Pag-IBIG Fund

Corporate Headquarters
Petron MegaPlaza
358 Sen. Gil Puyat Ave.,
Makati City

Circular No. 424

TO: ALL CONCERNED

SUBJECT: MODIFIED GUIDELINES ON EXTRAJUDICIAL FORECLOSURE

OF REAL ESTATE MORTGAGE

Pursuant to the approval of the Senior Management Committee, the Modified

Guidelines on Extrajudicial Foreclosure of Real Estate Mortgage are hereby issued:

I. GENERAL PROVISIONS

A. OBJECTIVE

This Guidelines aims to institute a system of procedures for the recovery of the
Fund's investment from housing loan accounts secured by real estate mortgage
(REM) that are in default through extrajudicial foreclosure.

B. COVERAGE AND EXCLUSION

1. This Guidelines shall apply to all housing loan accounts secured by REM that
are in default, such as but not limited to the following:

1.1 Mortgages under the name of the principal borrower;

1.2 Mortgages assigned or transferred to Pag-IBIG Fund;

1.3 Under accommodation arrangement; or

1.4 Under pari-passu arrangements.

2. Eligible accounts for foreclosure are those which are:

2.1 In default based on the prevailing applicable housing loan guidelines,

or

2.2 Under any or all of the following circumstances:

2.2.1 No single payment has been made from loan takeout, which shall
also include accounts whose only payment resulted from its
deduction from the borrower's takeout proceeds and the borrower
has not availed of any Pag-IBIG Fund housing loan remediation
programs to revive the account;

2.2.2 No response on demand notices;

2.2.3 No plan of payment submitted;

1
 2.2.4 Submitted a plan of payment that is not acceptable to the Fund;

2.2.5 The housing unit has been abandoned including those illegally
occupied, and the borrower is already in default; and/or

2.2.6 The mortgaged property is leased or had been leased to another

party, and the borrower is already in default.

3. In the event the borrower-mortgagor failed to settle the outstanding loan

obligation during the full cycle of remediation activities, such account shall
be endorsed to the appropriate operating unit responsible for processing
the loan account for extrajudicial foreclosure.

C. DEFINITION OF TERMS

1. Bid Price - It shall be the total claim of the Fund against the mortgagor
computed as of the date of the actual foreclosure sale, which shall not fall
below the sum of the book value of the property, foreclosure expenses,
payment for taxes, and other monetary obligations, if any.

2. Book Value - This refers to the carrying amount or the outstanding principal
balance, net of its allowance for probable loss, plus three (3) months accrued
interest, plus insurances advanced by the Fund, if any, up to a given date fixed
by the Fund.

It is the net amount at which an asset or asset group appears on the books of
account, as distinguished from its market value or intrinsic value.

3. Certificate of Sale - A statutory instrument, signed and issued by the Sheriff

who conducted the public auction, attesting to the proceedings of the public
auction, conveying the equitable interest in the property to the purchaser,
subject however to the redemption right of the mortgagor, his successor/s-
in-interest, judgment creditor of said debtor, or any person having a lien
on the property subsequent to the mortgage. It constitutes evidence of the
purchaser's right to the subject property.

4. Consolidation of Title - Change in the name reflected in the

Transfer/Condominium Certificate of Title (TCT/CCT) from that of the borrower-
mortgagor to that of the Fund.

5. Extrajudicial Foreclosure - A foreclosure proceeding by which the sale is

effected through a sheriff or notary public without judicial proceedings, subject
only to the required publication and posting of foreclosure notices. It can be
availed of if the mortgage contract expressly authorizes the mortgagee to
foreclose extra-judicially.

6. Foreclosure - It is a legal process by which the lender forces a sale of a

mortgaged property because the borrower has not met the terms of the
mortgage. It also refers to a legal procedure in which the property securing the
debt is sold by the lender to pay the defaulting borrower's debt.

7. Foreclosure Expenses - Refers to all expenses relative to the foreclosure

of REM such as notarization, filing fee, publication fee, sheriff posting fee, legal
research fee, and other incidental fees. This also covers all expenses
incurred in the processing of Certificate of Sale (CaS), annotation and
registration of cas.

