JUDICIAL FORECLOSURE UNDER RULE 68, RULES OF COURT

1. The mortgagee should file a petition for judicial foreclosure in the court which has jurisdiction over the area where the property is situated 2. The court will conduct a trial. If, after trial, the court finds merit in the petition, it will render judgment ordering the mortgagor/debtor to pay the obligation within a period not less than 90 nor more than 120 days from the finality of judgment. 3. Within this 90 to 120 day period, the mortgagor has the chance to pay the obligation to prevent his property from being sold. This is called the EQUITY OF REDEMPTION PERIOD. 4. If mortgagor fails to pay within the 90-120 days given to him by the court, the property shall be sold to the highest bidder at public auction to satisfy the judgment. 5. There will be a judicial confirmation of the sale. After the confirmation of the sale, the purchaser shall be entitled to the possession of the property, and all the rights of the mortgagor with respect to the property are severed or terminated. The equity of redemption period actually extends until the sale is confirmed. Even after the lapse of the 90 to 120 day period, the mortgagor can still redeem the property, so long as there has been no confirmation of the sale yet. Therefore, the equity of redemption can be considered as the right of the mortgagor to redeem the property BEFORE the confirmation of the sale. Notwithstanding Act 3135, juridical persons whose property is being sold pursuant to an extrajudicial foreclosure, shall have the right to redeem the property in accordance with this provision until, but not after, the registration of the certificate of foreclosure sale with the applicable Register of Deeds which in no case shall be more than three (3) months after foreclosure, whichever is earlier. Owners of property that has been sold in a foreclosure sale prior to the effectivity of this Act shall retain their redemption rights until their expiration. After the confirmation of the sale, the mortgagor does not have a right to redeem the property anymore. This is the general rule in judicial foreclosures there is no right of redemption after the sale is confirmed. The proceeds of the sale of the property will be disposed as follows: a. First, the costs of the sale will be deducted from the price at which the property was sold b. The amount of the principal obligation and interest will be deducted c. The junior encumbrances will be satisfied d. If there is still an excess, the excess will go back to the mortgagor. In mortgage, the mortgagee DOES NOT get the excess (unlike in pledge). e. If there is a deficiency, the mortgagee can ask for a DEFICIENCY JUDGMENT which can be imposed on other property of the mortgagor. The rule on extrajudicial foreclosure is different. The mortgagee must go to court and file another action for the collection of the deficiency. ONE WOULD SHY AWAY FROM A JUDICIAL FORECLOSURE: 1. Judicial foreclosure is costly, since the parties would need to hire lawyers. But then again, the present rules provide that court fees are needed to be paid in extrajudicial proceedings also. 2. The parties have very little control over the sale because there is court intervention. 3. More susceptible to stalling/dilatory tactics by the mortgagor, since he can file all sorts of motions in court to prevent the sale. 4. It is more efficient to have extrajudicial proceedings since for judicial proceedings, there is a minimum lapse of time of 6 years.