Home Financing Act

September 15, 1950

REPUBLIC ACT NO. 580

AN ACT TO CREATE THE HOME FINANCING COMMISSION, TO STIMULATE HOME BUILDING AND LAND OWNERSHIP AND TO PROMOTE THE DEVELOPMENT OF LAND FOR THAT PURPOSE, PROVIDE LIBERAL FINANCING THROUGH AN INSURED MORTGAGE SYSTEM, AND DEVELOP THRIFT THROUGH THE ACCUMULATION OF SAVINGS IN INSURED INSTITUTIONS

SECTION 1. This Act shall be known and cited as the "Home Financing Act."

CHAPTER I

Creation Of The Home Financing Commission

SECTION 2. There is hereby created a body corporate to be known as the Home Financing Commission which shall have its principal place of business in the City of Manila and shall exist for a period of fifty years. The functions of this Commission shall be —

(a) To operate a mortgage insurance program as provided in this Act.

(b) To encourage, aid or initiate the organization or incorporation of Savings and Loan Associations as provided in this Act.

(c) To promote home building and land ownership and the development of land for that purpose, and to promulgate rules and regulations to carry out the provisions of this Act.

SECTION 3. Membership. — The Commission shall be composed of five members appointed by the President of the Philippines with the consent of the Commission on Appointments. The President shall designate one of the members as Chairman of the Commission who shall receive a compensation of twelve thousand pesos per annum. Two of the members appointed shall be officers or directors of non-government mortgagee-institutions participating in the insured mortgage program in accordance with the provisions of this Act. Unless holding other offices in the Government or a position with fixed compensation in any Government corporation or instrumentality, the members shall receive for each meeting of the Commission attended a per diem of twenty pesos: Provided, however, That a member shall receive a total of not more than one thousand pesos a year in per diems. The Chairman shall hold office for five years. The members of the Commission shall likewise hold office for five years, with the exception of the members first appointed who shall serve for one, two, three and four years, respectively, as stated in their appointments. Thereafter, the person appointed to succeed a member of the Commission whose term shall have expired shall continue to serve for the full five-year term, and, except in the case of vacancies caused otherwise than the expiry of the term, only one member shall be appointed to the Commission each year. In the event of a vacancy, the successor appointed to fill the same shall serve only the unexpired portion of the term of the member he succeeds.

SECTION 4. Powers. — The Commission shall have the following powers:

(a) To insure mortgages and loans upon application by qualified mortgages as provided in Chapter II of this Act; aisa dc

(b) To insure the paid subscription of shareholders in the Savings and Loan Associations as provided in Chapter III of this Act;

(c) To underwrite, purchase, own, sell, mortgage or otherwise dispose of stocks, bonds, debentures, securities and other evidences of indebtedness issued for in connection with the powers enumerated in the preceding paragraphs and under Chapters II and III of this Act;

(d) To issue bonds, debentures, securities, collaterals, notes and other obligations with the approval of the President after consultation with the Monetary Board of the Central Bank of the Philippines, but in no case to exceed at any one time the aggregate amount of the principal obligations of all mortgages and accounts insured under Chapters II and III of this Act plus the amount authorized for the Home Financing Fund in accordance with the provisions of section six of this Act. These bonds and other obligations shall be issued under such terms and conditions as are provided in this Act and the rules and regulations prescribed by the Commission and shall be redeemable at the option of the Commission at or before maturity and in such manner as may be stipulated therein and shall bear such rate of interest as may be fixed by the Commission, but not more than three per cent per annum. Such obligations shall be secured by the assets of the Commission, including the stocks, bonds, debentures and other securities under-written, purchased or held by it under the provisions of this Act. The Commission shall provide for appropriate reserves for the redemption or retirement of said obligations. Such obligations may be issued and offered for sale at such price or prices as the Commission may determine, and shall be exempt from taxation as to principal and interest, except estate, inheritance and gift taxes. The said obligations shall be and are hereby fully and unconditionally guaranteed both as to principal and interest by the Government of the Republic of the Philippines and such guaranty shall be expressed on the face thereof. Bonds issued by the Commission shall be registered at the request of the holders thereof under such rules and regulations as may be prescribed by the Commission;

(e) To adopt, alter, and use a corporate seal; to make contracts; to lease or own real and personal property, and to sell, mortgage or otherwise dispose of the same;

(f) To sue and be sued in any court of competent jurisdiction;

(g) To employ such officers and personnel as may be necessary to carry out the business of the Commission; and otherwise to do and perform any and all things that may be necessary, proper or incidental to carry out the purposes of this Act.

