Foreclosure of real estate in the Philippines primarily occurs due to a borrower’s default on loan payments, allowing lenders to seize and sell mortgaged property under Act No. 3135 (for extrajudicial) or the Rules of Court (for judicial). Key grounds include failure to settle debts, violation of mortgage terms, and non-compliance with loan obligations.
Primary Grounds for Foreclosure
- Default on Payment: The most common ground is failure to pay the principal amount or interest on a loan, often defined as missing a specific number of payments.
- Breach of Mortgage Contract: Violation of any terms, such as failure to pay real estate taxes, failure to maintain insurance, or selling the property without the lender’s consent.
- Unpaid Interest and Principal: Even if part of the loan was paid, significant unpaid, legitimate, and agreed-upon interest and principal can trigger foreclosure.
Consequences
- If a sale is conducted, the proceeds pay for costs and the debt; any remaining funds go to the debtor, but if there is a deficiency, the lender may sue for it, depending on the type of foreclosure.
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