortgage, one of the more popular collateral forms used in financing transactions.

The "maximum sum" mortgage

A "maximum sum" mortgage (keretbiztosítéki jelzálog) is a special form of mortgage particularly used in financing practice as collateral to revolving facilities. A maximum sum mortgage may not only secure a specific claim (as a regular mortgage) but also any and all claims arising from a specific legal relationship between the parties, up to a maximum amount. Consequently, the maximum sum mortgage is a particularly flexible security, but this flexibility may also result in serious risks in certain banking transactions.