2
8. Judgment Creditor - Any creditor of the mortgagor having a final judgment
in his favor on which execution may issue at the time he seeks to redeem.

9. Juridical Person - refers to an entity such as but not limited to local

government units, corporations, institutions, partnerships, and associations for
private interest or purpose, which has been granted by law with a juridical
personality, separate and distinct from that of its shareholder, partner, or
member.

10. Outstanding Loan Obligation - Refers to the outstanding principal balance,

plus interest, penalties, insurance advances up to the point of auction sale,
Mortgage Origination Fee (MOF)/Mortgage Administration Fee (MAF), Housing
Contributory Fund (HCF), Housing Fund Contribution (HFC), and other
charges, if any.

11. Pari-Passu Loan - a loan extended by an accredited financial institution,

in addition to the Pag-IBIG member's housing loan, secured by the same
collateral on a pro-rata sharing of the mortgage lien.

12. Real Estate Mortgage (REM) - It is a contract where specific property is

hypothecated to secure the fulfillment of principal obligation without necessity
of change of possession.

13. Redemption - It is a transaction through which the borrower-mortgagor, his

successors-in-interest, judgment creditor of said debtor, or any person having
a lien on the property subsequent to the mortgage, re-acquires or buys back
the property sold at an auction sale, or divests the mortgaged property of the
lien which the mortgage may have created by means of his payment or the
performance of a condition.

14. Redemption Period - It shall be one (1) year reckoned from the date of
registration of the Sheriff's COS with the Office of the Registry of Deeds, within
which the redemptioner may redeem the foreclosed property from the winning
bidder at the auction sale. The one-year period is applicable to the borrower
and to other parties, whether natural or juridical, who have an interest in
the property.

15. Redemption Price -It is the amount to be paid by the redemptioner who may
or may not be the mortgagor of the Fund, who has an interest in the property,
which consists of the following:

15.1 The winning bid plus one percent (1%) legal interest per month from the
date of the auction sale up to the time of redemption;

15.2 The amount of any assessments or taxes which the Fund may have paid
thereon after the auction sale; and

15.3 Interest on the taxes at the rate of 1% per month from the date of
payment by the Fund up to the time of redemption.

16. Successors-in-Interest - Refers to natural or juridical persons who

succeed to the rights and interest of the borrower-mortgagor in the mortgaged
property either by voluntary conveyance, including one who assumed the
mortgaged obligation of the borrower-mortgagor, or by succession.

17. Theoretical Value (Intrinsic Value) - Refers to the outstanding loan obligation
and all foreclosure expenses incurred up to the point of auction sale.

3
 18. Total Purchase Price - Refers to the bid amount of the winning bidder
during the auction sale, plus the Sheriff's Percentage Fees.

II. SPECIFIC PROVISIONS

A. FILING OF PETITION FOR EXTRA-JUDICIAL FORECLOSURE (EJF)

1. A Petition for Extra-Judicial Foreclosure of Mortgage of a particular housing

loan account shall be filed with the Executive Judge, through the Office of the
Clerk of Court-Regional Trial Court (OCC-RTC), which has jurisdiction over the
property. A copy of the following loan documents shall be attached to the
petition:

1.1 Promissory Note

1.2 Loan and Mortgage Agreement

1.3 Transfer/Condominium Certificate of Title (photocopy)

1.4 Statement of Account

1.5 Final Demand Letter (receipt acknowledged by the borrower, or with

attached Postal Registry Receipt or Affidavit of Service)

1.6 Deed of Assignment (For accounts classified under Folio 1, Overhang, 303
M, Unified Home lending Program)

1.7 Purchase of Loan Mortgage with Borrower Information Sheet (For

accounts classified under Folio 1, Overhang, 303 M, Expanded Housing
Loan Program with Bank as Originator)

1.8 Purchase of Loan Agreement and Batch Information Sheet (For Unified
Home lending Program)

2. The pendency of any legal action involving the mortgaged property shall not
bar the Fund from filing foreclosure proceeding against the borrower-mortgagor
whose account is already eligible to be foreclosed, except if there is a restraint
from the Court in the form of a Temporary Restraining Order (TRO), Preliminary
or Permanent injunction, or a final order or decision nullifying the Loan and
Mortgage Agreement or the mortgage contract.

