Foreclosure is the legal process by which a mortgagee, or other lien holder, usually a lender, obtains a court ordered termination of a mortgagor's equitable right of redemption. In Montillano vs. San Juan, Adm. Matter No. P-91-547, 17 February 2013, the Supreme Court defined foreclosure as “termination of all rights of the mortgagor in the property covered by the mortgage; it denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself.” The primary objective of foreclosure is to have the property seized and sold with a view to applying the proceeds to the payment of the principal obligation.
There are two modes of foreclosing a real estate mortgage in the Philippines; to wit: (a) judicial foreclosure; and (b) extrajudicial foreclosure. Judicial foreclosure is governed by Rule 68 of the 1997 Revised Rules of Civil Procedure while extrajudicial foreclosure is governed by the provisions of Act. No. 3135, as amended.
A judicial foreclosure is done by filing a complaint in the Regional Trial Court of the place where the property is located. The judge renders judgment, ordering the mortgagor to pay the debt within a period of 90–120 days. If the debt is not paid within the said period, a foreclosure sale is held to satisfy the judgment.
In an extrajudicial foreclosure, the mortgagee need not initiate an action in court but may simply file an application before the Clerk of Court to secure the attendance of the Sheriff who conducts the public sale. This is done pursuant to a power of sale.
In judicial foreclosure, there is no right of redemption, except when allowed by law. While in extrajudicial foreclosure, the mortgagor has the right of redemption within one (1) year from the registration of sale in the office of the register of deeds.
Foreclosures both impact the mortgagor and the mortgagee. The dilemma is not solely borne by the mortgagor who is afraid of losing his/ her home but also by the mortgagee or the lender, considering that foreclosure proceedings entail significant costs like attorney’s fees and eviction costs.
Here are helpful tips on how a mortgagor can avoid foreclosure of his/ her home:
Remember that you are not without options whenever foreclosure looms. Ponder on your options well and ensure that the decision you make would lessen the burdens caused by your financial woes.
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