September 28, 1994
DAR OPINION NO. 79-94
Mr. Jaime A. Fabiana
VP — Mindanao
Pag-ibig Fund — Mindanao Group
Ebro-Pelayo Bldg., Jacinto St.
Davao City
Dear Mr. Fabiana:
This has reference to your letter of 30 March 1994 addressed to DAR Regional Director Alejo V. Duque requesting clarification relative to the following:
1. Under Sec. 71 of R.A. 6057, Pag-IBIG Fund is allowed by law to hold mortgage rights in agricultural lands covered by CLOAs to secure loans and may acquire title to these mortgaged properties in case of foreclosure but subject to existing laws on compulsory transfer of foreclosed assets and acquisition as prescribed under Sec. 16 of R.A. 6657. Given these provisions, may we know how Pag-IBIG Fund can recover the loan it has extended?
2. Who will determine the appraisal value of the property? Will DAR consider the valuation of Pag-IBIG Fund?
3. Will DAR sell the property even if the two (2) year right to repurchase of the children or spouse of the beneficiary has not yet lapsed?
4. In case no qualified beneficiary is interested or can afford the Pag-IBIG foreclosed property, can Pag-IBIG Fund or DAR sell the property to the public?
Anent your first query, we wish to clarify that Section 71 of RA 6657 (the Comprehensive Agrarian Reform Law or CARL) refers only to agricultural lands which have not yet been covered under CARP. This must be so because the Section itself provides that the lands over which banks and other financial institutions are allowed to acquire title by way of foreclosure are "subject . . . to acquisition as prescribed under Section 16" of said Act. It follows that Section 71 does not apply to agricultural lands already acquired and distributed pursuant to CARL and covered by corresponding CLOAs. Moreover, please be informed that for lands financed by the Land Bank of the Philippines, a lien by way of mortgage is constituted on the land awarded to the beneficiary, which mortgage may be foreclosed by the LBP for non-payment of an aggregate of three (3) annual amortizations (Sec. 26, RA 6657). As to said lands subject of LBP amortizations, we do not see how Pag-ibig Fund can extend a subsequent loan with the same land as collateral.
As for lands already fully paid by the beneficiary, the law does not prohibit the encumbrance of the land, such as when it is used as collateral for a housing loan with the Pag-ibig Fund. However, since Section 27 of CARL prohibits the sale, transfer or conveyance of the land acquired for a period of ten years, no foreclosure of the mortgage can be made prior to the lapse of said period. This means that although the land may be used as collateral for a housing loan, the mortgagee cannot avail of the right to foreclose on the mortgage because of the 10-year prohibition against transfer. After the lapse of the 10-year period, it is submitted that foreclosure of the mortgage may be effected, as there would then be no prohibition against the transfer of the property in the name of the mortgagee in case of non-payment of the loan. Having made the foregoing clarification, we deem it unnecessary to answer the other queries posed.
Very truly yours,
(SGD.) HECTOR D. SOLIMAN
Assistant Secretary
Legal Affairs Office
Copy furnished:
Atty. Leonora Fiel
DAR Region XI
Davao City