An Act to Amend, Repeal, and Add New Sections to Republic Act Numbered Five Hundred Eighty, Otherwise Known as the Home Financing Act, to Enable the Home Financing Commission Carry Out its Functions Effectively and to Correct the Deficiencies of the Act in Order to Make it More Responsive to Peculiar Local Needs and Requirements

REPUBLIC ACT No. 1557

An Act to Amend, Repeal, and Add New Sections to Republic Act Numbered Five Hundred Eighty, Otherwise Known as the Home Financing Act, to Enable the Home Financing Commission Carry Out its Functions Effectively and to Correct the Deficiencies of the Act in Order to Make it More Responsive to Peculiar Local Needs and Requirements

Be it enacted by the Senate and House of Representatives of the Philippine Congress Assembled:

Section 1. Republic Act Numbered Five hundred and eighty otherwise known as the "Home Financing Act" is hereby amended to read as follows:

Chapter I
Creation of the Home Financing Commission

Section 2. There is hereby created a body corporate to be known as the Home Financing Commission which shall have its principal place of business in the City of Manila and shall exist for a period of fifty years. The functions of this Commission shall be—(a) To operate a mortgage insurance program as provided in this Act.

Section 3. Membership. -The Commission shall be composed of five members appointed by the President of the Philippines with the consent of the Commission on Appointments. The President shall designate one of the members as Chairman of the Commission who shall receive a compensation of twelve thousand pesos per annum. Any member of the Commission may be removed by the President for cause. Two of the members appointed shall be officers or directors of non-governmental mortgagee-institutions participating in the insured mortgage program in accordance with the provisions of this Act. The members shall receive for each meeting of the Commission attended a per diem of twenty-five pesos: Provided, However, That a member shall receive a total of not more than one thousand pesos a year in per diems. The Chairman shall hold office for five years. The members of the Commission shall likewise hold office for five years, with the exception of the members first appointed who shall serve one, two, three and four years, respectively, as stated in their appointments. Thereafter, the person appointed to succeed a member of the Commission whose term shall have expired shall continue to serve for the full-five year term, and, except in the case of vacancies caused otherwise than the expiry of the term, only one member shall be appointed to the Commission each year. In the event of vacancy, the successor appointed to fill the same shall serve only the unexpired portion of the term of the member he succeeds. Any person who is directly or indirectly interested in a construction company or in firm dealing in building and construction materials and accessories, real estate development companies and financial institutions that may have transactions with the Home Financing Commission shall be disqualified from being a member thereof, except for the two members who are officers or directors of non-governmental mortgagee-institutions participating in the insured mortgage program who shall be appointed as provided in this section.

Section 4. Powers. -The Commission shall have the following powers:

Section 5. The Chairman. -The Chairman of the Commission shall preside over its deliberations and shall be its General Manager. He shall, on behalf of the Commission, have the direction and control of the business of the Commission in all matters which are not by this Act or by the rules and regulations of the Commission specifically reserved to be done by the Commission. The decisions of the Commission shall be made by a vote of the majority of all its members.

Section 6. Home Financing Fund. -There is hereby authorized to be appropriated an amount not exceeding five million pesos to be designated as a Home Financing Fund, which shall be used by the Commission to carry out the provisions of this Act; and for this purpose the Commission is hereby authorized, with the approval of the President, to borrow such amounts as may be necessary from any government office, agency, or instrumentality or private financing entity or entities authorized to give loans. This loan may be negotiated in the form of bonds under the authority contained in section four (d) of this Act.

Section 7. Auditor. -The Auditor of the Commission shall be appointed by the Auditor General, who shall also appoint and for cause, remove, upon the recommendation of the Auditor, the personnel of the Auditing Office. The Commission shall fix the salary of the Auditor and the number and rates of salaries of the personnel of the Auditing Office. The amount of other operating expenses of the Auditing Office shall also be fixed by the Commission. The Auditor shall submit, through the Commission, an annual report on the financial condition and the result of the operation of the Commission to the President, the Senate through its President, the House of Representatives through the Speaker, the Secretary of Finance, the National Economic Council and the Auditor General.

Section 8. Report. -The Commission shall submit an annual report to the President and to the Congress of the Philippines, after the first day of January of each year but not later than the first day of April, regarding its activities under this Act for the previous year.