SECTION 5. Procedure. — The Chairman of the Commission shall preside over its deliberations and shall be its General Manager. The decisions of the Commission shall be made by a vote of the majority of all its members.

SECTION 6. Home Financing Fund. — There is hereby authorized to be appropriated an amount not exceeding five million pesos to be designated as a Home Financing Fund, which shall be used by the Commission to carry out the provisions of this Act; and for this purpose the Commission is hereby authorized, with the approval of the President, to borrow such amounts as may be necessary from any government office, agency, or instrumentality or private financing entity or entities authorized to give loans. This loan may be negotiated in the form of bonds under the authority contained in section four (d) of this Act.

SECTION 7. (a) Accountant. — The accountant of the Commission and the subordinate personnel of the Accounting Office shall be appointed by the Commissioner of the Budget. The Commission shall fix the salary of the accountant and the number and rates of salaries of the personnel of the Accounting Office.

(b) Auditor. — The auditor of the Commission shall be appointed by the Auditor General, who shall also appoint and for cause, remove, upon the recommendation of the Auditor, the personnel of the Auditing Office. The Commission shall fix the salary of the Auditor and the number and rates of salaries of the personnel of the Auditing Office. The amount of other operating expenses of the Auditing Office shall also be fixed by the Commission. The Auditor shall submit, through the Commission, a semi- annual report on the financial condition and the result of the operation of the Commission to the President, the Senate through its President, the House of Representatives through the Speaker, the Secretary of Finance, the Secretary of Economic Coordination, and the Auditor General.

SECTION 8. Report. — The Commission shall submit an annual report to the President and to the Congress of the Philippines, after the first day of January of each year but not later than the first day of April, regarding its activities under this Act for the previous year.

CHAPTER II

Classification Of Risks And Method Of Insuring Lending Institutions

SECTION 9. With a view to encourage the financing of new construction for small business, agricultural and residential units in a limited amount, the repair of existing residential, small business or agricultural buildings and the rehabilitation requirements and recovery from damage caused by the elements, the Home Financing Commission shall prescribe rules and regulations to govern the insurance authorized under this section in accordance with the provisions set forth hereunder:

(a) The Commission is authorized to insure banks, insurance companies, building and loan associations and other qualified lending institutions against losses which they may sustain as a result of eligible property improvement loans. The lending institutions shall be charged with the responsibility or exercising the proper credit judgment in making the loans.

(b) The lending institution shall be insured against loss up to ten per centum of the aggregate net amount loaned over a given period.

(c) Four classes of loans may be insured under this section at the discretion of the Commission even though they may be subject to existing mortgages:

(1) Loans covering the cost of repair, alteration or improvement begun after the date of the approval of this Act of an existing structure, such loans not to be in excess of six thousand pesos and to mature in not to exceed five years on a monthly amortization basis;

(2) Loans covering the cost of alteration, repair, improvements or conversion begun after the date of the approval of this Act of an existing structure used or to be used as a dwelling for two or more families, such loans not to be in excess of twenty thousand pesos and to mature in not exceeding ten years on a monthly amortization basis; cd

(3) Loans covering the construction of a new structure begun after the approval of this Act to be used for small business or agricultural purposes, such loans not to be in excess of six thousand pesos and to mature in not exceeding six years on a monthly amortization basis;

(4) Loans covering the construction of a new structure begun after the date of the approval of this Act to be used for a combination of residential and small business purposes or for a combination of residential and agricultural purposes, such loans not to be in excess of ten thousand pesos and to mature in not to exceed ten years on a monthly amortization basis.

 

SECTION 10. (a) The Commission is authorized, upon application by a qualified mortgagee, to insure in accordance with the provisions of this Act, any mortgage offered to it which is eligible for insurance as hereinafter provided, and, upon such terms as the Commission may prescribe, to make commitments for the insuring of such mortgages prior to the date of their execution or any disbursement thereon.

