DOJ Opinion No. 172, s. 1980

DOJ OPINION NO. 172 , s. 1980 November 21, 1980 Mr. Florencio B. Orendain President National Home Mortgage Finance Corporation 10th Floor, Citibank Center Paseo de Roxas, Makati Metro Manila Sir : This refers to your query concerning the exemption of the National Home Mortgage Finance Corporation (NHMFC) "from fees and taxes involved in the registration of mortgages in its favor". LLphil You state that the NHMFC is mandated by its Charter, P.D. No. 1267, to develop and provide for a secondary market for home mortgages in response to the housing problem; that in order to carry out this purpose, it contracts with financial institutions whereby the latter shall lend out money for home construction or purchase under NHMFC loan standards, on a prior commitment by the NHMFC that it shall purchase the notes and mortgages so generated; that under this financing system, the original parties to the loan and mortgage are the borrowers and the financial institution originating the same, the NHMFC subsequently succeeding to the rights of the financial institution concerned by assignments executed by the latter in its favor; that this circuitous arrangement is necessitated by the fact that the NHMFC lacks authority to engage in direct lending operations; that notwithstanding such arrangement, the loan at its very inception is an NHMFC loan, the NHMFC being the intended mortgage from the very start; and that this financing system exposes the NHMFC to double registration costs the first, upon the original transaction and the second, upon the assignment of the transaction to the NHMFC although this could be avoided if the NHMFC's participation in the transaction as the real party in interest is appreciated and recognized and its exemption privilege under Section 20 of P.D. No. 1267 is given effect. Particularly, you now seek our opinion on whether the exemption granted in Section 20 of the NHMFC Charter "may serve as a basis for writing off, in effect, the expenses connected with the original registration of the mortgages and the annotation of their subsequent assignment" to the NHMFC. We take it that the NHMFC wishes to be informed whether the above-mentioned mortgage transactions may be deemed covered by the exemption provision of Section 20 of its Charter which states: "SEC. 20. Tax Exemption . Not-withstanding the provisions of any general or special law to the contrary, the Corporation, its properties and transactions except income shall be exempt from the payment of all taxes, duties, fees and other charges including costs, service and filing fees, appeal bonds, supersede as bonds in any other court in administrative proceedings." (Emphasis supplied.) Subject to the extended discussion hereunder set forth, we answer the query in the negative with respect to registration fees on original mortgages executed by the private borrowers with the financial institutions, and in the affirmative with respect to registration fees on the assignments of the same mortgages to the NHMFC. Registration fees under the Land Registration Law (Act No. 496, now P.D. No. 1529) are collected by Registers of Deeds for services rendered and are therefore not considered taxes which are collected for revenue purposes (Luzon Stevedoring Corporation v. Land Registration Commission, 5 SCRA, 145 [1962] cited in Op. Sec. of Justice No. 137, s. 1974). Nonetheless, such registration fees may fall within the scope of the exemption privilege of the NHMFC under Section 20, supra , as among the "fees and other charges" on the "properties and transactions" of NHMFC covered by the above-quoted exemption provision. Section 20, supra , being a tax and fee exemption provision, must be construed strictly and its coverage may not be extended beyond that which appears from the language of the provisions, Therefore, the exemption privilege of the NHMFC under subject provision should be taken as one that exclusively attaches to the NHMFC itself and may not be extended to "transactions" which, both ostensibly and legally, are not transactions of the NHMFC, but are mortgage transactions of private borrowers with financial institutions. Furthermore, the NHMFC, as you yourself admit, has no "authority to engage in direct lending operations". Indeed, there is no provision in the NHMFC Charter empowering the said entity to extend loans for housing and home development, such power having been expressly vested in banks by Section 6 of the said Charter. In view thereof, it is clear that the mortgage transactions entered into by banks with the private borrowers pursuant to this provision are legally transactions of said banks and not transactions of the NHMFC, within the meaning of the exemption provision of Section 20, supra . Such transactions, while allegedly intended from the very start to be transactions of the NHMFC, cannot legally be considered transactions of the NHMFC as these are transactions which it may not legally engage in, for lack of authority to do so. On the other hand, the subsequent assignments of the same mortgage transactions to the NHMFC may be viewed in a different light. Section 4 of the NHMFC Charter provides that the "primary purpose of the [NHMFC] shall be to develop and provide for a secondary market for home mortgages granted by public and/or private home financing institutions". Precisely, to achieve this purpose, the NHMFC has been granted authority, inter alia , to "purchase, acquire, sell, discount, refinance, or otherwise deal in home mortgages or participation therein . . ." (sec. 5a., ibid ) These provisions provide sufficient legal basis for the subsequent assignments to the NHMFC of subject mortgage transactions, which assignments may be deemed transactions of the NHMFC with respect to which the NHMFC may enjoy exemption from registration fees under the cited provision of Section 20 of its Charter. Very truly yours, For the Minister of Justice: (SGD.) JESUS N. BORROMEO Deputy Minister of Justice