Fourteenth Congress

Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-seventh day of July, two thousand nine.

REPUBLIC ACT No. 9904

AN ACT PROVIDING FOR A MAGNA CARTA FOR HOMEOWNERS AND HOMEOWNERS’

ASSOCIATIONS, AND FOR OTHER PURPOSES

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

CHAPTER I
TITLE AND DECLARATION OF POLICY

Section 1. Title. – This Act shall be known as the "Magna Carta for Homeowners and
Homeowners’ Associations".

Section 2. Declaration of Policy. - In fulfillment of the constitutional principles directing the State to
encourage, promote and respect nongovernmental, community - based and people’s organizations
in serving their legitimate collective interests in our participatory democracy, it is hereby declared the
policy of the State to uphold the rights of the people to form unions, associations, or societies, and to
recognize and promote the rights and the roles of homeowners as individuals and as members of
the society and of homeowners' associations. To this end, the State shall endeavor to make
available resources and assistance that will help them fulfill their roles In serving the needs and
interests of their communities, in complementing the efforts of local government units (LGUs) in
providing vital and basic services to our citizens, and in helping implement local and national
government policies, programs, rules and ordinances for the development of the nation.

Section 3. Definition of Terms. - For purposes of this Act, the following terms shall mean:

(a) "Accounting period" refers to the fiscal or calendar year adopted by a homeowners’
association in the recording and reporting of its fiscal transactions.

(b) "Association" refers to the homeowners’ association which is a nonstick, nonprofit

corporation registered with the Housing and Land Use Regulatory Board (HLURB), or one
previously registered with the Home Insurance Guarantee Corporation (now Home Guaranty
Corporation) or the Securities and Exchange Commission (SEC), organized by owners or
purchasers of a lot in a subdivision/village or other residential real property located within the
jurisdiction of the association; or awardees, usufructuaries, legal occupants and/or lessees of
a housing unit and/or lot in a government socialized or economic housing or relocation
project and other urban estates; or underprivileged and homeless citizens as defined under
existing laws in the process of being accredited as usufructuaries or awardees of ownership
rights under the Community Mortgage Program (CMP), Land Tenure Assistance Program
(LTAP) and other similar programs in relation to a socialized housing project actually being
Implemented by the national government or the LGU.

(c) "Association member" refers to a homeowner who is a member of the association where
his/her housing unit or lot is situated and those defined in the articles of incorporation and
bylaws of the association.
(d) "Basic community services and facilities" refer to services and facilities that redound to
the benefit of all homeowners and from which, by reason of practicality, no homeowner may
be excluded such as, but not limited to: security; street and vicinity lights; maintenance,
repairs and cleaning of streets; garbage collection and disposal; and other similar services
and facilities.

(e) "Board" refers to the board of directors or trustees of the association which has primary
authority to manage the affairs of the association.

(f) "Common areas" refer to property owned or otherwise maintained, repaired or

administered in whole or in part by the association including, but not limited to, roads, parks,
playgrounds and open spaces as provided in Presidential Decree No. 1216.

(g) "Common expense" refers to costs incurred by the association to exercise any of the
powers provided for in this Act.

(h) "Economic housing" refers to a type of housing project with lower interest rates and
longer amortization periods provided to moderately low - income families, as defined under
existing laws, rules and regulations.

(i) "Governing document" refers to the articles of incorporation, bylaws, conditions, rules and
regulations of the association, or other written instrument by which the association has the
authority to exercise any of the powers provided for in this Act.

(j) "Homeowner" refers to any of the following;

(1) An owner or purchaser of a lot in a subdivision/village;

(2) An awardee, usufructuary, or legal occupant of a unit, house and/or lot in a

government socialized or economic housing or relocation project and other urban
estates; or

(3) An informal settler in the process of being accredited as beneficiary or awardee of

ownership rights under the CMP, LTAP, and other similar programs.

(k) "Residential real property" refers to any real property, the use of which is limited by law to
primarily residential purposes.

(l) "Simple majority" refers to fifty percent (50%) plus one (1) of the total number of
association members.

(m) "Socialized housing" refers to housing programs and projects covering houses and lots
or home lots only undertaken by the government or the private sector for the underprivileged
and homeless citizens which shall include sites and services development, long - term
financing, liberalized terms on interest payments, and other benefits in accordance with the
provisions of Republic Act No. 7279, otherwise known as the Urban Development and
Housing Act of 1992 (UDHA).

(n) "Subdivision/Village" refers to a tract or parcel of land partitioned into individual lots, with
or without improvements thereon, primarily for residential purposes.
Section 4. Registration with the HLURB. - Every association of homeowners shall be required to
register with the HLURB. This registration shall serve to grant juridical personality to all such
associations that have not previously acquired the same by operation of the General Corporation
Law or by any other general law.

The procedure for registration shall be specifically provided for in the implementing rules and
regulations to be promulgated by the HLURB pursuant to Section 28 of this Act.  Such procedure
1avvphi1

shall provide for an adjudicatory mechanism that will be observed in the event there is a dispute
involving two (2) or more associations established within the same subdivision/village),
community/area, or housing project seeking registration. In resolving this type of dispute, the HLURB
shall take into account the date each association was legally established, the date of submission of
its application for registration, the number of members, and other similar factors.

The existence of associations previously registered with the Home Insurance Guarantee Corporation
or the SEC shall be respected, and the said associations shall not be charged a penalty when they
register with the HLURB after this Act takes effect.

CHAPTER II
HOMEOWNERS

Section 5. Rights and Duties of Every Homeowner. - Every homeowner has the right to enjoy the
basic community services and facilities: Provided, That he/she pays the necessary fees and other
pertinent charges.

Section 6. Qualification of a Member. - A homeowner as defined under this Act shall be qualified to
be a member of an association: Provided, however, That a lessee, usufructuary, or legal occupant
shall have the right of a homeowner as set forth under this Act upon procurement of a written
consent or authorization from the owner of the lot or housing unit.

Until such consent or authorization is revoked in writing, the owner of the lot or housing unit is
deemed to have waived his/her rights enumerated under Section 7 of this Act, except subsection (b)
of the same section which can be simultaneously enjoyed by both the owner and the lessee.

For purposes of this Act, the lessee authorized in accordance with this sect shall qualify as a
member with all the rights enumerated in this Act, including the duties and obligations enumerated
under Sections 7, 8 and 9 hereof: Provided, further, That lessees in government socialized housing
projects or urban estates and those in communities of underprivileged and homeless citizens
covered under the term under Section 3 of this Act will be considered as homeowners for the
purpose of qualifying as a member of a homeowners' association without need of such written
consent or authorization.

Section 7. Rights of a Member. - An association member has full rights:

(a) to avail of and enjoy all basic community services and the use of common areas and
facilities;

(b) to inspect association books and records during office hours and to be provided upon
request with annual reports, including financial statements;

(c) to participate, vote and be eligible for any elective or appointive office of the association
subject to the qualifications as provided for in the bylaws;
 (d) to demand and promptly receive deposits required by the association as soon as the
condition for the deposit has been complied with or the period has expired;

(e) to participate in association meetings, elections and referenda, as long as his/her bona
fide membership subsists; and

(f) to enjoy all other rights as may be provided for in the association bylaws.

Section 8. Duties of a Member. - A member shall have the following duties:

(a) to pay membership fees, dues and special assessments;

(b) to attend meetings of the association; and

(c) to support and participate In projects and activities of the association.

Section 9. Delinquent Member. - The bylaws shall provide for guidelines and procedures in
determining who is a delinquent member, or a member not in good standing, and to prescribe the
administrative sanctions to be imposed on such member. The right to due process shall be observed
in cases where administrative sanctions are imposed on a delinquent member.

CHAPTER III
HOMEOWNERS’ ASSOCIATION

Section 10. Rights and Powers of the Association. - An association shall have the following rights
and shall exercise the following powers:

(a) Subject to consultation and with the approval of a simple majority of the members, adopt
and amend the articles of incorporation and bylaws, rules and regulations, pursuant to
existing laws and regulations;

(b) In behalf of its members, institute, defend, or intervene in litigation and/or administrative
proceedings affecting the welfare of the association and the subdivision/village as a whole,
excluding, however, disputes that are not the responsibility of the association;

(c) Regulate the use, maintenance, repair, replacement and modification of common areas
and cause additional improvements to be made part of the common areas: Provided, That
the aforementioned do not contradict the provisions of the approved subdivision plan;

(d) Regulate access to, or passage through the subdivision/village roads for purposes of
preserving privacy, tranquility, internal security, and safety and traffic order: Provided, That:
(1) public consultations are held; (2) existing laws and regulations are met; (3) the authority
of the concerned government agencies or units are obtained; and (4) the appropriate and
necessary memoranda of agreement are executed among the concerned parties;

(e) Hire, discharge or contract managing agents and other employees, agents and
independent contractors to ensure the full functioning and operation of the association;

(I) Subject to consultation with and the approval of a simple majority of the association
members, acquire, hold, encumber and convey in its own name any right, title to or interest
in real or personal property: Provided, That such approval of a simple majority of the
 association members shall not be required for the acquisition, holding, encumbrance and
conveyance of personal properties in amounts not exceeding ten percent (10%) of the
association’s cash holdings for its use in the course of its normal operations;