(b) To be eligible for insurance under this section a mortgage shall —

(1) Involve a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the Commission shall approve) in an amount —

(A) not to exceed thirty thousand pesos nor in any case eighty per centum of the appraised value (as of the date the mortgage is accepted for insurance) of a property upon which there is located a dwelling or dwellings designed principally for residential use by not more than four families in the aggregate, irrespective of whether or not such dwelling or dwellings have a party wall or walls or are otherwise physically connected with another dwelling or dwellings the construction of which is begun after the date of the approval of this Act: Provided, That no mortgage shall be insured under this paragraph unless the mortgagor is the owner and occupant of at least one of the dwelling units of the property at the time for the insurance and shall have paid on account of the property, in cash or its equivalent, at least twenty per centum of the appraised value thereof;

(B) not to exceed thirteen thousand five hundred pesos nor in any case ninety per centum of the appraised value (as of the date the mortgage is accepted for insurance) of a property, whether urban, suburban, or rural, upon which there is located a dwelling designed principally for a single-family residence, the construction of which is begun after the date of approval of this Act and which is approved for mortgage insurance prior to the beginning of construction: Provided, That no mortgagee shall be insured under this paragraph unless the mortgagor shall be the owner and occupant of the property at the time of the insurance and shall have paid on account of the property, in cash or its equivalent, at least ten per centum of the appraised value thereof;

(C) not to exceed nine thousand five hundred pesos nor in any case ninety-five per centum of the appraised value of a property, whether urban, suburban, or rural, upon which there is located a dwelling, designed principally for a single-family residence which is approved for mortgage insurance prior to the beginning of construction: Provided, That no mortgage shall be insured under this paragraph unless the mortgagor shall be the owner and occupant of the property at the time of the insurance and shall have paid on account of the property, in cash or its equivalent, at least five per centum of the appraised value thereof.

(2) Have a maturity satisfactory to the Commission, but not to exceed twenty years from the date of the insurance of the mortgage in the case of mortgages under paragraph (1) (A) and not to exceed twenty-five years in the case of those under paragraphs (1) (B) and (1) (C) hereof.

SECTION 11. (a) The Commission is authorized upon application by the mortgagee, to insure, in accordance with the provisions of this Act, any mortgage offered to it which is eligible for insurance as hereinafter provided and upon such terms as the Commission may prescribe (including advance on such mortgages during construction), if the mortgage covers property held by — cdt

(1) The National Government, provincial, city or municipal governments, or government-owned or controlled corporations and agencies.

(2) Private corporations, associations, cooperative societies which are legal agents of owner-occupants, or trusts formed or created for the purpose of rehabilitating slum or blighted areas, or providing housing for rent or sale, and which possess powers necessary therefor and incidental thereto, and which, until the termination of all obligations of the Commission under such insurance, are regulated or restricted by the Commission as to rents or sales, charges, capital structure, rate of return, and methods of operation to such extent and in such manner as to provide reasonable rentals to tenants and a reasonable return on the investment. The Commission may make such contracts with, and acquire for not to exceed one hundred pesos such stock or interest in, any such corporation, association, cooperative society, or trust as it may deem necessary to render effective such restriction or regulation. Such stock or interest shall be paid for out of the Fund, and shall be redeemed by the corporation, association, cooperative society, or trust at par upon the termination of all obligations of the Commission under the insurance.

(3) An individual owner or joint-owners.

(b) Such mortgages may cover the installation of improvements involving —

(1) A rental project not to exceed one hundred units and involve a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the Commission shall approve) in an amount not to exceed one million pesos.

(2) A rental project not to exceed one thousand units and involve a principal obligation (including such initial service, charges, appraisal, inspection, and other fees as the Commission shall approve) in an amount not to exceed five million pesos.

(c) To be eligible for insurance under this section a mortgage shall —

(1) Involve a principal obligation not to exceed eighty per centum, for projects under subsection (b) (1); and not to exceed ninety per centum, for projects under subsection (b) (2), of the amount which the Commission estimates will be the value of the property or project when the proposed improvements are completed, including the land; the proposed physical improvements; utilities within the boundaries of the property or project; architect's fees; taxes and interest accruing during construction; and other miscellaneous charges incident to construction and approved by the Commission.

