Are Co-Makers Included on the Title in a Pag-IBIG Housing Loan?

Introduction

In the Philippine housing finance landscape, the Pag-IBIG Fund (Home Development Mutual Fund) plays a pivotal role in enabling Filipinos to acquire homes through affordable loan programs. One common query among borrowers pertains to the role of co-makers in these loans, particularly whether they are included on the property title. This article explores the legal and procedural aspects of co-makers in Pag-IBIG housing loans, clarifying their status vis-à-vis property ownership and title registration. Drawing from Philippine laws on loans, mortgages, and property registration, as well as Pag-IBIG's established guidelines, we delve into the distinctions, requirements, and implications to provide a comprehensive understanding.

Understanding Key Terms in Pag-IBIG Housing Loans

To address the central question, it is essential to define the relevant terms within the context of Philippine law and Pag-IBIG operations.

Pag-IBIG Housing Loan

The Pag-IBIG Housing Loan is a government-backed financing scheme under Republic Act No. 9679 (Pag-IBIG Fund Law of 2009), which amended Republic Act No. 7742. It allows eligible members to borrow funds for home acquisition, construction, improvement, or refinancing. The loan is typically secured by a first mortgage on the property being financed, ensuring the Fund has a legal claim in case of default.

Co-Maker vs. Co-Borrower

Co-Borrower: This refers to an individual who jointly applies for the loan with the principal borrower. Co-borrowers share equal liability for repayment and often have co-ownership rights in the property. In Pag-IBIG loans, co-borrowers are typically spouses or immediate family members, and their names may appear on the title if they are registered as co-owners under the property's deed of sale or absolute sale.
Co-Maker: A co-maker, on the other hand, acts as a guarantor or surety for the loan. Under Article 2047 of the Civil Code of the Philippines, a surety (or co-maker in loan parlance) binds themselves solidarily with the principal debtor for the fulfillment of the obligation. In Pag-IBIG housing loans, co-makers are required when the principal borrower's income or creditworthiness is insufficient to meet the loan's risk assessment criteria. They sign the promissory note, agreeing to pay if the borrower defaults, but they do not assume ownership or equity in the property.

The distinction is crucial: while co-borrowers participate in the ownership structure, co-makers provide financial backing without proprietary interest.

Property Title

In the Philippines, property ownership is evidenced by a Transfer Certificate of Title (TCT) for land or a Condominium Certificate of Title (CCT) for condominium units, issued by the Registry of Deeds under Presidential Decree No. 1529 (Property Registration Decree). The title lists the registered owner(s) and any encumbrances, such as mortgages.

Legal Framework Governing Co-Makers in Housing Loans

Philippine laws do not mandate the inclusion of co-makers on property titles, as their role is confined to loan repayment guarantees rather than ownership.

Civil Code Provisions

Article 2085: For a mortgage to be valid, it must be constituted by the owner of the property. Thus, only the borrower (or co-borrowers) who own the property can mortgage it to Pag-IBIG. Co-makers, not being owners, cannot be parties to the mortgage contract.
Article 2047-2057 (Suretyship): Co-makers are sureties who are jointly and severally liable with the borrower. Their liability is accessory to the principal obligation and does not extend to property rights. Upon default, Pag-IBIG can pursue co-makers for payment without transferring title ownership to them.

Pag-IBIG Fund Guidelines

Pag-IBIG's housing loan policies, as outlined in its Circulars (e.g., Pag-IBIG Fund Circular No. 428 on Housing Loan Program Guidelines), specify eligibility and documentation requirements. Key points include:

Co-makers must be Pag-IBIG members with good standing, typically relatives or close associates of the borrower.
They submit financial documents like income proofs and credit reports to demonstrate capacity to guarantee the loan.
However, Pag-IBIG does not require or allow co-makers to be added to the title. The title remains in the name of the borrower(s) as per the Deed of Absolute Sale or similar transfer documents.
In cases of joint applications (e.g., husband and wife), both may be listed as co-borrowers on the title if the property is acquired under conjugal or co-ownership regimes, but this is distinct from co-maker status.