(g) Ensure the availability of quality water services at a reasonable price and at its option,
administer and manage the waterworks system of the subdivision;

(h) Upon consultation, grant easements, leases, concessions and authority to use common
areas and petition for or consent to the vacation of streets and alleys: Provided, That the said
grant of easements, leases, concessions and authority shall not be applicable to access
roads, main interconnecting roads, alleys and sidewalks within the subdivision;

(i) Impose or collect reasonable fees for the use of open spaces, facilities, and services of
the association to defray necessary operational expenses, subject to the limitations and
conditions imposed under the law, the regulations of the board and the association’s bylaws;

(j) Cause compliance with regard to height regulations, easements, use of homes, buildings,
edifices, or structures that may be built within the subdivision, in accordance with the
National Building Code, zoning laws, HLURB rules and regulations, existing local
ordinances, and existing deeds of restriction;

(k) Subject to consultation and with the approval of a simple majority of the association
members, allow the establishment of certain institutions such as, but not limited to, schools,
hospitals, markets, grocery stores and other similar establishments that will necessarily
affect the character of the subdivision/village in terms of traffic generation, and/or opening
the area to outsiders which may result in the loss of privacy, security, safety, and tranquility
to its residents, in accordance with the National Building Code, zoning laws, existing local
ordinances, HLURB rules and regulations, and existing jurisprudence: Provided, That such
prior approval shall not be necessary for the establishment of sari - sari stores, home
industries and similar small - scale business enterprises within the subdivision/village
classified as socialized housing;

(l) Suspend privileges of and services to and/or impose sanctions upon its members for
violations and/or noncompliance with the association's bylaws, and rules and regulations;

(m) Petition for the creation of a separate barangay, independently or together with
neighboring subdivisions: Provided, That all the requirements of the Local Government Code
of 1991 are met; and

(n) Exercise any other powers conferred by the bylaws and the HLURB necessary for the
governance and operation of the association.

Section 11. Board of Directors or Trustees. - The bylaws of the association shall provide for the
qualifications and number of the directors or trustees that will comprise the board.

Section 12. Duties and Responsibilities of the Board. In addition to the duties and responsibilities
stated in the bylaws of the association, the board shall have the following duties and responsibilities:

(a) Regularly maintain an accounting system using generally accepted accounting principles,
and keep books of accounts, which shall be open for inspection to any homeowner and duly
 authorized representatives of government agencies upon request, during reasonable hours,
on business days;

(b) Collect the fees, dues and assessments that may be provided for in the bylaws and
approved by a majority of the members;

(c) Collect reasonable charges for assessments, and after due notice and hearing by the
board in accordance with the procedures as provided in the bylaws, and rules and
regulations adopted by the board, charge reasonable fines for late payments and for
violation of the bylaws, rules, and regulations of the association, in accordance with a
previously established schedule adopted by the board and furnished to the homeowners;

(d) Propose measures to raise funds and the utilization of such funds and submit the same
for consideration of the members of the association;

(e) Undergo a free orientation by the HLURB or any other competent agency deputized by it
on how to conduct meetings, preparation of minutes, handling of accounts, laws and
pertinent rules and regulations within thirty (30) days after election or appointment;

(f) Discharge the duties and responsibilities provided for in the association’s bylaws; and

(g) Exercise such other powers as may be necessary and proper in accordance with this Act
and for the accomplishment of the purposes for which the association was organized.

The board shall act in all instances on behalf of the association, except to amend the articles of
incorporation, to dissolve the association, to elect members of the board or to determine the
qualifications, powers and duties, or terms of office of the board, and other instances that require the
vote or approval of the members themselves. In the performance of their duties, the officers and
members of the board shall exercise the degree of care and loyalty required by such position.

Section 13. Removal of a Director or Trustee. - Through a signed petition of a simple majority of the
association members in good standing, subject to a verification and validation by the HLURB, a
director/trustee may be removed for causes provided in the bylaws of the
association: Provided, That if a majority of the members of the board is removed, it shall be
considered a dissolution of the entire board, in which case, Section 14 hereof shall govern.

Within sixty (60) days after the removal of a director or trustee, an election shall be called by the
remainder of the board for the purpose of determining who shall hold office for the unexpired term of
the removed director/trustee.

Section 14. Dissolution of the Board. - Through a signed petition of two - thirds (2/3) of the
association members subject to a verification and validation by the HLURB, the board of the
association may be dissolved for causes provided in the bylaws of the association.

Within sixty (60) days from the above dissolution, an election for a new board shall be called and
conducted by the HLURB for the purpose of determining who shall hold office for the unexpired term
of the dissolved board.

Until the new board members shall have been elected and qualified, the HLURB shall designate an
interim board: Provided, That such board shall be composed of association members in good
standing: Provided, further, That such interim board members shall not be eligible to run in the
election called for the purpose of replacing the members of the dissolved board.

Section 15. Association Bylaws. - The bylaws of the association shall be adopted by a simple
majority of the members of the association. Consistent with the provisions of this Act, it shall provide
for:

(a) The rights, duties and obligations of members;

(b) The circumstances under which membership is acquired, maintained, and lost;

(c) The schedule, venue, and manner of conducting the regular, special, and emergency
meetings of the general membership, the required quorum, and allowable proxies in such
meetings;

(d) The number, qualifications, powers and duties, terms of office, manner of electing and
removing the board and the filling of vacancies in the board: Provided, That the term of office
of the members of the board shall not exceed two (2) years;

(e) The qualifications, positions, duties, election or appointment, and compensation of other
officers and employees of the association: Provided, That the term of office of the other
officers shall not exceed two (2) years: Provided, further, That no officer of the association
holding a rank of director or trustee shall likewise be entitled to any compensation;

(f) The schedule, venue, and manner of conducting the regular, special, and emergency
meetings of the board, the required quorum, and allowable proxies in such meetings;

(g) Such powers that the board may delegate to a managing agent, if any, or to other
persons;

(h) Which of its officers may prepare, execute, certify and record amendments to the
governing documents on behalf of the association;

(i) The grounds and procedure for removal of director or trustee, and the manner of filling up
vacancies in the board, consistent with Section 13 of this Act;

(j) The grounds and procedure for dissolution of the board, and the manner of reconstituting
the board, consistent with Sections 13 and 14 of this Act;

(k) The actions for limiting, broadening or denying the right to vote, and the extent thereof;

(I) The designation of the presiding officer at meetings of directors or trustees and members;

(m) The time for holding the regular election of directors or trustees and the mode or manner
of giving notice thereof;

(n) The creation of election, grievance and audit committees, and such other committees
which the association may deem necessary; as well as a conciliation or mediation
mechanism for the amicable settlement of disputes among members, directors or trustees,
officers and committee members of the association;
 (o) The dues, fees, and special assessments to be imposed on a regular basis, and the
manner in which the same may be imposed and/or increased;

(p) The method of adopting, amending, repealing and abrogating the bylaws;

(q) The list of acts constituting a violation by its officers and the corresponding penalties
therefor;

(r) The penalties for violation of the bylaws; and

(s) Such other matters necessary for the proper or convenient transaction of its corporate
business and affairs.

Section 16. Proxies. - Association members may vote in person or by proxy in all meetings of
members. Proxies shall be in writing, signed by the member and filed before the scheduled meeting
with the association secretary. Unless otherwise provided in the proxy, it shall be valid only for the
meeting for which it is intended, No proxy shall be valid and effective for a period longer than three
(3) years at anyone time unless earlier revoked by the member.

Section 17. Financial and Other Records. - The homeowners’ association is enjoined to observe the
following, with regard to its funds, financial and other records:

(a) The association or its managing agent shall keep financial and other records sufficiently
detailed to enable the association to fully declare to each member the true statement of its
financial status. All financial and other records of the association including, but not limited to,
checks, bank records and invoices, in whatever form these are kept, are the property of the
association. Each association’s managing agent shall turn over all original books and
records to the association immediately upon termination of the management relationship with
the association, or upon such other demand as is made by the board. An association’s
managing agent is entitled to keep association records. All records which the managing
agent has turned over to the association shall be made reasonably available for the
examination and copying by the managing agent;

(b) All records involving the affairs of the association shall be available for examination by all
owners, holders of mortgages on the lots, and their respective authorized agents upon
reasonable advanced notice, during normal working hours at the office of the
association: Provided, That holders of mortgages on lots may have access to the information
about the property held in mortgage with the written consent of the registered owner;

(c) A financial statement of the association shall be prepared annually by an auditor, the
treasurer and/or an independent certified public accountant within ninety (90) days from the
end of the accounting period to be posted in the association office, bulletin boards, or other
conspicuous places within the subdivision/village, and to be submitted to the HLURB; and

(d) The funds of the association shall be kept in accounts in the name of the association and
shall not be joined with the funds of any other association, or any person responsible for the
custody of such funds.

Section 18. Relationship with LGUs. - Homeowners' associations shall complement, support and
strengthen LGUs in providing vital services to their members and help implement local government
policies, programs, ordinances, and rules.
Associations are encouraged to actively cooperate with LGUs in furtherance of their common goals
and activities for the benefit of the residents of the subdivisions/villages and their environs.