(2) Have a maturity satisfactory to the Commission but not to exceed twenty years from the date of the insurance of the mortgage under subsection (b) (1), and not to exceed thirty years from the date of insurance of the mortgage under subsection (b) (2).

SECTION 12. To be eligible for insurance under this section —

(a) A mortgage on any property or project shall —

(1) involve a principal obligation in an amount not to exceed one million pesos.

(2) not to exceed sixty per centum of the amount the Commission estimates will be the value of the property or project when the proposed improvements, consisting of utilities, are completed, including the land.

(b) The mortgage shall —

(1) provide for complete amortization by a schedule of payments within such term as the Commission shall prescribe, not to exceed five years. cdt

(c) No mortgage shall be accepted for insurance under this section unless —

(1) the Commission has approved the type of improvements to be installed, the plan of sub-division, and the contract of sale, or deed, under which the lots may be sold.

(2) the Commission has approved the tract of land for insured mortgages in accordance with the provisions of this Act.

SECTION 13. In order to assist in relieving the acute shortage of housing which now exists and to promote the production of housing at moderate prices or rentals, through the application of modern industrial processes, the Commission is authorized to insure loans to finance the manufacture of housing or the materials to be used in the construction of houses, when such loans are eligible for insurance as provided in the rules and regulations to be prescribed by the Commission, with the approval of the President of the Philippines.

SECTION 14. In order to assist in developing rural areas and to encourage development of agricultural areas by individuals and associations, the Commission is authorized to insure the loans as hereinafter provided:

(a) All loans insured under this section, whether in the form of notes secured by mortgages or in the form of debentures secured by mortgages, shall be subject to all of the conditions set forth in subsection (a)-(1), (2) and (3) of section eleven.

(b) Such loans may cover the installation and operation of improvements involving:

(1) Subdividing and developing tracts into small farms, including housing, for subsequent sale: Provided, That such projects shall be limited to one hundred units and involve a principal obligation in an amount not to exceed one million pesos nor in any case ninety per centum of the amount which the Commission estimates will be the value of the property or project when the improvements are completed, including the land, and that the mortgage shall have a maturity satisfactory to the Commission not to exceed twenty years from the date of the insurance of the mortgage.

(2) Acquisition or installation of facilities and equipment for increasing the productivity of land and the marketing of crops: Provided, That the borrower or mortgagor shall be a corporation owning land or association of landowners; that the loan or mortgage shall involve a principal obligation in an amount not to exceed ten million pesos and shall not exceed fifty per centum of the amount the Commission shall estimate to be the value of the property and project including the land, above all other encumbrances, when the improvements have been installed and are functioning; and, that the mortgage shall have a maturity satisfactory to the Commission not to exceed twenty years from the date of the insurance of the mortgage.

(3) Irrigation projects, including hydro-electric power, when in the opinion of the Commission, it shall benefit agricultural development: Provided, That the borrower or mortgagor shall be a corporation owning land or association of landowners; that the loan or mortgage shall involve a principal obligation not to exceed ten million pesos, and shall not exceed the cost of the improvement project, including the cost of preliminary surveys and initial operating fund; and that the mortgage shall have a maturity satisfactory to the Commission not to exceed twenty years from the date of the insurance of the mortgage: And provided, further, That disbursements hereon shall be made against progress reports verified by the Commission.

 

(c) The Commission is authorized to require that a portion of the crops or produce of any project insured under this section be allocated to the Commission to assure the amortization of such loan or mortgage.

General Provisions

SECTION 15. (a) Notwithstanding the foregoing provisions, the Commission may, as a matter of sound business policy, set a limit on the total amount to be insured under each section of this chapter and in no case shall the aggregate amount of the outstanding principal obligations of mortgages insured under this chapter exceed five hundred million pesos at any one time.