Chapter II
Classification of risks and method of insuring lending institutions

Section 9. With a view to encourage the repair of existing residential buildings, and the rehabilitation requirements and recovery from damage caused by the elements, the Home Financing Commission shall prescribe rules and regulations to govern the insurance authorized under this section in accordance with the provisions set forth hereunder:

Section 10. (a) The Commission is authorized, upon application by a qualified mortgagee, to insure in accordance with the provisions of this Act, any mortgage offered to it which is eligible for insurance as hereinafter provided, and, upon such terms as the Commission may prescribe, to make commitments for the insuring of such mortgages prior to the date of their execution or any disbursement thereon.

(b) To be eligible for insurance under this section a mortgage shall—

Section 11. (a) The Commission is authorized upon application by the mortgagee, to insure, in accordance with the provisions of this Act, any mortgage offered to it which is eligible for insurance as hereinafter provided and upon such terms as the Commission may prescribe (including advance on such mortgages during construction), if the mortgage covers property held by—

(b) Such mortgages may cover the installation of improvements involving—

(c) To be eligible for insurance under this section a mortgage shall—

GENERAL PROVISIONS

Section 12. (a) Notwithstanding the foregoing provisions, the Commission may, as a matter of sound business policy, set a limit on the total amount to be insured under each section of this chapter and in no case shall the aggregate amount of the outstanding principal obligations of mortgages insured under this chapter exceed five hundred million pesos at any one time.

Section 13. To be eligible for insurance under this chapter, a mortgage shall—

PAYMENT OF INSURANCE

Section 14. (a) In any case in which the mortgagee in a mortgage insured under this chapter shall have foreclosed and taken possession of the mortgaged property in accordance with regulations of the Commission, the mortgagee shall be entitled to receive the benefit of the insurance as hereinafter provided, upon (1) the prompt conveyance to the Commission of rights to the property and (2) the assignment to it of all claims of the mortgagee against the mortgagor or others. Upon such conveyance and assignment, the obligation of the mortgagee to pay the premium charges for insurance shall cease and the Commission shall subject to the cash adjustment hereinafter provided, issue to the mortgagee debentures having a total face value equal to the value of the mortgage and a certificate of claim, as hereinafter provided.

(b) For the purpose of the above-subsection (a), the value of the mortgage shall be determined, in accordance with the rules and regulations prescribed by the Commission, by adding to the amount of the original principal obligation of the mortgage which was unpaid on the date of the institution of foreclosure proceedings, or on the date of the acquisition of the property after default other than by foreclosure, the amount of all payments which have been made by the mortgagee for taxes, ground rents, and water rates, which are liens prior to the mortgage, special assessments which are noted on the application for insurance or which become liens after the insurance of the mortgage, insurance on the mortgaged property, and any mortgage insurance premiums paid after either of such dates, and by deducting from such total amount any amount received on account of the mortgage after either of such dates and any amount received as rent or other income from the property, less reasonable expenses incurred in handling the property, after either of such dates.

INVESTMENT OF FUNDS

Section 15. Moneys in the Fund, not needed for the current operations of the Home Financing Commission, shall be deposited with any government or commercial banks as may be approved by the Commission to the credit of the Fund, or invested in bonds or other obligations issued or guaranteed as to principal and interest by the Government. The Commission may purchase in the open market debentures issued under the provisions of this Act. Debentures so purchased shall be cancelled and not reissued.

Chapter III
Building and Loan Association

Section 16. (a) In order to provide local mutual thrift institutions for the accumulation of savings and for the financing of homes, the Commission is authorized, under such rules and regulations as it may prescribe, and in accordance with the provisions of existing laws, to encourage, aid or initiate the organization and incorporation of associations to be known as Building and Loan Associations, to provide for their examination, regulation, and operation when insured by the Commission, and to issue contracts of insurance for the accounts of such associations in accordance with the best practices of known mutual thrift and home financing institutions.

Section 17. (a) The Commission may insure the accounts of any Building and Loan Association and upon such term as the Commission may prescribe, to make commitments for the insuring of the accounts of such associations prior to the date of their organization and chartering. Notwithstanding the foregoing provisions, the total amount of accounts of Building and Loan Associations insured under this chapter shall not exceed the sum of five hundred million pesos at any one time.

