Can a Foreigner be a mortgagee in real estate mortgage?
A foreigner or an alien is allowed to be a mortgagee in an REM or real estate mortgage involving a property situated in the Philippines.
Although it is true that an alien or foreigner is prohibited from acquiring lands under our Constitution, it is equally true that a REM is not equivalent to a contract of sale. As such, the mere execution of a REM does not result in an outright transfer of ownership in favor of the mortgagee.
Indeed, the 1987 Constitution provides the proscription on foreign ownership of land, viz: “1987 Philippine Constitution “ARTICLE XII
“NATIONAL ECONOMY AND PATRIMONY
“Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.
“Section 8. Notwithstanding the provisions of Section 7 of this Article, a natural-born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations provided by law.”
However, the same is not equivalent to a prohibition on a foreigner being a mortgagee. In fact, the law, specifically Republic Act 4882, otherwise known as the “Act to Authorize the Mortgage of Private Real Property in Favor of Any Individual, Corporation, or Association Subject to Certain Conditions,” dictates the condition with respect to an alien/foreigner mortgagee:
“Section 1. Section one Republic Act Numbered One hundred thirty-three as heretofore amended by Republic Act Numbered Forty-three hundred eighty-one, is hereby further amended to read as follows:
“Sec. 1. Any provision of law to the contrary notwithstanding, private real property may be mortgaged in favor of any individual, corporation, or association, but the mortgage or his successor in interest, if disqualified to acquire or hold lands of the public domain in the Philippines, shall not take possession of the mortgaged property during the existence of the mortgage and shall not take possession of mortgaged property except after default and for the sole purpose of foreclosure, receivership, enforcement or other proceedings and in no case for a period of more than five years from actual possession and shall not bid or take part in any sale of such real property in case of foreclosure: Provided, That said mortgagee or successor in interest may take possession of said property after default in accordance with the prescribed judicial procedures for foreclosure and receivership and in no case exceeding five years from actual possession.”
Thus, it is clear that an alien/foreigner can be a mortgagee in a REM, subject to the rule that such alien/foreigner mortgagee must not take possession of the mortgaged property during the existence of the REM.
Moreover, an alien/foreigner mortgagee shall not take possession of the mortgaged property except after default and for the sole purpose of foreclosure, receivership, enforcement or other proceedings, and in no case for a period of more than five years from actual possession.
And finally, an alien/foreigner mortgagee shall not bid or take part in any sale of such real property in case of foreclosure.