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It depends if there is a fair exchange of value and information between the parties.

If the mortgagor is a farmer who mortgages his parcel of land and he waives the right to redeem, he can later argue that the waiver was not valid for being contrary to the public policy of preserving the property in the hands of the owner.

But if the mortgagor is a businessman who waives the right to redeem in exchange for lower interest rates, this waiver is valid because there is a fair exchange of value.

SUMMARY OF EXCEPTIONS UNDER SECTION 47 OF THE GENERAL BANKING LAW OF 2000

When the party foreclosing the mortgage is a BANK, the same procedure as in judicial or extra-judicial foreclosure, as the case may be, is followed. However, the following are the exceptions to the general rules, applicable only to banks:

1. In judicial foreclosures, there is still a right to redeem

As a general rule, there is no right of redemption in judicial foreclosure. Upon confirmation of the sale, the mortgagor cannot redeem the property anymore.

But if the mortgagor foreclosing judicially is a bank, the mortgagor shall have a right to redeem within one year from the sale.

2. Redemption Price

In ordinary extra-judicial foreclosure, the redemption price is the purchase price plus interest at 1% (or 2%?) per month.

In extra-judicial foreclosure by a bank, the redemption price consists of:

a. the amount of the mortgage obligation

b. plus the interest on the loan at the rate stipulated in the mortgage contract c. plus costs of the sale incurred by the bank

3. Automatic Right of Possession

In ordinary extra-judicial foreclosure, the mortgagor retains possession of the property within the redemption period. If the purchaser wishes to have possession within the redemption period, he must file a petition for the issuance of a writ of possession with a corresponding bond.

In extra-judicial foreclosure by a bank, the purchaser automatically has the right to take possession after the confirmation of the sale.

4. Injunction

If anybody wants to enjoin the conduct of foreclosure proceedings instituted by a bank, the petitioner must file a bond fixed by the court to satisfy whatever damage the bank may suffer by the injunction.

There is no such provision in the case of ordinary extra-judicial foreclosure.

5. Period of Redemption for Juridical Persons

In ordinary extra-judicial foreclosure, the mortgagor may redeem the property after it is sold within one year from the execution of the certificate of sale. There is no distinction, whether the party redeeming is a natural or juridical person.

If the party foreclosing extrajudicially is a bank, the same rule as above is applicable to natural persons. BUT, juridical persons may redeem the property subject only to the following conditions:

a. it must be BEFORE the registration of the sale

b. and, it must not be later than 90 days from the date of the sale

EFFECTS ON THE JUNIOR MORTGAGE

What happens if there was a second mortgage constituted on the property that was foreclosed?

If the property was mortgaged a second time, the second mortgage is subordinate to the first mortgage. The first mortgagor has the right to foreclose the mortgage upon default by the debtor.

The following are the rights of a junior mortgagee:

1. If the first mortgagee forecloses judicially, before the sale is effected, the junior mortgagee may exercise the equity of redemption vested in the mortgagor. The junior mortgagee may satisfy the obligation of the mortgagor to prevent the sale of the property.

What happens to the ownership of the property when the second mortgagee exercises the right of redemption?

There are two interpretations – one under the Rules of Court and another under the Civil Code.

When the second mortgagee exercises the equity of redemption by paying the obligation of the mortgagor/debtor, the mortgagor/debtor has 60 days to reimburse the second mortgagee what he paid. If the original debtor fails to pay within this period, ownership will be consolidated in the second

mortgagee who paid. This interpretation is according to Section 28 Rule 39 of the Rules of Court.

But according to the Civil Code rules on payment (oblicon), the effect should be like payment of an obligation by a third person, in which case, the second mortgagee merely becomes subrogated in the right of the first mortgagee to foreclose the mortgage.

2. When an extra-judicial sale is made, the junior mortgagee may exercise the mortgagor’s right to redeem within one year from the sale. De Leon says that he should pay the amount of the original obligation. JPSP says that the junior mortgagee exercising the right to redeem should follow Act 3135 – he should pay the price at which the property was sold.

3. If the property is sold for more than the amount of the obligation to the first mortgagee, the excess should be applied to the payment of the obligation to the second mortgagee.

But if there is no excess, the second mortgage is extinguished.

Õ If you’re the second mortgagee, you can also foreclose, not the property (since you cannot do that because the right of the first mortgagee is superior), but the

right of redemption instead. This is so that you would be the only one who can exercise it when the proper time comes.