Where the LGUs lack resources to provide for basic services, the associations shall endeavor to tap
the means to provide for the same. In recognition of the associations’ efforts to assist the LGUs III
providing such basic services, association dues and income derived from rentals of their facilities
shall be tax - exempt: Provided, That such income and dues shall be used for the cleanliness,
safety, security and other basic services needed by the members, including the maintenance of the
facilities of their respective subdivisions or villages.

LGUs shall, upon due notice, hold public consultations with the members of the affected
associations, especially their officers and directors, where proposed rules, zoning and other
ordinances, projects and/or programs affecting their jurisdiction and surrounding vicinity are to be
implemented prior to the effectivity or implementation of such rules, zoning, ordinances, projects or
programs: Provided, That in cases of zonal reclassification, the approval of a simple majority of
homeowners shall be required.

Such public consultations shall conform to the manner as specified in Rule XI, Article 54 of the
implementing rules and regulations of Republic Act No. 7160, otherwise known as the Local
Government Code of 1991.

Section 19. Relationship with National Government Agencies. - The associations shall complement,
support and strengthen the efforts of the national government agencies in providing vital services to
their members and help implement the national government policies and programs.

Associations are encouraged to actively cooperate with national government agencies in the
furtherance of their common goals and activities for the benefit of the residents of the subdivisions
and its environs. National government agencies shall consult the associations where proposed rules,
projects and/or programs may affect their welfare.

CHAPTER IV
DUTIES AND RESPONSlBILlTIES OF THE HLURB

Section 20. Duties and Responsibilities of the HLURB. - In addition to the powers, authorities and
responsibilities vested in it by Republic Act No. 8763, Presidential Decree No. 902 - A, Batas
Pambansa Big. 68 and Executive Order No. 535, Series of 1981, as amended, the HLURB shall:

(a) Regularly conduct free orientation for officers of homeowners’ associations or deputize
another competent agency to conduct the orientation;

(b) Formulate and publish a Code of Ethics and Ethical Standards for board members
detailing prohibited conflicts of interest;

(c) Register all associations, federations, confederations or umbrella organizations of the

associations;

(d) Hear and decide inter - association and/or inter - association controversies and/or
conflicts, without prejudice to filing civil and criminal cases by the parties concerned before
the regular courts: Provided, That all decisions of the HLURB are appealable directly to the
Court of Appeals;
 (e) Formulate the rules or manner of verification and validation of petitions for the removal of
director(s) or trustee(s) of the association or dissolution of the board pursuant to Sections 13
and 14 of this Act;

(f) Exercise the same powers over federations, confederations or umbrella organizations of
the associations;

(g) Formulate, in consultation with the representatives of associations, federations,

confederations or umbrella organizations of the associations, standard nomenclatures to be
used for the associations' books of accounts, and a standard articles of incorporation and
bylaws for homeowners' association for reference purposes;

(h) Formulate, in consultation with the representatives of associations, federations,

confederations or umbrella organizations of the associations, the guidelines in regulating the
kinds of contributions and fees that may be charged and/or collected by associations; and

(i) Call upon the Philippine National Police, other law enforcement agencies, and other
instrumentalities of the government, if necessary, for the enforcement of its functions.

Section 21. Additional Positions and Personnel for the HLURB. - For purposes of this Act, the
HLURB shall, upon its discretion, create positions and enlist additional personnel to carry out its
mandate.

CHAPTER V
FINAL PROVISIONS

Section 22. Prohibited Acts. - It shall be prohibited for any person:

(a) To compel a homeowner to join the association, without prejudice to the provisions of the
deed of restrictions, its extensions or renewals as approved by the majority vote of the
members or as annotated on the title of the property; the contract for the purchase of a lot in
the subdivision project; or an award under a CMP project or a similar tenurial arrangement;

(b) To deprive any homeowner of his/her right to avail of or enjoy basic community services
and facilities where he/she has paid the dues, charges, and other fees for such services;

(c) To prevent any homeowner who has paid the required fees and charges from reasonably
exercising his/her right to inspect association books and records;

(d) To prevent any member in good standing from participating in association meetings,
elections and referenda;

(e) To deny any member due process in the imposition of administrative sanctions;

(f) To exercise rights and powers as stated m Section 10 in violation of the required
consultation and approval of the required number of homeowners or members;

(g) To unreasonably fail to provide basic community services and facilities and maintain,
repair, replace, or modify such facilities;

(h) To unreasonably fail to comply with Section 17 of this Act; or

 (i) To violate any other provision of this Act.

Section 23. Penalties and Sanctions. - Any person who, intentionally or by gross negligence,
violates any provision of this Act, fails to perform his/her functions under this Act and/or violates the
rights of the members, shall be punished with a fine of not less than Five thousand pesos (Php5,
000.00) but not more than Fifty thousand pesos

(Php50, 000.00) and permanent disqualification from being elected or appointed as member of the
board, officer or employee of the association, without prejudice to being charged before a regular
court for violations of the provisions of the Revised Penal Code, Civil Code and other pertinent laws.

If the violation is committed by the association, the members, officers, directors or trustees of the
association who have actually participated in, authorized, or ratified the prohibited act shall be held
liable.

If the violation is committed by the employees and agents who acted in gross violation of the
provisions of this Act, the officers, directors or trustees, or incorporators of the association shall be
jointly and severally liable with the offending employees, agents, and the association. 1avvphi1

Section 24. Review of Association's Bylaws. - In order to comply with the provisions of this Act, the
homeowners' association shall, within six (6) months from the effectivity of this Act, conduct a review
of its bylaws, draft its own rules of procedure to be incorporated in the bylaws and conduct a
plebiscite for the approval of the members of the association. A simple majority shall be used to
determine the approval of the bylaws.

Section 25. Appropriations. - The amounts necessary for the implementation of this Act and for
carrying out the additional functions and responsibilities of the HLURB shall be included in the
annual General Appropriations Act.

Section 26. Separability Clause. - If any provision of this Act is declared invalid or unconstitutional,
the remainder of the Act shall remain valid and subsisting.

Section 27. Repealing Clause. - All other issuances, laws, decrees, orders, rules and regulations, or
parts thereof inconsistent with this Act are hereby repealed or modified accordingly.

Section 28. Implementing Rules and Regulations. - The HLURB shall formulate and promulgate, in
consultation with concerned sectors, rules and regulations necessary to implement the provisions of
this Act within SIX (6) months of its effectivity.

No rule or regulation shall be issued which tends to undermine the organizational and territorial
integrity of any association.

Section 29. Effectivity. - This Act shall take effect fifteen (15) days following Its publication ill the
Official Gazette or III at least two (2) national newspapers of general circulation.

Approved,

Approved,

PROSPERO C. NOGRALES JUAN PONCE ENRILE

 Speaker of the House of Representatives President of the Senate

This Act which is a consolidation of Senate Bill No. 3106 and House Bill No. 50 was finally passed
by the Senate and the House of Representatives on October 13, 2009.

MARILYN B. BARUA-YAP EMMA LIRIO-REYES

Secretary General House of Secretary of the Senate
Representatives

Approved: JAN. 07, 2010

GLORIA MACAPAGAL-ARROYO
President of the Philippines

REPUBLIC ACT 8763

ACT CONSOLIDATING AND AMENDING REPUBLIC ACT NOS. 580, 1557, 5488, AND 7835 AND
EXECUTIVE ORDER NOS. 535 AND 90, AS THEY APPLY TO THE HOME INSURANCE AND
GUARANTY CORPORATION WHICH SHALL BE RENAMED AS HOME GUARANTY
CORPORATION, AND FOR OTHER PURPOSES

Be enacted by the Senate and House of Representatives of the Philippines in Congress assemble:

CHAPTER I
TITLE AND DECRARATION OF POLICY

Section 1. Title. – This Act shall be known as Home Guaranty Corporation Act of 2000".

Section 2. Declaration of Policy. – It is hereby declared the policy of the State to undertake, in
cooperation with the private sector, continuing nationwide housing program which will make
available at affordable cost decent housing.

In recognition of the role of housing as catalyst of economic growth and development, it is hereby
declared a Statement policy to strengthen, promote and support the component activities of housing
production and finance.

Section 3. Statement of Objectives. – Toward this end, the State shall integrate all laws providing for
housing credit guaranty to attain the following objectives:

(a) Ensure continuous funding support to vigorously implement the government’s programs
for urban and rural housing, resettlement, the development of site and services, and the
renewal of blighted areas;

(b) Enhance the capability of low-income groups to acquire decent and low-cost housing
units through the introduction of support mechanisms and facilities which shall render
affordable such acquisitions;
 (c) Provide for a strong and sustainable housing finance program with complimentary
support systems, which will pump prime, build-up and strengthen available sources of cheap
and long term capital;

(d) Increase the private sectors’ participation in the investment of their funds into the
mainstream of housing finance for developmental and end-user financing requirements;

(e) Encourage the flow of private funds for mass housing development and homebuyers’
financing through a viable system of mortgage and credit guaranty;

(f) Enjoin the active participation of local government units in socialized housing programs
through adequate measures for housing development in their respective areas;

(g) Strengthen the capital base and optimize the resources of the Nation Government and
the Corporation to ensure that homeless families across the nation can enjoy benefits that
can be derived from the government’s guaranties facilities;

(h) Serve the housing requirement of all the underprivileged and those gainfully employed
especially those who are not members of any funding agencies such as the Government
Service and Insurance System (GSIS), Social Security System (SSS), and Home
Development Mutual Fund (HDMF); and

(i) Institutionalize and promote the aided self-help approach in homeownership and introduce
support facilities that will enhance the capability of low income groups to acquire decent
housing.

