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CHAPTER IV

Erni, Marianne Patrice


Gamalo, Lourdes Anne
Garcia, Julrey Florence C.
Gutierrez, Katherine
Talactac Aira Rowena
A bank shall grant loans and other
VII. Grant and credit accommodations only in
amounts and for the periods of time
Purpose of Loans and essential for the effective
other Credit completion of the operations to be
Accommodation financed.

RIGHT TO TERMINATE THE LOAN


OR OTHER CREDIT
ACCOMODATION & DEMAND
IMMEDIATE PAYMENT OF THE
OBLIGATION
A bank must ascertain that the debtor is
capable of fulfilling his commitments to
the bank.

False information or incorrect in any


material detail → termination of any loan
or other credit accommodation and right
to demand immediate payment or
liquidation of the obligation

Grant and Purpose of Loans and Other Credit Accommodations


Reason for Stringent Rules in
Granting Loans:

BANK → public interest


- guard against loss due to negligence and
bad faith

Grant and Purpose of Loans and Other Credit Accommodations


• issue such regulations as it may
deem necessary with respect to
unsecured loans and other credit
accommodations
• prescribe further security

MONETARY requirements to which various


types of bank credits shall be
subject

BOARD •


reduce the maximum ratios in
connection with loans
prescribe the maturities
• regulate the interest imposed on
microfinance borrowers by lending
investors and similar lenders

Grant and Purpose of Loans and Other Credit Accommodations


Amortization
The amortization schedule of bank loans and other credit
accommodations shall be adapted to the nature of the operations
to be financed.

with maturities of more than five (5) years made for periodic amortization payments,
but such payments must be made at least
annually
the borrowed funds are to be used for initial amortization payment to be deferred,
purposes which do not initially produce but in no case shall the initial amortization
revenues date be later than five (5) years
to microfinance sectors shall take into consideration the projected
cash flow of the borrower

Grant and Purpose of Loans and Other Credit Accommodations


Escalation Clause; when allowable
1. That there can be an increase in interest if
increased by law or by the Monetary Board;
2. It must include a provision for reduction of the
stipulated interest in the event that the applicable
maximum rate of interest is reduced by law or by the
Monetary Board.

Grant and Purpose of Loans and Other Credit Accommodations


Escalation Clause; effect of annulment

principal amount of the loan →


subject to the original or stipulated
rate of interest

Grant and Purpose of Loans and Other Credit Accommodations


Escalation Clause; exception

No de-escalation clause = VALID


- if the creditor unilaterally and actually decrease
the interest charges whenever the rate of interest is
reduced by law or the Monetary Board

Grant and Purpose of Loans and Other Credit Accommodations


Unilateral determination and
imposition
= violative of the principle of
mutuality of contracts

Grant and Purpose of Loans and Other Credit Accommodations


Iniquitous, Unconscionable
and Exorbitant Interest

Grant and Purpose of Loans and Other Credit Accommodations


Void Interest Rate
Courts may reduce the interest rate as
reason and equity demand

Grant and Purpose of Loans and Other Credit Accommodations


A borrower may at any time prior to
the agreed maturity date prepay
the unpaid balance.

Grant and Purpose of Loans and Other Credit Accommodations


• shall take place when two
persons, in their own right,
are creditors and
Legal debtors
• takes effect by operation
Compensation of law
• requires confluence in
the parties of the
characters of mutual
debtors and creditors

Grant and Purpose of Loans and Other Credit Accommodations


Banks cannot extend peso
loans to non-resident

Grant and Purpose of Loans and Other Credit Accommodations


all debts due to any
BAD DEBTS = bank on which interest
is past due and unpaid
for such period

Grant and Purpose of Loans and Other Credit Accommodations


Extraordinary Inflation Extraordinary Deflation

There is unusual There is unusual


decrease in the increase in the
purchasing power of purchasing power of
currency currency

Grant and Purpose of Loans and Other Credit Accommodations


IX. Foreclosure of
Real Estate Mortgage

Section 47 of General Banking Law


(R.A. 8791)
In the event of foreclosure,
IX. Foreclosure of MORTGAGOR or DEBTOR SHALL
HAVE THE RIGHT OF REDEMPTION
Real Estate Mortgage WITHIN ONE (1) YEAR.

REDEMPTION PRICE = Amount due


under mortgage deed + Interest stated
in the mortgage + Expenses by the
bank - Income derived from property.

However, the purchaser at the auction


sale shall have the right to enter
upon and take possession of such
property right after the confirmation of
Section 47 of General Banking Law
(R.A. 8791) the auction sale.
DEMAND BEFORE FORECLOSURE IS
ESSENTIAL.

Foreclosure of Real Estate Mortgage


Equity of Redemption
vs
Right of Redemption

Foreclosure of Real Estate Mortgage


Right of redemption may be extended.

How?

Foreclosure of Real Estate Mortgage


Application of Estoppel
in relation to redemption period

Foreclosure of Real Estate Mortgage


Redemption after the prescriptive period ≠ redemption
but REPURCHASE

Foreclosure of Real Estate Mortgage


Offer to REPURCHASE ≠ WAIVER

Foreclosure of Real Estate Mortgage


Effect of Rehabilitation of a Corporate Debtor
(P.D. 902-A)

Foreclosure of Real Estate Mortgage


Effect of Rehabilitation of a Corporate Debtor
(P.D. 902-A)

Foreclosure of Real Estate Mortgage


A. Ceiling on Investments in Certain Assets
X. Major Investments B. Acquisition of Real Estate By Way of
Satisfaction of Claims

Section 50 - 52 of General Banking Law


(R.A. 8791)