Extrajudicial Foreclosure of Real Estate Mortgage
to be made is subject to stipulation, such sale shall be made in said
Coverage
The law covers only real estate mortgages. It is intended merely to
regulate the extrajudicial sale and redemption of the property if and
when the mortgagee is given a special power or express authority to
do so in the deed itself or in a document annexed thereto.
Remedies available to mortgagee upon default of the mortgagor
The mortgagee has the right to foreclose the mortgage and to have
the property seized and sold, in order to apply the proceeds to the
payment of the principal obligation.
Requisites:
1. Debtor is in default in the payment of his obligation; and
2. Foreclosure limited to the amount mentioned in the mortgage
document.
Note:
If there is an acceleration clause, the failure of the mortgagor to
pay any installment will trigger the activation of the
acceleration clause and give the mortgagee the right to
foreclose the mortgage against the convention of
prematurity.
Once the proceeds have been applied to the payment of the
obligation, the debtor cannot anymore be required to
pay, unless there is a deficiency between the amount of
the loan and the foreclosure sale price.
The only rights which a mortgagor can legally transfer, cede and
convey after the foreclosure of his property are the right
to redeem the same and the possession, use, and
enjoyment of the same during the period of redemption.
Kinds of foreclosure
1. Judicial Foreclosure (Rule 68 of the Rules of Court)
2. Extrajudicial Foreclosure (Act 3135 as amended by Act 4118)
Need for Special Power of Attorney (SPA)
Under Section 1 of Act No. 3135, An SPA must be inserted in or
attached to any Real-Estate Mortgage.
Authority to Foreclose Extrajudicially
A mortgage may be foreclosed extrajudicially where there is inserted
in the contract a clause giving the mortgagee the power upon default
of the debtor, to foreclose the mortgage by an extrajudicial sale of the
mortgaged property.
Note: The authority to sell is not extinguished by the death of the
mortgagor (or mortgagee).
Procedure in Extrajudicial Foreclosure Sale
(1) Where to file
All applications shall be filed with the Executive Judge, through the
Clerk of Court, who is also Ex-Officio Sheriff.
(2) Where to sell
General Rule: The Sale must be made inside the province in which the
property sold is situated.
Exception: In case the place within said province in which the sale is
place or in the municipal building of the municipality in which the
property or part thereof is situated.
(3) Posting requirement
Notice of Sale shall be posted for not less than 20 days in at least 3
places of the municipality/city where the property is situated. (Sheriffs
Office, Assessors Office and Register of Deeds).
Posting of notice on mortgaged property not required.
Note: Failure to advertise a mortgage foreclosure sale in compliance
with statutory requirements constitutes a jurisdictional defect
invalidating the sale. A substantial error or omission in a notice of sale
will render the notice insufficient and vitiate the sale. (PNB v.
Nepomuceno 394 SCRA 405, 2002)
(4) Publication requirement
Notice of Sale shall also be published in a newspaper of general
circulation in such municipality/city where the property is located.
a. Sufficiency of newspaper publication
Notice shall also be published once a week for at least 3 consecutive
weeks in a newspaper of general circulation in the municipality or city
where the property is located. (Metrobank v. Peafiel G.R. No. 173976
Feb. 27, 2009)
b. Need for republication in case of
postponement
Notice of Sale shall be republished in case of postponement.
c. Personal notice to the mortgagor when and
when not needed
General Rule: Personal notice to the mortgagor is not generally
required.
Exemption: Unless required in the mortgage contract, the lack of
personal notice to the mortgagor is not a ground to set aside a
foreclosure sale.
f. Possession by purchaser of foreclosed
property
The purchaser may file a petition with the CFI of the province or place
where the property or any part thereof is situated, to give him
possession thereof during the redemption period.
Required Bond: A bond in an amount equivalent to the use of the
property for a period of twelve months shall be filed, to indemnify the
debtor in case it is shown that the sale was made without violating the
mortgage or without complying with the requirements of this Act.
Note: The court shall order that a writ of possession be issued upon
approval of the bond.
