of Promissory Notes and Debts and Collateral

[swordsman]

Hi guys, can i ask your advise for a relative of mine.

A neighbor owes a relative some money. Plan is, thru a signed promissory note, neighbor will acknowledge this debt and the terms of the agreed payment(installment payment for a period of time). Other terms in case of failure of payment are:

1) delayed scheduled partial payment shall be ground for legal action
2) the neighbor will give in trust their house as collateral without any demand upon failure of payment

The promissory note is not even notarized, just signed by those in debt. No separate written form is made in regards to using the house as collateral. In the case of failure to pay, how possible that the collateral(house) can actually be used as payment based on the promissory note? Can the promissory note alone be used to force the neighbor to give up their house? Should there be another written 'mortgage' contract?

[Galactus]

AFAIK, PN's need not be notarized.

Also, in order for a real estate mortgage to be enforceable, dapat may separate real estate mortgage (REM) agreement, which should be notarized. Also, the original TCT and other pertinent documents should be surrendered to the creditor, for proper annotation.

From what you posted,I don't think there is a valid ground for repossession in case the loan becomes delinquent.

[swordsman]

AFAIK, PN's need not be notarized.

Also, in order for a real estate mortgage to be enforceable, dapat may separate real estate mortgage (REM) agreement, which should be notarized. Also, the original TCT and other pertinent documents should be surrendered to the creditor, for proper annotation.

From what you posted,I don't think there is a valid ground for repossession in case the loan becomes delinquent.

Thanks. BTW, what do you mean by proper annotation? Isn't keeping the pertinent documents and having the REM enough? How would they go about properly annotating the docs?

Been looking for that REM template, is this the real estate mortgage agreement:

[SIZE="1"]"KNOW ALL MEN BY THESE PRESENTS:



This REAL ESTATE MORTGAGE, made executed by and between:



______________________________ (mortgagor), Filipino of legal age, single

(or married to __________________________), with postal address at ______________;

and ________________________ (mortgagee), Filipino, of legal age, single (or married to __________________________), with postal address at ________________________.



WITNESSETH:



That the MORTGAGOR does hereby convey by way of REAL ESTATE MORTGAGE unto the MORTGAGEE the following described real property, situated in_________________________, together with all the improvements, to wit:



(DESCRIPTION)



of which real property, the MORTGAGOR is the registered owner in accordance with the provisions of the Land Registration Act, his title thereto being evidenced by Transfer Certificate of Title No. __________, of the Registry of Deeds of ___________________.



That this real estate mortgage is given as security for the payment to the mortgagee of a certain promissory note, dated _______________ for the sum of ______________ PESOS (P________) with interest thereon at the rate of ________________per centum (____%) per annum, according to the terms thereof and in the words and figures as follows:



(copy important details of promissory note)



That the conditions of the REAL ESTATE MORTGAGE are such that if the mortgagor shall well and truly pay or cause to be paid unto by the mortgagee the aforesaid sum with accrued interest, then this mortgage shall be of no further force and effect, otherwise, the same shall remain in full force and effect and shall be enforceable in the manner provided by law.



IN WITNESS WHEREOF, the mortgagor has hereunto set his hands this _______day of ____________, 20____ in ___________________, Philippines.







_________________________ _________________________

(Mortgagor) (Mortgagee)







SIGNED IN TIHE PRESENCE OF:





________________________ ________________________

[/SIZE]

[Galactus]

Yup, that's the REM.

You have to annotate kasi the mortgaged collateral sa Registry of Deeds kung saan located ang property, para matatakan. This will serve as notice that the property is encumbered to the creditor's favor. In any foreclosure proceedings, dapat annotated ang property, because this will serve as additional proof na ito'y nakasangla. I just don't know kung paano ang proseso pag individual to individual ang transaction, as in your neighbor's case. Dun sa RD, alam na nila ang proseso dun, but be aware that there are charges to pay (Doc. Stamps, etc), depending on the appraised value of the collateral. Ang malupit dyan, yung pagbayad sa BIR ng DST, kasi mahaba ang pila.

[boybi]

The TCTs should be annotated so that they cannot sell the property.

[kuyabanoy]

Hi guys, can i ask your advise for a relative of mine.

A neighbor owes a relative some money. Plan is, thru a signed promissory note, neighbor will acknowledge this debt and the terms of the agreed payment(installment payment for a period of time). Other terms in case of failure of payment are:

1) delayed scheduled partial payment shall be ground for legal action
2) the neighbor will give in trust their house as collateral without any demand upon failure of payment

The promissory note is not even notarized, just signed by those in debt. No separate written form is made in regards to using the house as collateral. In the case of failure to pay, how possible that the collateral(house) can actually be used as payment based on the promissory note? Can the promissory note alone be used to force the neighbor to give up their house? Should there be another written 'mortgage' contract?

Sir swordsman may sample format ka ba ng iyon PN? Paki share naman dahil yung relative ko nanghiram din sa akin kaso ang pinirmahan lang niya ay "received" lang.

[leolop]

the sample REM form you posted is sufficient to constitute the mortgage. just some points and suggestions:

1. a mortgage is security for the principal obligation which is payment for the debt.

2. add a provision as to under what conditions the mortgage can be foreclosed (number of skipped payments). make it clear creditor has the option to foreclose judicially or extra-judicially.

3. the mortgage is valid between the original parties if it is not annotated on the TCT, but it will not bind third parties who are not notified of the existence of the mortgage.

4. the property can still be sold by the debtor because a real estate mortgage is a real right which follows the property, but if the property is sold, the creditor can still foreclose if it was annotated by the TCT.

5. a stipulation that the owner can not sell the property under REM is not allowed. but the new buyer is bound by the REM.

6. in case of non-payment, the property does not automatically become the property of the creditor, because this is contrary to law. extrajudicial foreclosure only allows you to sell the property through a public auction where the creditor can participate. regardless of who wins in the auction, the mortgagor (original owner) can still buy it back within 1 year from registration of the sale.

[TJMaxx]

Before accepting that piece of land as collateral, better make sure that the TCT is "clean" i.e. there are no existing liens or lis pendens or adverse claims annotated on the copy with the Register of Deeds.
Just do the necessary due diligence first.

[pup2]

Alam ko nga hindi ganun kadali mag-foreclose ng property. Kaya nga banks charge an arm and a leg AND only loan you about half the property's worth. Parang may provision pa nga yata na hindi puwede i-foreclose if it's the ONLY property owned by the family of the borrower? (Di lang ako sure).