B. NOTICE REQUIREMENT OF THE AUCTION SALE SCHEDULE

The Fund shall cause the posting and publication of the Sheriff's Notice of
Foreclosure or Auction Sale in accordance with Act No. 3135 as amended by
Republic Act No. 4118.

C. WITHDRAWAL OF PETITION FOR EJF

A Notice of Withdrawal of Foreclosure Petition shall be filed with the appropriate

Office of the Clerk of Court (OCC) - RTC on or before the scheduled auction sale,
under any of the following cases:

1. Full updating of arrearages,

2. Full payment of the outstanding loan, or

4
 3. Approval of the borrower's application for housing loan remediation
programs.

The borrower shall be required to pay the filing fee, Sheriff's Fee, Notarial Fee,
publication expenses, legal research fee, attorney's fee and other incidental
expenses prior to the auction sale.

D. AUCTION SALE

The Fund shall file its bid at the auction sale based on the bid price computed in
accordance to Item No. I.C.1 of this Guidelines.

1. The Fund as the Winning Bidder

In case the Fund is the winning bidder, it shall:

1.1 Pay the Sheriff's Percentage Fees

1.2 Secure the Certificate of Sale (CaS).

1.3 Register the cas with the concerned RD within sixty (60) calendar days
from receipt of the said cas.

2. Remedy of the Borrower-Mortgagor before COS Registration

In case the Fund is the winning bidder, the borrower-mortgagor may settle
the total outstanding obligation on the foreclosed property before the
registration of the cas by paying the redemption price, applicable attorney's
fees and other incidental expenses in accordance with the prevailing
housing loan remediation programs of the Fund.

The Fund shall issue a Release of Real Estate Mortgage (RREM) in case of
full payment of the said redemption price and other pertinent charges
mentioned in the preceding paragraph.

3. Other Party as the Winning Bidder

3.1 The winning bidder shall pay his bid amount exclusively to the Fund
right after the auction sale.

Consequently, the Fund shall release the owner's duplicate copy of the
TCT/CCT to the winning bidder.

3.2 The Fund shall return to the borrower-mortgagor any excess from the
proceeds of the sale, after deducting therefrom the amount of claim,
the attorney's fee as stipulated in the Loan and Mortgage Agreement,
foreclosure/litigation expenses and other monetary obligations, if any.

E. REDEMPTION OF THE FORECLOSED PROPERTY

In all cases in which an extrajudicial foreclosure sale has been made under a
special power of attorney, the borrower-mortgagor, his successor/s-in-interest or
any judicial creditor or judgment creditor of said borrower-mortgagor, or any person
having a lien on the property subsequent to the mortgage under which the property
has been sold, may redeem the foreclosed property within a period of one (1) year

5
from the date of registration of the COS by paying the redemption price in
accordance with the provision of Item No. I.C.15 hereof.

1. Redemption of Property by the Borrower

1.1. The Fund shall issue a Notice of Redemption to the borrower-mortgagor

stating among others that the mortgaged property has been extra-
judicially foreclosed and said mortgagor may redeem the property within
the period provided in Item No. II.E of this Guidelines.

1.4 The redemptioner shall pay the redemption price as defined in Item
I.C.15 hereof.

1.5 During the redemption period, the Fund may take possession of the
property with the proper authority from the court, which may be granted
upon posting a bond in an amount equivalent to the use of the property,
to indemnify the debtor in case the sale is set aside or in case the property
is redeemed after the Fund has been given possession.

1.6 Upon payment of the redemption price, the Fund shall issue a notarized
Certificate of Redemption (COR) together with the title to the
redemptioner.

1.7 In case of non-redemption, the one percent (1%) legal interest per month
shall be computed only up to the expiration of the redemption period.

