Did you apply for a housing loan and are now having difficulty sustaining your payment? Do not fret because before initiating foreclosure, your lender will make every effort to provide you with viable alternatives. A few of these alternatives are outlined and described in the notice that will be sent to you. But even so, a lot of borrowers do not attach great importance to it, there are also those who do not even take a significant amount of time to review the notice they received, thereby missing out on better options. In the Philippines, your lender may take the time to explain various arrangements, and you should make the most of the chance to make sure that your property will not be foreclosed.
What is the meaning of a foreclosed property?
Foreclosure is a legislative procedure in which a bank or mortgage lender gains control of a property once the borrower fails to complete payments on the loan’s principal or interest for an extended amount of time. When the bank repossesses the foreclosed property in the Philippines, it offers it at a reduced price to recuperate the funds consumed on the mortgage loan. Foreclosure is among the most damaging types of financial report entries and can have an adverse influence on a borrower’s future ability to obtain credit or apply for a loan. A foreclosure will appear on a borrower’s credit report for approximately seven years.
Foreclosed properties in the Philippines usually go through these stages:
1. Payment Default
Payment default happens once you fail to make at least one mortgage payment within the agreed period with your lender. Nevertheless, take note that the technical definition of payment default varies depending on the lender. After the first payment is missed, the lender will contact you via a memo or phone. Mortgage payments are usually due on the first (1st) day of each month, with several lenders offering a time window until the fifteenth (15th). Following that, the creditor may take into account a late payment fee and deliver a missed payment notice to you.
If the borrower committed again a missed payment the following month, the lender will most likely contact you by phone. But even so, the creditor may still be prepared to cooperate with you to consider other payment arrangements, which might include having to make only one payment to avoid crashing farther and farther behind your payment.
If for some unforeseen circumstance you missed three payments in a row, the lender typically sends a demand letter declaring the amount in delinquency and giving the borrower thirty (30) days to provide the mortgage current. Your property loan in default can either result in good standing, modification, or the property repossessed or sold through foreclosure or voluntary withdrawal.
2. Notice of Default
Following your fourth month of missed payments which means that payments due are ninety (90) days late, expect to receive a Notice of Default (NOD). The above public notice grants you thirty (30) days to make up missed payments before the foreclosure process is officially initiated. Just about all lenders will not submit a default notice until you are ninety (90) days overdue, this meant that you already committed three consecutive missed payments. As a result, you may fall behind on payments for a month or two before undergoing property foreclosure.
3. Notice of Trustee’s Sale
The lender’s lawyer or foreclosure trustee will organize a sale of the repossessed property once the required forms are submitted to the court or consent is obtained. A Notice of Trustee’s Sale, also widely recognized as a Notice of Sale, is then documented in the local government unit where the property is situated declaring the precise time and location of the offer, together with the minimum opening offer for the foreclosed property. In addition, the lender usually publicizes and promotes the foreclosed property through various advertisement schemes in the weeks preceding the auction, specifying that your foreclosed property will be readily accessible at the foreclosure sale.
The duration between receiving notice of demand and the auction date depends on many factors, but it can be as little as two to three (2-3) months. You are still given the option for another payment arrangement or to complete your due balance up until about the auction date, such as legal expenses accumulated by the lender to get the foreclosure process started.
4. Trustee’s Sale
Now the foreclosed property is open for public auction, and the winning bidder who fulfills all of the conditions required will be granted it. Then the lender, or firm representing the lender, will determine an initial bid depending on the outstanding loan value as well as any liabilities, tax issues, and purchase fees.
When the winning bidder has been validated and the sale has been fulfilled, the winning bidder will be given a trustee’s deed upon sale. The winning bidder then becomes the foreclosed property’s new owner and has the right to take the property as soon as possible.
5. Real Estate Owned (REO)
The lender will impose a minimum bid based on the assessable value of the property, the total sum still owed on the property, some other unpaid taxes, and legal expenses. If and when the property is not sold at the public auction, the lender may become the property owner and offer to sell this through a real estate agent or with the help of a real estate-owned (REO) asset manager. This foreclosed property is commonly known as “bank-owned,” and the lender may consider removing some of the outstanding debts and other charges to make the property more appealing.
If you are still living in your foreclosed property after the auction and a new owner had been declared, may it either be the bidding winner or the lender if the property is not sold, you will receive an order to leave. One such eviction notice requires you or anyone else residing in the foreclosed property to move out of the premises as soon as possible.
Usually, multiple days may be allowed to make it possible for you and other current residents to depart and consider removing all personal possessions. The local law enforcement will then generally go to the property, eliminate the former owner’s belongings, and tow away any left-standing possessions.
It is important for you to take action as soon as possible, rather than waiting until it is far too late! In the Philippines, you can stop your property from being foreclosed by talking to your lender if you did not obtain any offer from them or if you ended up taking the suggestions for granted too soon.
Do you have plans of purchasing foreclosed properties in the Philippines?
Recently, purchasing foreclosed properties in the Philippines has been a trend among aspiring Filipino property owners. If one of your considerations is affordability, purchasing foreclosure property is one of the wisest choices. Foreclosed properties are not only cost-effective, but they can also protect you from the additional burden that goes with the challenging procedure of buying real estate properties in the Philippines.
Read more here: Things to Know Before Buying Foreclosed Properties
Speaking of affordability, BRIA Homes primes itself on developing affordable house and lot packages and easy-on-the-pocket condominium units that cater to ordinary Filipino families who aspire to acquire their own homes. It had become the perfect choice for average Filipino workers who wanted to invest in a high-quality and affordable home.
Interested property seekers can check out BRIA Homes developments through virtual tours on the BRIA website. You may also send inquiries via the official BRIA Facebook page, or reserve a property online through the BRIA reservation page.
Written by MC Sanchez