(b) The Commission shall fix, in accordance with sound actuarial practice and the risk characteristics involved, the rates of insurance premiums for each class of loans or mortgages as prescribed under each section of this chapter: Provided, however, That no insurance premium for any particular class of loans or mortgages shall be fixed at less than one fourth of one per centum nor more than one per centum of the amount of the outstanding principal obligation. cd

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

(d) The Commission may charge and collect such amounts as it deems reasonable for the appraisal of a property or project offered for insurance and may likewise charge and collect such amounts as it deem reasonable for the inspection of such property or project during construction: Provided, That such charges for appraisal and inspection shall not aggregate more than one per centum of the principal face amount of the mortgage.

SECTION 16. To be eligible for insurance under this chapter, a mortgage shall —

(a) Have been made to, and be held by, a qualified mortgage approved by the Commission as responsible and able to service the mortgage properly;

(b) Contain complete amortization provisions satisfactory to the Commission requiring periodic payments by the mortgagor not in excess of his reasonable ability to pay as determined by the Commission;

(c) Bear interest (exclusive of premium charges for insurance) at not to exceed five per centum per annum on the amount of the principal obligation outstanding at any time, or not to exceed six per centum per annum if the Commission finds that in certain areas or under special circumstances the mortgage market demands it: Provided, That loans made under section nine may be made at a discount of five pesos per annum per one hundred pesos;

(d) Provide, in a manner satisfactory to the Commission for the application of the mortgagor's periodic payments (exclusive of the amount allocated to interest and to the premium charge which is required for mortgage insurance as hereinafter provided) to amortization of the principal obligation of the mortgage; and,

(e) Contain such terms and provisions with respect to insurance, repairs, alterations, payment of taxes, default reserves, delinquency charges, foreclosure proceedings, anticipation of maturity, additional and secondary liens, and other matters as the Commission may in its discretion prescribe.

Payment Of Insurance

SECTION 17. (a) In any case in which the mortgagee in a mortgage insured under this chapter shall have foreclosed and taken possession of the mortgaged property in accordance with regulations of the Commission, the mortgagee shall be entitled to receive the benefit of the insurance as hereinafter provided, upon (1) the prompt conveyance to the Commission of rights to the property, and (2) the assignment to it of all claims of the mortgagee against the mortgagor or others. Upon such conveyance and assignment, the obligation of the mortgagee to pay the premium charges for insurance shall cease and the Commission shall, subject to the cash adjustment hereinafter provided, issue to the mortgagee debentures having a total face value equal to the value of the mortgage and a certificate of claim, as hereinafter provided.

(b) The debentures issued under this chapter to any mortgagee with respect to mortgages or loans insured under Chapters II and III shall be executed in the name of the Home Financing Commission as obligor, and signed for the Commission by the Chairman-General Manager by either his written or engraved signature, and shall be negotiable. All such debentures shall be dated as of the date the foreclosure proceedings were instituted, or the property was otherwise acquired by the mortgagee after default, and shall bear interest from such date at a rate to be determined by the Commission, with the approval of the President after consultation with the Monetary Board, but not to exceed three per centum per annum, payable semi- annually of the first day of January and the first day of July of each year, and shall mature ten years after the date on which the debentures were issued.

(c) The aggregate amount at any one time of all such debentures issued to mortgagees with respect to mortgages or loans insured under this Act shall be fixed by the Commission with the approval of the President after consultation with the Monetary Board, which shall in no case exceed the aggregate amount of the outstanding principal obligations of all mortgages insured under this Act. casia

Investment Of Funds

SECTION 18. Moneys in the Fund, not needed for the current operations of the Home Financing Commission, shall be deposited with the Treasurer of the Philippines to the credit of the Fund, or invested in bonds or other obligations issued or guaranteed as to principal and interest by the Government. The Commission may purchase in the open market debentures issued under the provisions of this Act. Debentures so purchased shall be cancelled and not reissued.

CHAPTER III

National Savings And Loan Associations

SECTION 19. (a) In order to provide local mutual thrift institutions for the accumulation of savings and for the financing homes, the Commission is authorized, under such rules and regulations as it may prescribe, and in accordance with the provisions of existing laws, to encourage, aid or initiate the organization and incorporation of associations to be known as "National Savings and Loan Associations," to provide for their examination, regulation, and operation, and to issue contracts of insurance for the accounts of such associations in accordance with the best practices of known mutual thrift and home-financing institutions.