Section 18. Each institution whose application for insurance under this Chapter is approved by the Commission shall be entitled to insurance up to the full withdrawal or repurchasable value of the accounts of each of its shareholders: Provided, However, That no shareholder shall be insured for an aggregate amount in excess of ten thousand pesos in any one association.

Section 19. The Commission is hereby authorized to prescribe, in accordance with existing laws, rules and regulations governing the procedure to be followed in the event of a default by any insured institution including the rehabilitation or liquidation of such insured institution.

Section 20. To enable the Commission to encourage local thrift and local home financing and to promote, organize and develop the association herein provided for, the Commission is hereby authorized to use money from the Fund. The sums expended under this section shall be used impartially in the promotion and development of local thrift and home financing institutions.

Section 21. Each association organized under this Chapter shall use the words "Building and Loan Association" in their corporate names in addition to any other specific designation that may be used, and, further, that no other corporation or association other than those organized under this Chapter shall be permitted to use the words "Building and Loan Association".

Chapter IV
Miscellaneous

Section 22. Definitions. -As used in this Act:

Section 23. Open-end Mortgages. -Notwithstanding any other provisions of this Act, in connection with any mortgage insured pursuant to any section of this act which covers a property upon which there is located a dwelling designed principally for residential use, the Commission is authorized, upon such terms and conditions as it may prescribe, to insure the amount of any advance for the improvement or repair of property made to the mortgagor pursuant to an "open-end" provisions in the mortgage, and to add the amount of such advance to the original principal obligation in determining the value of the mortgage for the purpose of computing the amounts of debentures and certificate of claim to which the mortgagee may be entitled: Provided, That the Commission may require the payment of such charges, including charges in lieu of insurance premiums, as it may consider appropriate for the insurance of such "open-end" advances: Provided, further, That only advances for such improvements or repairs as substantially protect or improve the basic livability or utility of the property involved shall be eligible for insurance under this section: Provided, further, That no such advance shall be insured under this section if the amount thereof plus the amount of the unpaid balance of the original principal obligation of the mortgage would exceed the amount of such original principal obligation unless the mortgagor certifies that the proceeds of such advance will be used to finance the construction of additional rooms or other enclosed space as a part of the dwelling: And Provided, further, That the insurance of "open-end" advances shall not be taken into account in determining the aggregate amount of principal obligations of mortgages which may be insured under this act.

Section 24. Warranty. -The Commission is hereby authorized and directed to require that, in connection with any property upon which there is located a dwelling designed principally for not more than a one family residence and which is approved for mortgage insurance or guaranty prior to the beginning of construction, the seller or builder, and such other person as may be required by the said Commission to become warrantor, shall deliver to the purchaser or owner of such property a warranty that the dwelling is constructed in substantial conformity with the plans and specifications on which the Commission based its valuation of the dwelling: Provided, That the Commission shall deliver to the builder, seller, or other warrantor or their written approval of any amendment of or change or variation in, such plans and specifications which the Commission deems to be a substantial amendment thereof, or change or variation therein, and shall file a copy of such written approval with such plans and specifications: Provided, further, That such warranty shall apply only with respect to such instances of substantial non-conformity to such approval plans and specifications as to which the purchaser or homeowner has given written notice to the warrantor within one year from the date of conveyance of title to, or initial occupancy of, the dwelling, whichever first occurs: Provided, further, That such warranty shall be in addition to, and not in derogation of all other rights and privileges which such purchaser or owner may have under any other law or instrument: And Provided, further, That the provisions of this section shall apply to any such property covered by a mortgage after the passage of this Act.

The Commission is further directed to permit copies of the plans and specifications for dwellings in connections with which warranties are required by this section to be made available in their appropriate offices for inspection or for copying by any purchaser, homeowner, or warrantor during such hours or periods of time as the said Commission may determine to be reasonable.

Section 25. Amendatory provisions.—

Section 26. Penalties.—

Section 27. Separability provisions. -If any provisions of this Act, or the application thereof to any person or circumstances, is held invalid, the remainder of the Act, and the application of such provision to other persons or circumstances, shall not be affected thereby.

Section 28. All laws or parts of laws inconsistent with the provisions of this Act are hereby repealed.

Section 29. This Act shall take effect upon its approval.

Approved: June 16, 1956.