Pag-IBIG FundCorporate Headquarters

Petron MegaPlaza358 Sen. Gil Puyat Ave.,

Makati City

Circular No. 424

TO: ALL CONCERNED

SUBJECT: MODIFIED GUIDELINES ON EXTRAJUDICIAL FORECLOSUREOF REAL ESTATE MORTGAGE

Pursuant to the approval of the Senior Management Committee, the ModifiedGuidelines 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 theFund'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 thatare 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 shallalso include accounts whose only payment resulted from itsdeduction from the borrower's takeout proceeds and the borrowerhas not availed of any Pag-IBIG Fund housing loan remediationprograms 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 illegallyoccupied, and the borrower is already in default; and/or

2.2.6 The mortgaged property is leased or had been leased to anotherparty, and the borrower is already in default.

3. In the event the borrower-mortgagor failed to settle the outstanding loanobligation during the full cycle of remediation activities, such account shallbe endorsed to the appropriate operating unit responsible for processingthe loan account for extrajudicial foreclosure.

C. DEFINITION OF TERMS

1. Bid Price - It shall be the total claim of the Fund against the mortgagorcomputed as of the date of the actual foreclosure sale, which shall not fallbelow 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 principalbalance, net of its allowance for probable loss, plus three (3) months accruedinterest, plus insurances advanced by the Fund, if any, up to a given date fixedby the Fund.

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

3. Certificate of Sale - A statutory instrument, signed and issued by the Sheriffwho conducted the public auction, attesting to the proceedings of the publicauction, 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 lienon the property subsequent to the mortgage. It constitutes evidence of thepurchaser's right to the subject property.

4. Consolidation of Title - Change in the name reflected in theTransfer/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 iseffected through a sheriff or notary public without judicial proceedings, subjectonly to the required publication and posting of foreclosure notices. It can beavailed of if the mortgage contract expressly authorizes the mortgagee toforeclose extra-judicially.

6. Foreclosure - It is a legal process by which the lender forces a sale of amortgaged property because the borrower has not met the terms of themortgage. It also refers to a legal procedure in which the property securing thedebt is sold by the lender to pay the defaulting borrower's debt.

7. Foreclosure Expenses - Refers to all expenses relative to the foreclosureof REM such as notarization, filing fee, publication fee, sheriff posting fee, legalresearch fee, and other incidental fees. This also covers all expensesincurred in the processing of Certificate of Sale (CaS), annotation andregistration of cas.

2

8. Judgment Creditor - Any creditor of the mortgagor having a final judgmentin 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 localgovernment units, corporations, institutions, partnerships, and associations forprivate interest or purpose, which has been granted by law with a juridicalpersonality, separate and distinct from that of its shareholder, partner, ormember.

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), HousingContributory Fund (HCF), Housing Fund Contribution (HFC), and othercharges, 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 samecollateral on a pro-rata sharing of the mortgage lien.

12. Real Estate Mortgage (REM) - It is a contract where specific property ishypothecated to secure the fulfillment of principal obligation without necessityof change of possession.

13. Redemption - It is a transaction through which the borrower-mortgagor, hissuccessors-in-interest, judgment creditor of said debtor, or any person havinga lien on the property subsequent to the mortgage, re-acquires or buys backthe property sold at an auction sale, or divests the mortgaged property of thelien which the mortgage may have created by means of his payment or theperformance of a condition.

14. Redemption Period - It shall be one (1) year reckoned from the date ofregistration of the Sheriff's COS with the Office of the Registry of Deeds, withinwhich the redemptioner may redeem the foreclosed property from the winningbidder at the auction sale. The one-year period is applicable to the borrowerand to other parties, whether natural or juridical, who have an interest inthe property.

15. Redemption Price -It is the amount to be paid by the redemptioner who mayor 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 thedate of the auction sale up to the time of redemption;

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

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

16. Successors-in-Interest - Refers to natural or juridical persons whosucceed to the rights and interest of the borrower-mortgagor in the mortgagedproperty either by voluntary conveyance, including one who assumed themortgaged obligation of the borrower-mortgagor, or by succession.

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

3

18. Total Purchase Price - Refers to the bid amount of the winning bidderduring 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 housingloan account shall be filed with the Executive Judge, through the Office of theClerk of Court-Regional Trial Court (OCC-RTC), which has jurisdiction over theproperty. A copy of the following loan documents shall be attached to thepetition:

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 withattached Postal Registry Receipt or Affidavit of Service)

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

1.7 Purchase of Loan Mortgage with Borrower Information Sheet (Foraccounts classified under Folio 1, Overhang, 303 M, Expanded HousingLoan Program with Bank as Originator)

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

2. The pendency of any legal action involving the mortgaged property shall notbar the Fund from filing foreclosure proceeding against the borrower-mortgagorwhose account is already eligible to be foreclosed, except if there is a restraintfrom the Court in the form of a Temporary Restraining Order (TRO), Preliminaryor Permanent injunction, or a final order or decision nullifying the Loan andMortgage 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 ofForeclosure or Auction Sale in accordance with Act No. 3135 as amended byRepublic Act No. 4118.

C. WITHDRAWAL OF PETITION FOR EJF

A Notice of Withdrawal of Foreclosure Petition shall be filed with the appropriateOffice 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, or4

3. Approval of the borrower's application for housing loan remediationprograms.

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 incidentalexpenses prior to the auction sale.