CHAPTER II
HOME GUARANTY CORPORATION

Section 4. Home Guaranty Corporation. – The Home Insurance and Guaranty Corporation is hereby
renamed as the Home Guaranty Corporation, hereinafter referred to as the Corporation, which shall
have its principal office in Metropolitan Manila and shall exist for a period of fifty (50) years from
December 15, 2000. The Corporation may establish such offices, agencies, subsidiaries or branches
anywhere in the Philippines as its operations would require and its Board of Directors would
determine.

Section 5. Corporation Powers and Functions. – The Corporation, in addition to the regular powers
and functions provided under Section 36 of the Corporation Code, shall have the following powers
and functions, subject to the limitations hereinafter provided:

(a) To promote homebuilding and land ownership, giving primary preference to the homeless
and underprivileged sectors of the society;

(b) To guaranty the payment in favor of any natural or juridical person, of any and all forms of
mortgages, loans and other forms of credit facilities and receivables arising from financial
contracts exclusively for residential purposes and the necessary support facilities thereto;

(c) To assist private developers to undertake socialized, low and medium cost mass housing
projects by encouraging private funds to finance such housing projects through a viable
system of long-term mortgages, guaranties and other incentives;
(d) To pursue the development and sustainability of a secondary mortgage market for
housing as the primarily strategy to encourage private sector participation in housing finance.
The Corporation shall undertake such programs and measures using the guaranty cover as
enhancement to encourage trading by the public in a secondary market for housing
mortgages, bonds, debentures, notes and securities;

(e) To underwrite, purchase, own, sell, mortgage or otherwise dispose of stocks, bonds,
debentures, securities and other evidence of indebtedness issued in correction with the
powers enumerated in this Act: Provided, That, it shall not engage in direct mortgage lending
activities;

(f) To borrow money and/or to issue bonds, debentures, securities, collaterals, notes and
other obligations in local currencies with the approval of the President of the Philippines after
consultation with the Monetary Board of the Bangko Sentral ng Pilipinas, and in foreign
currencies, here or abroad, with the approval of the President of the Philippines with the
Monetary Board of Bangko Sentral ng Pilipinas and the Secretary of Finance, but in no case
to exceed at any one time the aggregate amount of the principal obligations of all mortgages
and account guaranteed under this Act. This bonds and other obligations shall be issued
under such terms and conditions as provided in this act and the rules and regulations
prescribed by the Corporation, and in such manner as maybe stipulated therein and shall
bear such rate of interest as may be fixed by the Corporation. Such obligation shall be
secured by the assets of the Corporation including the stocks, bonds, debentures and other
securities underwritten, purchased or held by it under the provisions of this Act. Such
obligations may be issued and offered for sale at such price as the Corporation may
determine, and shall be exempt from taxation as hereinafter provided as to principal and
interest, except state, inheritance and gift taxes.

Bonds issued by the Corporation shall be registered at the request of the holder thereof
under such rules and regulations as may be prescribed by the Corporation;

(g) To promote housing by the aided self –help method whereby families with some outside
aid build their won houses with their own labor; to provide technical guidance to such
families; to guaranty loans to such families on first liens on house and land with such other
security and conditions as the Corporation shall determine, providing at least for ultimate
recovery of principals; and to do all other activities as are relevant and significant in such a
program of aided self-help for housing;

(h) To adopt, alter, and use a corporate seal; to enter contracts; and to sue and be sued in
any court of competent jurisdiction;

(i) To acquire, purchase, own, hold, manage, administer, operate, develop, lease pledge,
mortgage, exchange, sell, transfer or otherwise dispose of, in any manner permitted by law,
real and personal property with every kind and description, monies and funds, or any interest
therein as may be necessary to carry out the purposes and objectives of the Corporation;
and

(j) To do any and all acts and things and to exercise all powers which may be necessary or
convenient to the accomplishment or furtherance of its purposes and objectives, or which a
natural person can do and exercise and which may now be or hereafter be authorized by
law.
Section 6. Authorized Capital Stock. - The Corporation shall have an authorized capital stock of Fifty
Billion pesos (P50,000,000,000.00), divided into Fifty Million (50,000,000.00) shares of common
stock with a par value of One Thousand Pesos (P1,000.00) per share.

Out of the increase in its authorized capital stocks of Forty-Seven Billion Five Hundred Million Pesos
(P47,500,000,000.00), the amount of Seven Billion Five Hundred Million Pesos (P7,500,000,000.00)
is hereby appropriated out of the funds of the National Treasury, not otherwise appropriated.
Succeeding National Government equity to the Corporation shall be included in the annual General
Appropriations Act.

No portion of the authorized capital stocks of the Corporation shall accrue to any agency or
instrumentality of the National Government, including government-owned or-controlled corporations.

Section 7. Use of Net Worth – The use of the net worth of the Corporation shall be subject to the
following limitations:

(a) At least forty percent (40%) shall be allocated exclusively for socialized housing, to be
distributed equitably among all the regions, to the extent practicable;

(b) At least thirty percent (30%) shall be allocated exclusively for low-cost housing, to be
distributed equitably among all the regions, to the extent practicable;

(c) At least twenty percent (20%) shall be allocated exclusively for medium-cost housing, to
be distributed equitably among all the regions, to the extent practicable; and

(d) Not more than ten percent (10%) may be allocated for open housing.

Investments, if any, by the Corporation in any establishment or enterprise, whether public or private,
shall be subject to the same limitation, herein above provided as well as those specified in Chapter
III of this Act.

Section 8. Board of Directors. – The Corporation shall be governed and its activities be directed,
controlled and manage by a Board of Directors, hereinafter referred to as the Board, which shall be
composed of seven (7) members, as follows:

(a) The Secretary of the Department of Finance as the ex-officio Chairman;

(b) The Chairman of the Housing and Urban Development Coordinating Council (HUDCC),
as the ex-officio Vice Chairman;

(c) The Director General of the National Economic and Development Authority (NEDA), as
ex-officio member;

(d) The President of the Corporation, as member; and

(e) Three (3) other members to be appointed by the President of the Philippines, who shall
serve for a term of five (5) years; Provided, That the person appointed shall be of good moral
character, of unquestionable integrity of known probity and patriotism and with expertise and
experience of at least ten (10) years in business, finance and the professions: Provided,
further, That in the event of a vacancy, the successor appointed to fill the same shall serve
only unexpired portion of the term of the member he succeeds to.
The decision of the Board shall be made by a vote of the majority of all its members.

The Chairman of the Corporation shall preside over meetings of the Board of Directors. The Vice
Chairman of the Board shall assist the Chairman and act in his stead in case of the latter’s absence
or incapacity.

The Chairman, Vice Chairman, and the Members of the Board shall be entitled to per diem for each
meeting actually attended at such amount as may be fixed by the Board in accordance with existing
laws, rules and regulations.

Section 9. Powers, Functions and Duties of the Board of Directors. – The Board shall have the
following powers, functions and duties:

(a) To adopt the by-laws of the Corporations and to revise of amend the same as may be
expedient;

(b) To direct the management, operations and administration of the Corporations;

(c) To authorize such expenditures by the Corporations as are in the interest of the effective
administration and operations of the Corporation;

(d) To formulate, revise or adjust periodically all policies, and to promulgate the necessary
rules and regulations and manuals of procedures for the effective implementation of the
provisions of this Act, in any event to conform to the prevailing economic and financial
conditions: Provided, That anything contained herein to the contrary notwithstanding, manual
or procedures, on ceilings and limitation shall be subject to the concurrence of the Monetary
Board of the Bangko Sentral ng Pilipinas;

(e) To create offices or positions necessary for the efficient management, operation, and
administration of the Corporation: Provided, That all positions in the Home Guaranty
Corporation (HGC) shall be governed by a compensation and position classification system
and qualifications standards approved by the Corporation’s Board of Directors based on a
comprehensive job analysis and audit on actual duties and responsibilities: Provided, further,
That the compensation plan shall be comparable with the prevailing compensation plans in
the private sector and which shall be exempt from Republic Act No. 6758, otherwise known
as the Salary Standardization Law, and from other laws, rules and regulations on salaries
and compensations; and to establish a Provident Fund and determine the Corporation’s and
the employee’s contributions to the Fund; and

(f) To exercise such other powers as may necessary and proper for the effective
enforcement of this Act and to accomplish the purposes for which the Corporation was
organized; and to do and to perform any and all acts and incidental to the attainment of all
the purposes of the Corporation

Section 10. President of Corporation. – The President of Corporation shall be appointed by the

President of the Philippines for a term of five (5) years unless sooner removed for cause. He shall be
a person of good moral character, of unquestionable integrity, of known probity and patriotism, and
with expertise and experience of at least ten (10) years in business, finance and the professions. He
shall receive such compensation, allowances and other emoluments as may be determined by the
Board.
Section 11. Powers and Duties of the President. – The President shall have the following powers
and duties:

(a) To prepare the agenda for meetings of the Board, and to submit for its consideration the
policies and measures which the necessary to carry out the purposes and provisions of this
Act;

(b) To execute and administer the policies and measures approved by the Board;

(c) To represent the Corporation in all dealings with other offices, agencies and
instrumentalities of the Government and with all persons and entities, public or private,
domestic or foreign; and

(d) To exercise such other powers, functions, and duties as may be delegated by the Board.