1.6 The borrower-mortgagor who did not redeem the foreclosed property shall
vacate the same upon expiration of the redemption period. Otherwise, the
Fund shall immediately file a Petition for Writ of Possession, or an
ejectment case if circumstances warrant.

2. Redemption of Property by the Successors-in-lnterestlAssignee

2.1 Redemption by the successor/s-in-interest / assignee/s of the borrower-

mortgagor of a foreclosed property shall be allowed. If there are
simultaneous offers to redeem the property, the one who first paid the
redemption price shall be preferred. If the offers and payment were
received at the same date and time, the following order of preference shall
be applied:

2.1.1. One who assumed the outstanding loan obligation of the

borrower-mortgagor, as evidenced by Deed of Assignment of Sale
with Assumption of Mortgage;

2.1.2. One to whom the former owner has conveyed his interest in the
property for the purpose of redemption, as evidenced by the Deed
of Sale of the property subject of redemption; and

2.1.3. The borrower-mortgagor's heirs, if the deceased borrower has not

transferred his rights and interest in the property during his lifetime.
alienated

2.2. The following are the legal documents that shall be presented by the
successor/s-in-interest / assignee/s, depending on the circumstances of
the case:

2.2.1 For Legal Heirs:

a. Death Certificate of the borrower-mortgagor

6
 b. Birth Certificate of the legal heir
c. Last Will and Testament (if any)
d. Extra-Judicial Settlement of Estate/Partition (if any)

2.2.2 Buyer/Assignee - Deed of Absolute Sale/Deed of Assignment

3. Redemption by Judgment Creditor and Subsequent Mortgagor/

Encumbrancer

A judgment creditor or a subsequent mortgagor/encumbrancer, or any

person having an interest in the property, whether a natural or a juridical
person, may redeem the same by paying the redemption price within the
redemption period, and submitting the following documents:

3.1. For judgment creditor-

3.1.1 Entry of Judgment of the decision of the court in favor of the

judgment creditor and against the borrower-mortgagor;

3.1.2 A writ of execution granting the judgment creditor authority to

redeem the property or to sell the property of the borrower
mortgaged to the Fund to satisfy the latter's debt to said
judgment creditor.

3.2 For Subsequent Mortgagor/Encumbrancer-Mortgage Document or

instrument showing the interest of the redemptioner in the property.

4. Redemption of the property through installment basis shall be allowed to

all redemptioners, subject to the following conditions:

4.1 Full payment shall be made within the redemption period.

4.2 The redemptioner pays an amount not lower than ten percent (10%) of
the redemption price, as deposit.

4.3 Partial payments shall be recorded in the books as "Deferred Credit".

4.4 In case the redemptioner fails to pay the full redemption price within the
redemption period, the deposit and subsequent payments shall be
refunded to him without interest. However, if the redemptioner is the
borrower-mortgagor or the latter's heirs or the person who assumed
the mortgaged obligation, the payments shall be credited to the
deficiency, if any, and attorney's fee stipulated in the Loan and
Mortgage Agreement.

4.5 The redemption period may be extended by the Fund for a period not to
exceed one (1) year, provided that:

4.5.1 If the redemptioner is the borrower-mortgagor's heirs, or the person

who assumed the outstanding loan obligation:

a. The redemptioner must pay the taxes, fees, and charges for
the transfer of title from the borrower-mortgagor to the Fund, and
from the Fund to the redemptioner;

b. His installment payments or deposit would cover such taxes,

fees, interest, penalties, and surcharges;

7
 c. The redemptioner agrees to pay not just the redemption
price, but the theoretical value of the property, the
attorney's fees and foreclosure expenses.

Meanwhile, the person who assumed the outstanding loan

obligation agrees to pay the taxes, fees and charges for the
transfer of title from the borrower-mortgagor to the Fund, and from
the Fund to the redemptioner;

4.5.2 If the redemptioner is not the borrower-mortgagor, or the latter's

heir, or the one who assumed the mortgage obligation, the
installment payments already paid must be whichever is higher of
the following: the 10% of the redemption price, or the estimated
interest, penalties and surcharges that the Fund will incur in
consolidating the title in its name belatedly.