(b) Such associations shall raise their capital only in the form of payments on such shares as are authorized in their charter or articles of incorporation. No deposit shall be accepted and no certificates of indebtedness shall be issued except for such borrowed money as may be authorized by regulations of the Commission.

(c) Such associations shall lend their funds only on the security of their shares, or on the security of first liens upon homes or combination of homes and business property, or, upon the approval of the Commission, on any insured mortgage on property located within the area designated in their charter or articles of incorporation as their respective sphere of operation: Provided, however, That no loan exceeding fifty thousand pesos shall be made on the security of first liens upon any one such property nor in any case an aggregate of fifteen per centum of the assets of such association on the security of such first liens: And provided, further, That a portion of the assets of such associations may be invested in bonds and obligations issued or guaranteed by the Republic of the Philippines.

(d) The Commission shall have full power to provide in the rules and regulations herein authorized for the reorganization, consolidation, merger, or liquidation of such associations in accordance with existing laws, including the power to appoint a conservator or a receiver to take charge of the affairs of any such association, and to require an equitable readjustment of the capital structure of the same; and to release any such association from such control and permit its further operation.

(e) The Commission is authorized to subscribe for preferred shares in such associations which shall be preferred as to the assets of the association and which shall be entitled to a dividend, if earned, after payment of expenses and provision for reasonable reserves, to the same extent as other shareholders: Provided, however, That the subscription by the Commission to the shares of any one such association shall not exceed one hundred thousand pesos, and no such subscription shall be made unless in the judgment of the Commission the funds are necessary for the encouragement of reasonable local home financing in the community to be served. In case of the liquidation of any such association, the shares held by the Commission shall be retired on the same basis as payments are made to other shareholders in accordance with existing laws.

(f) Such associations, including their franchises, capital, reserves, and surplus, and their loans and income, shall be exempt from all taxation now or hereafter imposed by the Government.

SECTION 20. (a) Notwithstanding the foregoing provisions, the total amount of accounts of National Savings and Loan Associations insured under this chapter shall not exceed the sum of five hundred million pesos at any one time.

(b) Each institution whose application for insurance is approved by the Commission shall pay to the Commission in such manner as it shall prescribe, a premium charge for such insurance at the rate set by the Commission under the provisions of this Act on the basis of the total amount of all accounts of the insured members of such institutions plus any creditor obligations of such institutions. Such premium shall be paid at the time the certificate is issued by the Commission and thereafter annually, or semi-annually as the Commission may prescribe. A reserve fund shall be established by the Commission equal to five per centum of all insured accounts and creditor obligations of all insured institutions.

 

(c) The Commission is further authorized to raise the rate of premiums for insurance until the amount of such premiums is sufficient to cover the amount of all losses and expenses of the Commission: Provided, however, That the total amount of such premiums in any one year shall not exceed one per centum of the total amount of the accounts of its insured members and its creditor obligations.

SECTION 21. Each institution whose application for insurance under this Chapter is approved by the Commission shall be entitled to insurance up to the par value of the shares of each of its shareholders: Provided, however, That no shareholder shall be insured for an aggregate amount in excess of ten thousand pesos.

SECTION 22. The Commission is hereby authorized to prescribe, in accordance with existing laws, rules and regulations governing the procedure to be followed in the event of a default by any insured institution including the rehabilitation of liquidation of such insured institution.

SECTION 23. To enable the Commission to encourage local thrift and local home financing and to promote, organize and develop the associations herein provided for, the Commission is hereby authorized to use money from the Fund. The sums expended under this section shall be used impartially in the promotion and development of local thrift and home financing institutions.

SECTION 24. Each association organized under this Chapter shall use the words "National Savings and Loan Association" in their corporate names in addition to any other specific designation that may be used, and, further, that no other corporation or association other than those organized under this Chapter shall be permitted to use the words "National Savings and Loan Association."

CHAPTER IV

Miscellaneous

SECTION 25. Definitions. — As used in this Act:

(a) The term "mortgage" means a first mortgage on real estate in fee simple, or on the interest of either the lessor or lessee thereof under a lease for not less than ninety-nine years which is renewable or under a lease having a period of not less than fifty 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 use; and the term "first mortgage" means such classes of first liens as are commonly given to secure advances (including but not being limited to advances during construction) on, or the unpaid purchase price of, real estate together with the credit instrument or instruments, if any, secured thereby, and may be in form of trust mortgages or mortgage indentures in deeds of trust securing notes, bonds, or other credit instruments.