Section 12. Executive Vice President and General Manager of the Corporation. – The Executive
Vice President, who shall be the Board of Directors. He shall act as President of the Corporation in
the latter’s absence.

CHAPTER III
CREDIT GUARANTY

Section 13. Requirements for Guaranty. – To be eligible for credit guaranty, the account shall:

(a) For developmental loans, involve a principal obligation not to exceed: (I) seventy percent
(70%) of the prudent production cost of the project for bond guaranty coverage; and (ii) sixty
percent (60%) of the prudent production cost of the project for cash guaranty coverage.

Such obligations may cover the installation of improvements involving:

a project by a developmental builder for the construction of not less than twenty (20) dwelling
at one time under a single-mortgage with a release clause permitting the subsequent sale of
each individual completed house together with land. Loans for advances of funds used for
purchase of materials in anticipation of mass construction and standardization of parts may
be guaranteed in the discretion of the Corporation; and

a rental project of at least twenty (20) units and involve a principal obligation, including such
initial service charges, appraisal, inspection, and other fees as the Corporation shall
approve.

The prudent production cost of the project shall be determined in accordance with the
prevailing industry standards: Provided, That the builder shall submit certified bills of sale
and other evidences of prudent production cost of the project and the Corporation shall be
the sole judge of the prudence of the expenditure as necessary to comply with the plans and
specifications.

(b) For single family residence, involve a principal obligation not to exceed; (I) one hundred
percent (100%) of the appraised value of the property for socialized housing packages; (ii)
ninety percent (90%) of the appraised value of the property for low-cost housing packages;
(iii) eighty percent (80%) of the appraised value of the property for medium-cost housing
 packages; and (iv) seventy percent (70%) of the appraised value of the property for open
housing packages.

The Corporation as a matter of sound business policy may set downward limits on the total
amount to be guaranteed for the aforestated programs which limits may be adjusted to
conform with the prevailing economic and financial conditions subject to the concurrence of
the Monetary Board of the Bangko Sentral ng Pilipinas;

(c) Be secured by a first lien on real estate or other rights in including leasehold rights under
a contract of lease for not less than twenty (20) years to run from the date the guaranty as
executed, held by a qualified lender or trustee determined by the Corporation as responsible
and able to service the guaranteed account: Provided, That such mortgage rights, or other
rights in are duly annotated on the title to the real estate; or otherwise effectively protected;

(d) Be intended for production and/or acquisition of residential lot or house and lot,
improvements, repairs and mass housing construction projects;

(e) Contain complete amortization provision satisfactory to the Corporation requiring periodic
payments by the borrower not in excess of his reasonable ability to pay the loan which shall
comply with the required loan to collateral ratio as determined by the Corporation;

(f) Have a maturity satisfactory to the Corporation but not to exceed thirty (30) years;

(g) Contain such terms and provisions with respect to insurance, repair alternations,
payments of taxes, default, reserves, delinquency charges, foreclosure proceedings,
anticipation of maturity, additional and secondary liens, and other matters as the Corporation
may in its discretion prescribe; and

(h) Shall involve real properties held by the following:

(1) The National Government, provincial, city of municipal governments, or

government-owned or -controlled corporation and agencies;

(2) Private corporations, banking institutions, trust companies, personal finance

companies, mortgage companies, building and loan associations, savings and loan
associations, installment lending companies, insurance companies, developmental
builders, associations and cooperative societies which are legal agents of owner-
occupants, or trust formed or created for the purpose of rehabilitating slum or
blighted areas, or providing housing for rent or sale, and which possess powers
necessary therefore and incidental thereto; and

(3) An individual owner or joint-owners.

Section 14. Guaranty Preniums, Appraisal Fees and Other Charges. -

(a) The Corporation shall fix in accordance with sound actuarial practice and the risk
characteristics involved, the rates of guaranty premiums to be imposed: Provided, however,
That no guaranty premium shall be fixed at less than one half of one percent (1/2 of 1%) of
the amount of the outstanding principal obligation for socialized housing; three fourths of one
percent (3/4 of 1%) for low-cost housing; one percent (1%) for medium-cost; and one and
one half percent (1.5%) for open housing. Such guaranty premiums shall be payable by the
 mortgagee or guaranteed entity, either in cash or in debentures issued by the Corporation at
its present value, in such manner as maybe prescribed by the Corporation. In addition, the
Corporation may charge and collect from the mortgagee or guaranteed entity, such fees and
amounts as maybe reasonable to implement its guaranty programs.

(b) In addition, the Corporation may fix, charge and collect such fees and amounts as may
be reasonable for the appraisal of a property or project offered for guaranty and may likewise
charge and collect such fees and amount as may be reasonable for the inspection of such
property or project during construction.

Section 15. Guaranty Coverage and Composition of Guaranteed Accounts. -

(a) The Corporation shall guaranty payments of the balance outstanding and due on the
guaranteed principal obligation, plus interest and yields thereon up to eleven percent (11%)
per ten percent (10%) per annum for low-cost housing packages; nine and one-half percent
(9.5%) per annum for medium-cost housing packages; and eight and one-half percent
(8.5%) per annum for open housing packages;

(b) The corporation shall guarantee accounts under this Act, as follows:

1) At least forty percent (40%) of guaranty accounts shall be allocated for socialized
housing packages;

2) At least thirty percent (30%) of guaranty accounts shall be allocated for low-cost
housing packages;

3) At least twenty percent (20%) of guaranty accounts shall be allocated for medium-
cost housing packages; and

4) Not more than ten percent (10%) of guaranty accounts may be allocated for open
housing packages.

For the foregoing purpose, the respective ceilings for socialized, low-cost, medium-cost, and
open housing shall be jointly determined by the Housing and Urban Development
Coordinating Council and the National Economic and Development Authority: Provided, That
at any time, but not more often than once every two (2) years, such ceilings may be reviewed
or revised to conform to prevailing economic conditions.

(c) The Corporation shall as much as possible and practicable, allocate its guaranty
obligations fairly and equitably among all the regions of the country.

Section 16. Guaranty Limitations. - Any and all guaranty issued by the Corporation shall be subject
to the following limitations, anything to the contrary notwithstanding:

(a) The extension of guaranty or guaranties for development projects for the account of
anyone institution or entity shall not, at any time, exceed three (3) times the net worth of such
institution or entity;

(b) The extension of guaranty shall not exempt banks and other financial institutions
regulated by the Bangko Sentral ng Pilipinas from complying with the pertinent single
borrowers limit as provided by the Monetary Board of the Bangko Sentral ng Pilipinas;
 (c) The aggregated amount of the outstanding obligations shall not, at anytime, exceed
twenty (20) times the capital and surplus of the Corporation;

(d) All guaranteed bonds, debentures, commercial papers and other securities issued by the
individual persons which are sold to the public shall be subject to the registration
requirements under the Revised Securities Act;

(e) The Corporation shall set aside five percent (5%) of its annual net operating revenues
before interests as reserve or sinking fund to answer for guaranty calls; and

(f) All rules and regulations and limitations under this Act shall be subject to the concurrence
of the Monetary Board of the Bangko Sentral ng Pilipinas.

Section 17. Payments of Guaranty Calls. –

(a) In the event of a default on the guaranteed obligation in accordance with the regulations
of the Corporation, the guaranty entity shall be entitled to receive the benefit of the guaranty
as herein provided, upon (1) the prompt conveyance to the Corporation of the right to the
property securing the guaranteed obligations; and (2) the assignment to the Corporation of
all claims of the mortgagee against the mortgagor under the guaranteed obligation. Upon
such conveyance and assignment, the obligation of the guaranty entity to pay the premium
charges for guaranty shall cease and the Corporation shall, at its option, pay in cash and/or
issue to the guaranteed entity, debenture bonds equivalent to the guaranteed obligations;

(b) For the purpose of the above subsection (a), the balance outstanding and due on the
guaranteed mortgage shall be determined in accordance with the rules and regulations
prescribed by the Corporation;

(c) Debentures issued under this Section shall be subject to such terms and conditions, and
shall include such provisions for redemption, if any, as may be in coupon or registered form;

(d) Debentures issued under this Section to any mortgagee with respect to mortgages or
loans guaranteed under Chapters III and IV shall be executed in the name of the Home
Guaranty as obligor, and signed for the Corporation by the President of the Corporation,
either by his written or engraved signature, and shall be negotiable, exempt from taxation to
the extent specified in this Act, attachment, execution or seizure, redeemable at the option of
the Corporation at or before maturity and fully guaranteed as to principal and interest by the
Republic of the Philippines. All such debentures shall be dated as of the date the mortgagee
conveys and assigns to the Corporation its right under the mortgage and valid claims against
the mortgagor and shall bear interest not exceeding the interest rate established for the
principal obligation. The interest of the debentures shall be payable semi-annually on the first
day of January and the first day of July of each year. The debenture shall mature ten (10)
years after date on which the debentures were issued or three (3) years after July first
following the maturity of the mortgage on the property on exchange for the debentures were
issued whichever is the shorter period, and may be used at the option of the mortgagee in
the payment of the guaranty premium due to Corporation.

