Monday, March 4, 2013

Mortgage Crisis

The mortgage crisis of 2008 threatened wide spread recession.  Corporations in the US were bailed out like felons.  The Philippines has its share of foreclosures but a few foreclosures do not a mortgage crisis make. 

      Philippine banks require the borrower to submit documented proof of regular income and bank savings.  What does a borrower do to avoid foreclosure due to sudden hardship?  In the US, to resell a property the buyer will need his own loan approval.  Here lies the difference, in the Philippines the buyer and seller need only execute two documents, an undated Deed of Sale and a Contract to Sell which stipulates the buyer will assume the balance and arrears of the mortgage and give a down payment to the seller.  The buyer holds the seller free of all liabilities from the date of the contract.  

   After the bank loan has been fully paid by the buyer then the accompanying undated Deed of Sale previously signed by both parties would be dated and used for the transfer of title.  Should the new buyer need to dispose of the property in the future the same procedure is done.  The property continues to change hands but the bank would hold the original title of the property until the current owner pays off the entire balance.

   This system expands the number of eligible home buyers to include people who have money for down and monthly payments but would not qualify for a bank loan due to undocumented job, inheritance or business too small to license.  It gives baby sitters, home cleaners, freelance maintenance or construction laborers, convenience store or repair shop owners a chance to buy real estate.  This hard working sector is what the main stream society call ‘underground economy’.  It has its origin from Biblical time as Leviticus 25:14 says “Now in case you should sell merchandise to your associate or be buying from your associate’s hand do not you wrong one another”. 

   Every country has its poor.  Jesus Christ himself said “For you have the poor always with you…” (John 12:8). Just as Jesus said it, the Philippines will always have its poor but for now it does not have a mortgage crisis. 

See also: A Breakout Nation 

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