Under the Family Code (Executive Order No. 209), if a co-maker is a spouse, they may have indirect interests via conjugal property rules, but this does not automatically place them on the title unless specified in the purchase documents.

Procedural Aspects in Pag-IBIG Loan Processing

Loan Application and Approval

The principal borrower applies for the loan, providing property details and collateral valuation.
If a co-maker is needed (e.g., to meet the debt-to-income ratio), they sign the Loan and Mortgage Agreement (LMA) and Promissory Note, but not the Real Estate Mortgage (REM) itself, which is executed solely by the owner-borrower.
Pag-IBIG annotates the mortgage on the title at the Registry of Deeds, listing the Fund as mortgagee, but co-makers are not mentioned on the title annotation.

Title Registration and Transfer

Upon loan approval and property purchase, the title is transferred from the seller to the borrower via a Deed of Absolute Sale, registered with the Registry of Deeds.
Co-makers have no role in this transfer; their involvement ends at guaranteeing the loan.
In developer-assisted loans, where Pag-IBIG partners with real estate developers, the title is issued in the borrower's name, with the mortgage encumbrance noted.

Default and Foreclosure Scenarios

If the borrower defaults, Pag-IBIG may foreclose under Act No. 3135 (Law on Extrajudicial Foreclosure of Mortgages). The property is auctioned, and proceeds satisfy the debt.
Co-makers become liable for any deficiency judgment post-foreclosure, as per Article 2053 of the Civil Code, but they do not gain title rights. They cannot claim ownership unless they separately purchase the property.
In rare cases, a co-maker might step in to assume the loan (via loan restructuring), but even then, title transfer requires separate legal processes like a Deed of Assignment, not automatic inclusion.

Implications for Borrowers and Co-Makers

For Borrowers

Relying on co-makers strengthens loan applications without diluting ownership.
However, borrowers must understand that co-makers' credit can be affected by defaults, potentially straining relationships.

For Co-Makers

They bear financial risk without benefits like tax deductions or equity buildup.
Co-makers should review credit implications, as Pag-IBIG reports to credit bureaus like the Credit Information Corporation (under Republic Act No. 9510).
Legally, co-makers can seek reimbursement from the borrower under Article 2066 (right of subrogation), but this is a separate civil action.

Tax and Inheritance Considerations

Property taxes (e.g., under the Local Government Code) are borne by the titled owner, not co-makers.
In inheritance, the title determines heirs' rights under the Civil Code's succession rules; co-makers have no claim unless they are legal heirs independently.

Exceptions and Special Cases

While co-makers are generally not on the title, certain scenarios warrant nuance:

If Co-Maker Becomes Co-Borrower: Pag-IBIG allows conversion if the co-maker contributes to payments and seeks co-ownership, but this requires amending the loan and title via a new deed, subject to approval.
Corporate or Partnership Borrowers: For non-individual borrowers, guarantors (akin to co-makers) are not on titles, which remain in the entity's name.
Refinancing or Loan Takeover: If a co-maker takes over the loan, title transfer can occur, but it's not inherent to their initial role.
Judicial Interventions: Courts may order title adjustments in disputes (e.g., under Article 1456 on constructive trusts), but this is exceptional and not standard in Pag-IBIG loans.

Conclusion

In summary, co-makers in Pag-IBIG housing loans are not included on the property title. Their function is strictly as guarantors under Philippine civil law, providing repayment assurance without conferring ownership rights. The title is reserved for the borrower or co-borrowers who execute the mortgage and hold proprietary interest. Borrowers and co-makers alike should consult Pag-IBIG counselors or legal experts for personalized advice, ensuring compliance with evolving guidelines. This structure safeguards the Fund's interests while promoting accessible homeownership, aligning with the national goal of housing for all Filipinos.