(b) The term "mortgagee" means the original lender under a mortgage, and its successors and assigns, and includes the holders of credit instruments issued under a trust mortgage or deed of trust pursuant to which such holders act by and thru a trustee herein named.

(c) The term "mortgagor" means the original borrower under a mortgage and its successors and assigns.

(d) The term "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.

(e) The term "slum or blighted area" means 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.

(f) The term "rental housing" means housing, the occupancy of which is permitted by the owner thereof in consideration of the payment of agreed charges, whether or not, by the terms of the agreement, such payment over a period of time will entitle the occupant to the ownership of the premises.

(g) The term "Commission" means the Home Financing Commission.

SECTION 26. Amendatory provisions. —

(a) All banking institutions, trust companies, personal finance companies, mortgage companies, building and loan associations, installment lending companies, insurance companies, and other financial institutions, are hereby authorized to invest part of their funds for the purpose of giving loans and advances of credit contemplated and provided in this Act, as well as in the purchases of obligations representing loans and advances of credit made pursuant to the provisions of this Act.

(b) The Rehabilitation Finance Corporation is hereby authorized:

(1) To purchase, service or sell mortgages which are insured under the provisions of this Act.

(2) Subject to the approval of the Monetary Board to issue bonds, debentures, securities, collaterals and other obligations against the security of mortgages insured under this Act, in such amounts and in such proportion to the face value of such mortgages as the Board of Governors may designate and such obligations may be issued and offered for sale at such price or prices as the Rehabilitation Finance Corporation may determine, and shall be exempt from taxes both as to principal and interest. The said obligations shall be and are hereby fully and unconditionally guaranteed both as to principal and interest by the Government of the Republic of the Philippines and such guarantee shall be expressed on the face thereof and the President is hereby authorized to endorse such debentures for the Government of the Republic of the Philippines as prime obligor in such form as may be designated by the International Bank of Reconstruction and Development.

(c) Interests accumulated by lending institutions on mortgages insured under the provisions of this Act shall be exempt from all taxation.

SECTION 27. Penalties. — (a) Whoever, for the purpose of obtaining any loan or advance of credit from any person, partnership, association, or corporation with the intent that such loan or advance of credit shall be offered to or accepted by the Home Financing Commission for insurance, or for the purpose of obtaining any extension or renewal of any loan, advance of credit, or mortgage insured by the said Commission, or the acceptance, release or substitution of any security on such a loan, advance of credit, or for the purpose of influencing in any way the action of the said Commission under this Act, makes, passes, utters, or publishes, or causes to be made, passed, uttered, or published any statement, knowing the same to be false, or alters, forges, or counterfeits, or causes or procures to be altered, forged, or counterfeited, any instrument, paper, or document or utters, publishes, or passes as true, or causes to be uttered, published, or passed as true, any instrument, paper, or document, knowing it to have been altered, forged, or counterfeited, or wilfully 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 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 issued 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 alters any obligation or coupon so issued or purporting to have been so issued, or (4) passes, utters, or publishes, or attempts to pass, utter, 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 more than ten thousand pesos, or by imprisonment for not more than five years, or both.

(c) Any person who wilfully 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 Home Financing Commission, or who knowingly counsels, aids, procures, or induces another to start, transmit, or circulate any such statement or rumor, is guilty of felony punishable by a fine of not more than one thousand pesos or by imprisonment of not exceeding one year, or both.

SECTION 28. Separability provisions. — If any provision of this Act, or the application thereof to any person or circumstances, is held invalid, the remainder of the Act, and the application of such provision to other persons or circumstances, shall not be affected thereby.

SECTION 29. All laws or parts of laws inconsistent with the provisions of this Act are hereby repealed. casia

SECTION 30. This Act shall take effect upon its approval.

Approved: September 15, 1950

Published in the Official Gazette, Vol. 46, No. 12, p. 5977 in December 1950