(e) If the net amount realized from the sale or disposition of any property conveyed to the
Corporation under this section and the claims assigned therewith, after deducting all
expenses incurred by the corporation in handling, dealing with, and disposing of such
property and in collecting such claims, exceeds the face value of the debentures issued and
 the cash paid in exchange for such property plus all interest paid on such debentures, such
excess shall be paid to the mortgagor of the property;

(f) The aggregate amount at any time of all such debentures, securities, and other evidences
of indebtedness issued under this Section, shall be determined by the Corporation with the
approval of the President of the Philippines after consultation with the Monetary Board of the
Bangko Sentral ng Pilipinas, which shall in no case exceed the aggregate amount of the
outstanding principal obligations of all mortgages insured under this Act; and

(g) The Corporation may, in accordance with the provisions of the mortgage, or in the
absence thereof, upon such term and conditions as it may prescribe, release part or parts of
the mortgage property from the lien of the mortgage.

Section 18. Guaranty of the Republic of the Philippines. –

(a) The Republic of the Philippines hereby fully and unconditionally guaranties to payment by
the Corporation both of the principal sums and interest of the bonds, debentures, collateral,
notes or other such obligations of the Corporation, issued or incurred by the virtue of this Act
and shall pay such principal sums and interest and in the event that the Corporation fails to
do so: Provided that such guaranty shall be expressed on the face of the certificate of
indebtedness: Provided further, That the aggregate of such bonds, debentures, collateral,
notes or other such obligations of the Corporation does not exceed at any time, the limit
prescribed under Section 5 (f) of this Act.

(b) The Republic Act of the Philippines hereby fully and unconditionally guaranties the
guaranty obligations of the Corporation incurred in accordance with this Act both as to
principal, and as to interest up to eleven percent (11%) for socialized housing, ten percent
(10%) for low cost housing, nine and one-half percent (9.5%) for medium cost housing and
eight and one-half percent (8.5%) for open housing: Provided, further, That the aggregate
amount of the outstanding obligations shall not, at any time, exceed twenty (20) times the
capital and surplus of the Corporation.

The Republic Act of the Philippines shall succeed to all the rights of the holders of such bonds,
debentures, collateral, notes or other instruments to the extent of the payments made, unless the
sums so paid by the Republic of the Philippines shall be refunded by the corporation within a
reasonable time.

Section 19. Tax Exemption. – Interest and yields earned or accumulated on mortgage, debentures,
bonds, notes, mortgage and asset backed securities, interest under a lease, and other credit
instruments, whether issued by the Corporation or covered by its guaranties in favor of natural or
judicial persons, in cash or in bonds, shall be exempt from all taxation to the same extent provided in
Section (15) (a) hereof: Provided, however, That the Corporation shall have the authority to increase
the limit of such exemption in such varying amounts shall be reflective of the social concern of the
state: Provided further, That the exercise of said authority shall be subject to the approval of the
President of the Philippines upon the recommendation of the Monetary Board of the Bangko Sentral
ng Pilipinas: provided finally, That the Corporation shall not exercise such authority more often than
once every five years.

CHAPTER IV
BUILDING AND LOANS ASSOCIATIONS

Section 20. Building and Loans Associations. –

 (a) In order to encourage the accumulation of savings and the financing of homes through
the local mutual thrift institutions, The Corporation is authorized, under such rules and
regulations as it may prescribed, to issue contracts of guaranty for the accounts of such
buildings and loan associations in accordance with the best practices of known mutual thrift
and home financing institutions.

(b) Whenever guaranteed by the Corporation and where the loan is intended for housing
development, such association shall lend their funds only on the security of first clients of
real estate located within an area to be determined by the Corporation.

(c) The Corporation is authorized to subscribed for preferred shares in such associations as
to assets of the associations and which shall be entitled to a dividend, if earned, after
payment of expenses and provision of reasonable reserves, to the same extent or other
shareholders: Provided, however, That no such subscription shall be made unless in the
judgement of the Corporation the funds are necessary for encouragement of reasonable
local home financing in the community to be served. In case of liquidation of such
associations, the shares held by the corporation shall be retired on the same basis as
payments are made to other shareholders in accordance with other laws.

(d) When guaranteed by the Corporation, such associations including their franchises,
capital, reserves, surplus, and their loans, receipts and incomes shall be exempt from all
taxation now or hereafter imposed by the government.

Section 21. Open-end Mortgages. – Notwithstanding any other provision of this Act, in connection
with any mortgage guaranteed pursuant to any section of this Act which covers a property upon
which there is located a dwelling designed for residential use, the corporation is authorized, upon
such terms and conditions as it may prescribed, to guarantee the amount of such advances for the
improvement or repair of the property made to the mortgagor pursuant to an "open-end" advances.
Only advances for such improvements or repairs as will substantially protect or improve the basic
liability or utility of the property involved shall be eligible for guaranty under section. No such
advances shall be guaranteed under this section if the amount thereof plus the amount of the unpaid
balance of the original obligation of the mortgage would exceed the amount of such original principal
obligation unless the mortgagor certifies that the proceeds of such advance be used to finance the
construction of additional rooms or other enclosed space as part of dwelling. The guaranty of "open-
end" advances shall not be taken into account in determining the aggregate amount of principal
obligations of mortgages which may be guaranteed under this Act.

Section 22. Investments of Funds. – Corporate funds not needed for the current operations for the
Corporation, shall be deposited with any government bank as may be approved by the board, or
invested in bonds or other obligations guaranteed as to principal and interest by the government.
The Corporation may purchase in the open market debentures issued under the provisions of this
Act which debentures will be cancelled and not re-issued.

CHAPTER V
MISCELLANEOUS PROVISIONS

Section 23. Definitions. - As used in this Act, and unless the context requires, the term:

(a) "Bond guaranty coverage" refers to the type of guaranty coverage which entitles the
guaranteed entity to a claim payment in the form of debenture bonds upon call on the
guaranty.
(b) "Builder/Developer" refers to the person or entity who develops raw lands for housing;

(c) "Cash guaranty coverage" refers to the type guaranty coverage which entitles the
guaranteed entity to cash payment upon call on the guaranty.

(d) "Development loan" pertains to a type of loan the proceeds of which shall be used for
housing subdivision development or construction of residential houses;

(e) "Guaranty premium" refers to the fee to be charged by the Corporation for the

extension of the guaranty;

(f) "Housing finance" refers to the comprehensive funds flow system covering the entire
housing provision cycle from identification of financial requirements, fund sourcing for various
aspects of housing program, such as lot acquisition, development and construction, to end
buyers financing;

(g) "Maturity date" means the date on which the mortgage indebtedness would be

extinguished if paid in accordance with the periodic payments provided for in the mortgage;

(h) "Mortgage" shall mean a first mortgage on real estate in fee simple, or in the interest of
either the lessor or the lessee thereof under a lease for not less than twenty (20) years to run
from the date the mortgage was executed, upon which there is located or upon which there
is to be constructed a building or buildings designed principally for residential used; and the
term "first mortgage" means such classes of first classes are commonly given to secure
advances on, or the unpaid purchase ,price of, real estate, together with the credit
instruments, if any secured thereby, and may be in the form of bonds, notes, stocks and
mortgage and asset-backed securities, trust mortgages or mortgage indentures of deeds of
trust securing notes, bonds, or other credit instrument.

(I) "Mortgagee" shall mean the original lender under a mortgage, and its successors and
assigns, and includes the holders of bonds, notes, stocks, mortgage and asset-backed
securities and other credit instruments issued under a trust mortgage or deed of trust
pursuant to which such holders act by and through a trustee herein named;

(j) "Mortgagor" shall mean the original borrower under a mortgage as defined herein, and
its successor and assigns;

(k) "Net-worth" shall mean the paid up capital plus (50%) of the retained earnings of the
Corporation.

(l) "Open-housing" refers to housing packages with cost above the medium package cost
set in Section 15 of this Act but in no case costing more than Five Million Pesos
(5,000,000.00);

(m) "Prudent production cost" of the project shall mean with respect to the relevant
project, the relevant cost of the builder of the proposed physical improvements, including
buildings, utilities within the boundaries of the subject property, cost of land, architects’ fees,
taxes and interest accruing during construction, but not including builders’ profit nor other
charges, except for estimated depreciated cost of any existing utilities;
 (n) "Rental housing" shall mean, housing the occupancy of which is permitted by the owner
thereof in consideration of the payment agreed charges, whether or not by the terms
agreement, such payment over a period of time will entitle the occupant to the ownership of
the premises.