The sheriff of the province in which the property is situated shall
execute the writ of possession immediately.
g. Remedy of debtor if foreclosure is not
proper
The debtor may petition that the sale be set aside and the writ of
possession cancelled for the reason that the mortgage was not
violated or the sale was not made in accordance with the provisions
thereof.
 This may be done in the proceedings in which possession was The said purchaser or last redemptioner may secure a writ of
requested. possession, upon motion, from the court that ordered the foreclosure.
Redemption Note:
Right of Redemption is the right of the mortgagor to redeem the A bond is required for the writ to be issued when it is within the
mortgage property within a certain period (1 year) after it was sold for 1 year period of redemption.
the satisfaction of the mortgage debt.
If the mortgagor fails to redeem within the 1 year period, the
Requisites for valid redemption: buyer in the public auction may file a motion for the
issuance of a writ of possession. On the strength of the
1. Redemption within 1 year from registration of sale;
sheriffs certificate of sale, the she sheriff is duty-bound
2. Payment of purchase price plus 1% interest per month thereon if any, to place the buyer at the public auction in actual
paid by purchaser; AND possession of the foreclosed property after the
consolidation of title in the buyers name for failure of
3. Written notice of redemption served on officer who made the sale. the mortgagor to redeem (De Vera v. Agloro).
(1) Who may Redeem (1) Ministerial duty of the court
The following persons may redeem the property: After the consolidation of title in the buyers name for failure of the
a. Debtor, mortgagor to redeem, the writ of possession becomes a matter of
right.
b. Debtors successors in interest,
Note:
c. Judicial creditors,
Mandamus will lie.
d. Judgment creditors of said debtor, or
The judge to whom an application for writ of possession is filed
e. Any person having a lien on the property subsequent to the mortgage or need not look into the validity of the mortgage or the
deed of trust under which the property is sold. manner of its foreclosure. In the issuance of a writ of
(2) Amount of Redemption price possession, no discretion is left to the Trial Court. Any
question regarding the cancellation of the writ in
It shall consist of: respect to the validity/regularity of the foreclosure sale
a. Purchase price, plus or the mortgage should be determined in a subsequent
proceeding (PNB v. Sanao).
b. 1% interest per month thereon if any.
(2) Enforcement against third parties
(3) Period for redemption
The purchaser or last redemption shall be entitled to possession of the
General Rule: The property may be redeemed at any time within the property upon the finality of the order of confirmation or upon the
term of one (1) year from and after the date of the sale. expiration of the period of redemption, unless a third party is actually
Exemption: RA 8791 limits the redemption period of juridical holding the same adversely to the judgment debtor.
mortgagors to only 3 months, to begin from the date of the foreclosure (3) Pendency of action for annulment of sale
sale but not after the registration of the certificate of foreclosure sale
whichever comes first whenever the mortgagee is a bank. The Person who obtained possession shall furnish a bond. If the court
finds the complaint of the debtor justified, it shall dispose in his favor of
Table: all or part of the bond furnished by the person who obtained
Mortgagee Banks Non-Banks possession.

Individual 1 year from 1 year from The order of possession shall continue in effect during the pendency
Debtors/Mortgagors registration of sale registration of sale of the appeal.
Annulment of Sale
Juridical Persons as Until registration of 1 year from
Debtors/Mortgagors certificate of sale or registration of sale The debtor may petition that the sale be set aside and the writ of
3 months from sale possession cancelled, specifying the damages suffered by him,
whichever is earlier because the mortgage was not violated or the sale was not made in
accordance with the provisions hereof.
(4) Effect of pendency of action for annulment of sale
Period for filing shall not be later than thirty (30) days after the
The filing of court action to enforce redemption has effect of purchaser was given possession.
preserving the redemptioners rights; and freezing the expiration of
one year period to redeem (Banco Filipino v CA). Note:
Writ of possession It shall be done in the proceedings in which possession was
requested.
Upon finality of the order of confirmation or upon the expiration of the
period of redemption allowed by law, the purchaser or last Summary Procedure shall be followed.
redemptioner shall be entitled to possession of the property.
Either of the parties may appeal from the order of the judge.