4.6 In case of failure to fully pay the redemption price during the extension
period, the installment payments made by the redemptioner shall be
refunded to him, net of the interest, penalties and surcharges.

However, if the redemptioner is the borrower-mortgagor, his heir, or

the person who assumed the outstanding loan obligation, there shall
be no refund as the installment payments shall be applied to the
deficiency, if any, attorney's fees and expenses attendant to
foreclosure.

F. CALL ON GUARANTY FROM HOME GUARANTY CORPORATION (HGC)

The Fund may, at its option, call for guaranty on its housing loan accounts
enrolled under the HGC Cash Flow Guaranty System. Such call of guaranty
shall be subject to the prevailing policies of the HGC.

G. CONSOLIDATION OF TITLE

1. The Fund shall comply/secure the following requirements:

1.1 Pay the Capital Gains Tax (CGT);

1.2 Pay the Documentary Stamp Tax (DST);

1.3 Secure Certificate Authorizing Registration (CAR) from the Bureau of

Internal Revenue (BIR);

1.4 Secure separate certified true copies of the Tax Declaration of Land and
Building from the City or MUnicipal Assessor's Office;

1.5 Secure Tax Clearance by paying the Real Estate Tax (RET) and Transfer
Fee at the City/MUnicipal Treasurer's Office.

2. The following documents shall be presented to the Registry of Deeds, for

consolidation of title in the name of the Fund:

2.1 Official Receipt (OR) on Transfer Fee (original copy)

2.2 Tax Clearance

2.3 Affidavit of Consolidation of Title

8
 2.4 Title (owner's duplicate copy)

2.5 Certificate Authorizing Registration (CAR)

Upon consolidation of the title, the Tax Declarations covering the lot and the
improvements, respectively, shall also be consolidated in the name of the Fund.

III. FORECLOSURE OF ACCOUNT COVERED BY PARI-PASSU ARRANGEMENT

Foreclosure of account covered by pari-passu arrangement may be initiated either by

the Fund or other financing institution, as may be applicable.

Foreclosure proceeds shall be divided according to the ratio of loan exposure of

Pag-IBIG Fund and the originating institution after deducting all the legal and
incidental expenses. Thus, the Fund's share shall be computed based on following
formula:

Pag-IBIG Fund Exposure

FP (Pag-IBIG Fund) = TLE
(TFP-TLlE)

where:

• FP (Pag-IBIG Fund) - Foreclosure Proceeds due to the Fund

• TLE - Total Loan Exposure
• TFP - Total Foreclosure Proceeds
• TLiE - Total Litigation and Incidental Expenses

IV. OTHER PROVISIONS

1. Aside from filing a Petition for Extra-Judicial Foreclosure with the concerned
Regional Trial Court (RTC), the same petition may be filed with a Notary Public
who shall be authorized to conduct the foreclosure proceedings of a particular
mortgaged property.

2. Pag-IBIG Fund, at its option, may bid higher than the computed minimum bid
price under Item LC.1 of this Circular, subject to the approval of the
concerned Pag-IBIG Fund officer handling the foreclosure process in cases
such as, but not limited to, when the appraised value of the property is
significantly higher than or double that of the claim of the Fund, or when the
property is a prime property, and the like.

V. REPEALING CLAUSE

Pag-IBIG Fund Circular No. 304 entitled "Amended Guidelines on the

Foreclosure of Real Estate Mortgage", memoranda, rules, regulations, and other
issuances that are inconsistent herewith are hereby repealed, amended or modified
accordingly.

VI. MECHANISM ON RESOLUTION OF ISSUES

Any issue in the interpretation and implementation of these guidelines shall, as much
as possible, be resolved by the concerned officer. Matters that are not thereby
satisfactorily resolved shall be escalated to the next higher approving authorities.

9
VII. EFFECTIVITY

This Circular takes effect after fifteen (15) calendar days following the completion of
its publication in the Official Gazette or in a newspaper. of general circulation.

ACMAD RI A wt. MOTI

Makati City,

April 16, 2019

10