D. AUCTION SALE

The Fund shall file its bid at the auction sale based on the bid price computed inaccordance 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 daysfrom 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 settlethe total outstanding obligation on the foreclosed property before theregistration of the cas by paying the redemption price, applicable attorney'sfees and other incidental expenses in accordance with the prevailinghousing loan remediation programs of the Fund.

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

3. Other Party as the Winning Bidder

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

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

3.2 The Fund shall return to the borrower-mortgagor any excess from theproceeds 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 aspecial power of attorney, the borrower-mortgagor, his successor/s-in-interest orany judicial creditor or judgment creditor of said borrower-mortgagor, or any personhaving a lien on the property subsequent to the mortgage under which the propertyhas 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 inaccordance 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-mortgagorstating among others that the mortgaged property has been extra-judicially foreclosed and said mortgagor may redeem the property withinthe period provided in Item No. II.E of this Guidelines.

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

1.5 During the redemption period, the Fund may take possession of theproperty with the proper authority from the court, which may be grantedupon 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 propertyis redeemed after the Fund has been given possession.

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

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

1.6 The borrower-mortgagor who did not redeem the foreclosed property shallvacate the same upon expiration of the redemption period. Otherwise, theFund shall immediately file a Petition for Writ of Possession, or anejectment 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 aresimultaneous offers to redeem the property, the one who first paid theredemption price shall be preferred. If the offers and payment werereceived at the same date and time, the following order of preference shallbe applied:

2.1.1. One who assumed the outstanding loan obligation of theborrower-mortgagor, as evidenced by Deed of Assignment of Salewith Assumption of Mortgage;

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

2.1.3. The borrower-mortgagor's heirs, if the deceased borrower has nottransferred his rights and interest in the property during his lifetime.alienated

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

2.2.1 For Legal Heirs:

a. Death Certificate of the borrower-mortgagor6

b. Birth Certificate of the legal heirc. 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 anyperson having an interest in the property, whether a natural or a juridicalperson, may redeem the same by paying the redemption price within theredemption 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 thejudgment creditor and against the borrower-mortgagor;

3.1.2 A writ of execution granting the judgment creditor authority toredeem the property or to sell the property of the borrowermortgaged to the Fund to satisfy the latter's debt to saidjudgment creditor.

3.2 For Subsequent Mortgagor/Encumbrancer-Mortgage Document orinstrument showing the interest of the redemptioner in the property.

4. Redemption of the property through installment basis shall be allowed toall 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%) ofthe 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 theredemption period, the deposit and subsequent payments shall berefunded to him without interest. However, if the redemptioner is theborrower-mortgagor or the latter's heirs or the person who assumedthe mortgaged obligation, the payments shall be credited to thedeficiency, if any, and attorney's fee stipulated in the Loan andMortgage Agreement.

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

4.5.1 If the redemptioner is the borrower-mortgagor's heirs, or the personwho assumed the outstanding loan obligation:

a. The redemptioner must pay the taxes, fees, and charges forthe transfer of title from the borrower-mortgagor to the Fund, andfrom 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 redemptionprice, but the theoretical value of the property, theattorney's fees and foreclosure expenses.

Meanwhile, the person who assumed the outstanding loanobligation agrees to pay the taxes, fees and charges for thetransfer of title from the borrower-mortgagor to the Fund, and fromthe Fund to the redemptioner;

4.5.2 If the redemptioner is not the borrower-mortgagor, or the latter'sheir, or the one who assumed the mortgage obligation, theinstallment payments already paid must be whichever is higher ofthe following: the 10% of the redemption price, or the estimatedinterest, penalties and surcharges that the Fund will incur inconsolidating the title in its name belatedly.

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

However, if the redemptioner is the borrower-mortgagor, his heir, orthe person who assumed the outstanding loan obligation, there shallbe no refund as the installment payments shall be applied to thedeficiency, if any, attorney's fees and expenses attendant toforeclosure.

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

The Fund may, at its option, call for guaranty on its housing loan accountsenrolled under the HGC Cash Flow Guaranty System. Such call of guarantyshall 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 ofInternal Revenue (BIR);

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

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

2. The following documents shall be presented to the Registry of Deeds, forconsolidation 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 Title8

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 theimprovements, 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 bythe Fund or other financing institution, as may be applicable.

Foreclosure proceeds shall be divided according to the ratio of loan exposure ofPag-IBIG Fund and the originating institution after deducting all the legal andincidental expenses. Thus, the Fund's share shall be computed based on followingformula:

FP (Pag-IBIG Fund) = Pag-IBIG Fund ExposureTLE

(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 concernedRegional Trial Court (RTC), the same petition may be filed with a Notary Publicwho shall be authorized to conduct the foreclosure proceedings of a particularmortgaged property.

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

V. REPEALING CLAUSE

Pag-IBIG Fund Circular No. 304 entitled "Amended Guidelines on theForeclosure of Real Estate Mortgage", memoranda, rules, regulations, and otherissuances that are inconsistent herewith are hereby repealed, amended or modifiedaccordingly.

VI. MECHANISM ON RESOLUTION OF ISSUES

Any issue in the interpretation and implementation of these guidelines shall, as muchas possible, be resolved by the concerned officer. Matters that are not therebysatisfactorily 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 ofits publication in the Official Gazette or in a newspaper. of general circulation.

ACMAD RI A wt. MOTI

Makati City,

April 16, 2019

10