(o) "Secondary mortgage market" means a market where existing mortgages are sold to

and bought by the public;

(p) "Single family residence" means a type of residential structure designed to include on

dwelling; and

(q) "Slum or blighted area" shall mean any area where dwellings predominate which, by
reason of dilapidation, overcrowding, faulty arrangement, or design, lack of ventilation, light
or sanitation facilities, or any combination of these factors, are detrimental to safety, health or
morals.

Section 24. Warranties of Developers/Builders, Sellers, or Funders – The Corporation not require

guaranteed sellers, developers/builders, or funders, or such other persons as may be required by
the said Corporation to become warrantor, to deliver to the purchaser or owner of such property a
warranty that the dwelling were constructed in substantial conformity with the plans and
specifications on which the corporation based its valuation of the dwelling. The Corporation shall
deliver to the developer/builder, seller, or funder or other warrantor their written approval of any
amendment of, or change or variation in, such plans and specifications which the Corporation 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. Such warranty shall apply only with respect to
such instances or substantial non conformity to such approved plans and specifications to which as
to purchaser or homeowner has given written notice to the warrantor within two (2) years from the
date of conveyance or title to, or initial occupancy of the dwelling, whichever first occurs, without
prejudice to all other rights and privileges which such purchaser or owner may have any other law or
instrument. Any amendment of, or change, or variation in, such plans and specifications shall be with
the prior written approval of the Corporation.

Section 25. Participation of Financing Institutions and Other Investors.

(a) All banking institutions, trust companies, personal finance companies, mortgage
companies, building and loan associations, savings and loans associations, installment
lending companies, insurance companies, the GSIS, the SSS, the Development Bank of the
Philippines (DBP), and other government financing institutions or other government owned
and controlled operations, are hereby authorized to invest part of their funds for the purpose
of giving loans and advances of credit contemplated provided in this Act, as well as on the
purchases of obligations representing loans and advances of credit made pursuant to the
provisions of this Act, any provision of their respective charters or by-laws to the contrary
notwithstanding. All housing loans, within the loan ceiling fixed by the foregoing government
institutions shall be guaranteed by the Corporation under the provisions of this Act.

All mortgagee institutions participating in the mortgage guaranty program shall be bound by
the terms and conditions of the guaranteed mortgage loans as may be approved by the
Corporation. Any amount invested by all foregoing entities in the financing or mortgage loans
for housing development under this Act shall be guaranteed both the Corporation and the
government of the Republic of the Philippines.
 (b) The aforementioned government financing institutions are hereby authorized to constitute
the secondary market for guaranteed and shall;

1) Purchase, service or sell mortgages which are guaranteed under the provisions of
this Act.

2) Subject to the approval of the Monetary Board of the Bangko Sentral ng Pilipinas,
issue bonds, debentures, securities, collaterals and other obligations against the
security of mortgage as their respective boards may designate and such obligations
may be issued and offered for sale at such price or prices as the particular
government institutions may determine, and shall be negotiable and exempt from
taxes both as to principal and interest, subject to section 19 hereof.

Section 26. Powers over Homeowners Associations. – The powers authorities and responsibilities
vested in the Corporation with respect to homeowners association under Republic Act No. 580, as
amended by executive Order No. 535 is hereby transferred to the housing and Land use Regulatory
Board (HLURB).

Subject to existing laws, the HLURB is hereby authorized to create additional positions and augment
its present budget as may be needed for the operation and maintenance of the newly created unit or
office as a consequence of the transfer of functions and powers.

Pending the approval of the HLURB Revised Staffing and Organizational plan and release of
budgetary allocations thereof, the Corporation shall extend technical, operational and administrative
assistance to the HLURB as may be mutually deemed necessary to ensure smooth turnover of
functions. However, such assistance shall not extend beyond a period of one (1) year from date of
activity of this Act.

Section 27. Penalties. –

(a) Whoever, for the purpose of obtaining any loan or credit from any person, partnership,
association or corporation with the intent that such loans or advance of credit shall be offered
to or accepted by the Corporation for guaranty, or for the purpose of credit, or mortgage
guaranteed by the said Corporation, or the acceptance, release, or substitution of any
security on such loan, advance of credit, or for the purpose of influencing in any way the
action of the said Corporation under this Act, (1) makes, passes, utters or publishes, or
causes to be made any statement knowing to be false, or (2) alters, forges, or counterfeits,
or causes or procures to be altered, forged, or counterfeited, any instrument, paper or
documents, or (3) utters, publishes, or passes as true or causes to be uttered, published, or
passed as true, any instrument, paper or documents, knowing it to have been altered, forged
or counterfeited, or (4) willfully overvalues any security, asset, or income, shall be punished
by a fine of not less than the amount of the loan or loans involved or by imprisonment for not
more than ten(10)years or both.

(b) Whoever (1) falsely makes, forges, or counterfeits any obligation or coupon, in imitation
of or purporting to be an obligation or coupon under authority of this Act, or (2) passes, utters
or publishes, or attempts to pass, utter, or publish any false, forged, or counterfeited
obligation or coupon purporting to have been so issued knowing the same to be false, forged
or counterfeited, or (3) falsely utters any obligation or coupon so issued or purporting to have
been so issued, or (4) passes, utters, publishes, or attempts to pass, utters or publish, as
true, any falsely altered or spurious obligation or coupon so issued or purporting to have
been so issued, knowing the same to be falsely altered or spurious shall be punished by a
 fine of not less than the amount of loan involved, or by imprisonment for not more than
five(5)years, or both.

(c) Any person (1) who willfully and knowingly makes, circulates, or transmits to another or
others any statement, or rumor written, printed, or by word of mouth, which is untrue in fact
and is directly or by inference derogatory to the financial condition or affects the solvency or
financial standing of the Corporation, or 92) who knowingly counsels, aids, procures, or
induces another to start, transmit, or circulate such any statement of rumor, is guilty of felony
punishable by a fine of not less than the amount of loan involved or by imprisonment of not
exceeding one(1)year, or both.

Section 28. Fund Sources for Operation. – The Bangko Sentral ng Pilipinas, may extend to the
Corporation advances which may be needed for its operations and grant loans secured by any
assets which are defined as acceptable securities by the Monetary Board.

Section 29. Exemptions. - The Corporation is exempted from the coverage of the regulations of
Bangko Sentral ng Pilipinas governing quasi-banking functions.

Section 30. Legal Counsel – The Office of the Government Corporate Counsel shall be the General
Counsel of the Corporation.

Section 31. Resident Auditor. – The resident Auditor of the Corporation shall be Appointed by the
chairman of the Commission on Audit, who shall also appoint for a cause, remove upon the
recommendation of the President Auditor, the personnel of the Auditing Office. The Auditor shall
submit, through the Commission, an annual report on the financial condition and the result of the
operations of the Corporation to the President of the Republic of the Philippines, each member of the
Senate and the House of Representatives, The National Economic and Development Authority and
the Chairman of the Commission on Audit.

Section 32. Reports. – The Corporation shall submit a quarterly report to the President of the
Philippines and to each member of the Congress of the Philippines, within the forty-five (45) days of
the succeeding quarter, regarding its activities under this Act for the previous quarter.

Section 33. Transitory Provision. - Any and all policies, guidelines, programs, ceilings and limits
currently in effect with respect to the issuance of guaranty shall be submitted to the Monetary Board
of Bangko Sentral ng Pilipinas for concurrence within six (6) months after the effectivity of this Act.

Section 34. Report on the Development of the Secondary Mortgage Market. – The Housing and
Urban Development Coordinating Council and the Corporation shall submit to the President of the
Philippines and to Congress a program for the development of the secondary mortgage market.

Section 35. Sunset Review. – Every year after the effectivity of this Act, Congress shall conduct a
sunset review which shall entail a systematic evaluation of the Corporation to determine whether or
not the performance, impact or accomplishments will respect to its mandates merit its continued
existence. Such review shall be undertaken by the Committee on Housing and Urban Development
and the Committee on Government Corporations and Public Enterprises of the Senate and the
Committee on Housing and Urban Development and the Committee on Government Enterprises and
Privatization of the House of Representatives which have legislative jurisdiction over the
Corporation.
Section 36. Suppletory Application of the Corporation Code. – The provision of the Corporation
Code shall have suppletory application in matters not provided in this Act.

Section 37. Implementing Rules and Regulation. – The Corporation with the Department of Finance,
the Housing and Urban Development Coordinating Council, and the Department of Budget and
Management shall promulgate the rules and regulations necessary for the implementation of and
consistent with this Act.

Section 38. Repeal. – Republic Act 580,1577 and5488, and Executive Order No. 535 are hereby
repealed. The provisions of Republic Act Nos. 6486,7279 and 7835, and Executive Order No. 90
and all other laws, orders and proclamations, rules and regulations, or parts thereof, inconsistent
with or contrary to the provisions of this Act or its purpose are hereby amended or modified
accordingly.

Section 39. Separability Provisions. – If for any reason, any provision of this Act, or the application
thereof to any person or circumstances, is held invalid, the remaining provisions is not affected
thereby shall continue to be in full force and effect.

Section 40. Effectivity. – This Act shall take effect fifteen (15) days after its publication in the Official
Gazette or in at least two (2) newspapers of general circulation.

