When the mortgage over the home is foreclosed

By Atty. Eduardo T. Reyes III

One of the biggest tragedies in life is losing a home.

As the Christmas season is fast approaching and sentimental Christmas songs in malls and restaurants begin playing, it’s evocative of home.  Redolent of childhood memories when the sun was not yet harsh and doting parents are just there to run to, indeed, there is no place like home.

The home is surely more than just the space within the four walls that encase it. It is the repository of memories- fun, laughter, the very essence of life itself.

Yet because of its economic value, the shell that houses the home can be mortgaged to secure a debt.

However, when the loan account becomes askew, the mortgage can be foreclosed.

Foreclosure, of course, means the selling at public auction of the mortgaged property so that the proceeds can be used to pay off the delinquent account of the property owner.

In a last-ditch attempt to recover the property after foreclosure which is technically called “legal redemption,” how much time does the property owner have?

In RA 8791, Sec. 47, if the one who mortgaged the property (mortgagor) is a corporation or partnership, it may do so “before the registration of the certificate of foreclosure but not more than 3 months.” If, however, the mortgagor is a natural person, the period of redemption is one (1) year from foreclosure sale (Sec. 6, Act 3135).

Why is there a difference in the redemption periods when the mortgagor is a natural person as against a juridical person (ie, corporation or partnership)?

In Zomer Development Company, Inc. v. Special Twentieth Division of the Court of Appeals, G.R. No. 194461, January 07, 2020, such difference was explained: 

“The difference in the treatment of juridical persons and natural persons was based on the nature of the properties foreclosed — whether these are used as residence, for which the more liberal one-year redemption period is retained, or used for industrial or commercial purposes, in which case a shorter term is deemed necessary to reduce the period of uncertainty in the ownership of property and enable mortgagee-banks to dispose sooner of these acquired assets. It must be underscored that the General Banking Law of 2000, crafted in the aftermath of the 1997 Southeast Asian financial crisis, sought to reform the General Banking Act of 1949 by fashioning a legal framework for maintaining a safe and sound banking system. In this context, the amendment introduced by Section 47 embodied one of such safe and sound practices aimed at ensuring the solvency and liquidity of our banks. It cannot therefore be disputed that the said provision amending the redemption period in Act 3135 was based on a reasonable classification and germane to the purpose of the law. 

X x x 

A longer period of redemption is given to natural persons whose mortgaged properties are more often used for residential purposes. A shorter period of redemption is given to juridical persons whose properties are more often used for commercial purposes. Goldenway Merchandising explains that the shorter period is aimed to ensure the solvency and liquidity of banks. This helps minimize the period of uncertainty in the ownership of commercial properties and enable mortgagee-banks to dispose of these acquired assets quickly.”  

The law indeed sees how important one’s home or residence is. When the property that was foreclosed is a home or residence, the longer period of one (1) year is accorded to the mortgagor; as opposed to the shorter period of not more than three (3) months when the mortgagor is a corporation or partnership who used the mortgaged property for commercial or industrial purposes.

Dubbed as “the best time of the year,” Christmastime is reminiscent of the family; of the home.

The home must not be mortgaged to the vagaries of life. But if it must be, it must be saved at all costs.

            (The author is the senior partner of ET Reyes III & Associates– a law firm based in Iloilo City. He is a litigation attorney, a law professor, MCLE lecturer, bar reviewer and a book author. His website is etriiilaw.com).


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