Approved: March 7, 2000

(Sgd.) JOSEPH EJERCITO ESTRADA

President of the Philippines

EXECUTIVE ORDER NO. 535 May 3, 1979

AMENDING THE CHARTER OF THE HOME FINANCING COMMISSION, RENAMING IT AS

HOME FINANCING CORPORATION, ENLARGING ITS POWERS, AND FOR OTHER PURPOSES

WHEREAS, Section 7, Article II of the Constitution of the Philippines mandates that: "The State shall
establish, maintain and insure adequate social services in the field of . . . housing . . . to guarantee
the enjoyment by the people of a decent standard of living;"

WHEREAS, Presidential Decree 1396 "creating the Ministry of Human Settlements and Human
Settlements Development Corporation," amends the respective charters of corporations, authorizing
agencies attached to the Ministry to better pursue and implement constitutional directives:

WHEREAS, P.D. 1396 authorize the amendment of existing charters or laws affecting the offices
attached to the Ministry to make them more responsive to the changing needs of the times;

WHEREAS, the Home Financing Commission is one of the agencies attached to the Ministry of
Human Settlements;

WHEREAS, to make the Home Financing commission a more effective instrument in the solution of
the acute housing problems of the country, its charter must be amended accordingly;

NOW, THEREFORE, I, FERDINAND, E. MARCOS, President of the Philippines, hereby order and
direct the following:
1. The Home Financing Commission shall henceforth be constituted and known as the HOME
FINANCING CORPORATION, hereinafter referred to as the Corporation. The corporation shall have
its principal office in Metro Manila.

2. In addition to the powers and functions vested under the Home Financing Act, the Corporation,
shall have among others, the following additional powers;

a) To require submission of and register articles of incorporation of homeowners

associations and issue certificates of incorporation/registration, upon compliance by the
registering associations with the duly promulgated rules and regulations thereon; maintain a
registry thereof; and exercise all the powers, authorities and responsibilities that are vested
on the Securities and Exchange Commission with respect to home owners association, the
provision of Act 1459, as amended by P.D. 902-A, to the contrary notwithstanding;

b) To regulate and supervise the activities and operations of all houseowners association
registered in accordance therewith;

c) To insure and guarantee loans extended to registered homeowners associations for

rendering purposes to their members for the construction, restoration and/or improvement of
residential homes as well as other structures beneficial to the members of such associations;

d) To revise/adjust periodically all ceilings otherwise fixed in the Home Financing Act, as
amended, to conform with the prevailing economic and financial conditions;

e) To extend the benefits granted to building and loan associations under Chapter III of the
Home Financing Act, as amended, to private development banks, Savings Bank, rural banks,
savings and loan associations, cooperative banks, registered homeowner's association and
other private entities under such terms and conditions as may be determined by the
Corporation;

f) To issue, among others, bonds, debentures, securities, collaterals, promissory notes,

certificates of indebtedness and other debt instruments in foreign currencies, here or abroad,
with the approval of the President after consultation with the Monetary Board of the Central
Bank of the Philippines and the Minister of Finance. These bonds and other obligations shall
be subject to the same limitations and requirements as provided for herein as well as in the
Home Financing Act, as amended;

g) To invest, own or otherwise participate in equity in any public or private establishment,

firm or entity doing business that is necessary, allied or desirable in the pursuit of the
purpose for which the Corporation was organized;

h) To form, organize, manage and operate such subsidiary or affiliate companies as it may
deem necessary to undertake its business to establish and/or maintain one or more offices
or branches in other parts of the Philippines or abroad; provided, that such subsidiary or
affiliate companies shall each have a Board of Directors of at least five members in which at
least one of the directors representing the Corporation shall be elected from among the
incumbent members of the Board of Directors of the Corporation;

i) To do any and all acts and things and to exercise all powers which may be necessary or
convenient to the accomplishment or furtherance of its purposes and objectives or which a
natural person could do and exercise and which may now or hereafter be authorized by law.
3) The authorized capital stock of the Corporation shall be ONE BILLION (P1,000,000,000.00)
PESOS, Philippine Currency, to be fully subscribed by the Government of the Republic of the
Philippines and paid as follows:

a) The net assets of and appropriate for the Home Financing Commission shall form part of
the authorized capital of the Corporation.

b) The balance shall be paid by the Government in such sums as may be determined by the
Ministry of Human Settlements and the Budget Commission, which amounts shall be
included in the annual appropriations until the entire authorized capital of the Corporation
shall have been paid in full.

4. The Central Bank of the Philippines is hereby authorized to extend to the Corporation advances
which may be needed for its operations and/or grant loans secured by any assets which are defined
as acceptable securities by the Monetary Board.

5. The Republic of the Philippines hereby guarantee to payment by the Corporation both of the
principal sums and interests of the bonds, debentures, collaterals, notes or such other obligations of
the Corporation, issued or incurred by virtue of its Charter and this Executive Order and shall pay
such principal sums and interests in the event that the Corporation fails to do so, provided, however,
that the aggregate amount of the outstanding obligations shall not, at any one time, exceed fifteen
(15) times the capital and surplus of the Corporation.

In such event, the Republic of the Philippines, shall succeed to all the rights of the holders of such
bonds, debentures, collaterals, notes or other instruments to the extent of the payments made,
unless the sums so paid by the Republic of the Philippines shall be refunded by the Corporation
within a reasonable time.

6. The powers and functions of the Corporation shall be exercised by a Board of Directors,
hereinafter referred to as the Board, which shall be composed of five (5) members, as follows:

a) The Minister of Human Settlements, who shall be the ex-officio Chairman of the Board;

b) The Vice-Chairman, who shall be the President of the Corporation shall assist the
Chairman and act in his stead in case of the latter's absence or incapacity;

c) Three (3) other members to be appointed by the President of the Philippines, who shall
serve for a term of five (5) years unless sooner removed by the President for cause.

7. The Board shall have the following additional powers:

a) To formulate policies, plans, projects, rules and regulations to carry out effectively the
functions of the Corporation;

b) To direct the management, operations and administration of the Corporation;

c) To authorize such expenditures by the Corporations as are in the interest of the effective
administration and operations of the Corporations;

d) To create offices or positions necessary for the efficient operations of the Corporation; to
appoint and fix the remuneration and other emoluments of subordinate officers and
 personnel of the Corporation and to remove or otherwise discipline such officers/employees
for cause as provided by law; and

e) To exercise such other powers as may be necessary to accomplish the purposes for
which the Corporation was organized;

8. The Vice-Chairman of the Board shall be the President of the Corporation. He shall serve for a
term of five (5) years unless sooner removed by the President for cause. He shall receive such
salary as may be determined by the Board but in no case less than SIXTY THOUSAND PESOS
(P60,000.00) per annum. The Board may authorize payment of allowances and other emoluments to
the President of the Corporation.

9. The powers and duties of the President shall be:

a) To prepare the agenda for meetings of the Board and to submit for the consideration of
the Board the policies and measures which are necessary to carry out the purposes and
provisions hereof;

b) To execute and administer the policies and measures approved by the Board;

c) To represent the Corporation in all dealings with other offices, agencies and
instrumentalities of the Government and with all persons and entities, public or private,
domestic or foreign; and

d) To exercise such other powers as may be vested in him by the Board.

10. The General Manager who shall be appointed by the Board, shall be the Executive Vice-
President of the Corporation. He shall receive such salary as may be determined by the Board but in
no case less than FIFTY-TWO THOUSAND PESOS (P52,000.00) per annum. The Board may
authorize payment of allowances and other emoluments to the Executive Vice-President of the
Corporation.

11. The Corporation shall coordinate its policies, plans projects and regulations with those of the
Ministry of Human Settlements and all other agencies of the Government involved in home building
and development and mortgage financing.

The Central Bank of the Philippines is hereby directed to exempt the Corporation and/or its
subsidiary/affiliate companies from the coverage of its regulations governing quasi-banking
functions.

12. The Office of the Government Corporate Counsel shall be the General Counsel of the
Corporation.

13. The Board shall adopt the By-Laws of the Corporation and promulgate the necessary rules and
regulations for the effective implementation of the policies and purposes of the Corporation and
revise or amend the same as may be expedient.

14. The period of lease, as provided in Sec. 22 (a) of the Home Financing Act, in case the mortgage
is on the interest of either lessor or the lessee of the real estate is hereby reduced from not less than
forty (40) years to not less than twenty (20) years.
15. Subject to the approval of the President of the Philippines upon consultation with the Minister of
Finance, the tax exemptions granted in favor of lending institutions under Sec. 25 (c) of the Home
Financing Act, as amended, shall likewise extend to mortgages held by other entities and persons
which are insured under the mortgage insurance program of the corporation.

16. The provisions of the Corporation Law, insofar as they are no consistent with the provisions and
policies provided herein, shall be applicable to the Corporation.

17. Any provisions of law, decree, executive order, ordinance, rules and regulations inconsistent
herewith are hereby repealed, amended or modified accordingly.

18. If for any reason, any section or provision of this Executive Order is declared to be
unconstitutional or invalid, the other sections or provisions hereof, which are not affected thereby,
shall continue to be in full force and effect.

19. This Executive Order shall take effect immediately.

Done in the City of Manila, this 3rd day of May, in the Year of Our Lord, Nineteen Hundred and
Seventy-Nine.