Developer Demand for Loan & Mortgage Agreement (LMA) Payment After Pag-IBIG Housing Loan Take-out

Philippine Legal Context – Comprehensive Guide

1. Pag-IBIG Housing Loan in a Nutshell

Stage	Key Actors	Core Documents
Reservation / Equity Period	Buyer & Developer	Reservation Agreement, Contract to Sell
Loan Processing	Buyer, Developer, Pag-IBIG Fund (HDMF)	Loan Application, Buyer’s CTS, Developer’s Masterlist
Loan Take-out (HDMF releases the loan proceeds)	Developer, Pag-IBIG, Registry of Deeds	Loan & Mortgage Agreement (LMA), Deed of Real Estate Mortgage (REM)
Post-Take-out	Buyer & Pag-IBIG	Amortization schedule, Notice of Approval

Under Republic Act 9679 (HDMF Charter) Pag-IBIG can purchase, originate or insure housing loans. Developers usually initiate a “developer-assisted” mode, bridging the gap until Pag-IBIG releases funds.

2. What Exactly Is the Loan & Mortgage Agreement (LMA)?

Dual Nature – It is both the loan contract and the real-estate mortgage securing the loan.
Parties – Borrower-members sign with Pag-IBIG Fund, not with the developer.
Purpose – Consolidates:
- principal amount approved;
- interest & repricing terms;
- amortization schedule;
- acceleration, default & foreclosure clauses;
- covenant to insure the property (Mortgage Redemption Insurance & Fire Insurance).
Form & Registration – Must be notarised and registered with the Registry of Deeds (RD) to create a real right.
Statutory Basis – §§10-14, HDMF Circular No. 310-C (2014 Consolidated Housing Loan Guidelines).
Standard Charges Embedded – Documentary Stamp Tax, registration fees, transfer tax, annotation fees, notarial fees.

3. Why Do Developers “Demand” LMA-Related Payments After Take-out?

Typical Charge	Why Developer Pays Up-front	Why They Ask for Reimbursement
RD Registration & DST	To meet Pag-IBIG’s 60-day post-take-out deadline for annotation of mortgage	Developer aims to recover cash-out from buyer
BIR Capital Gains / VAT	Developer initially shoulders filing to secure release of HDMF funds	Re-bills buyer if contract shifts the tax burden
Processing / “Handling” Fee	Not officially required by HDMF	Purely contractual—often contested

4. Is the Post-Take-out Billing Legal?

The answer depends on three layers of rules:

A. The Contract

Contract to Sell / Deed of Absolute Sale often contains a “buyer-pays-all-taxes-and-registration” clause.
If the obligation is expressly stated and fully disclosed before reservation, it is generally enforceable (Civil Code Art. 1159 on the binding effect of contracts).

B. Statutory & Regulatory Limits

Source of Law	Relevant Provision	Effect on Developer Billing
PD 957 (Subdivision & Condominium Buyers’ Protective Decree)	§20 requires developers to deliver title “free from liens and encumbrances” after full payment	Developer cannot pass on undisclosed or after-the-fact fees.
RA 6552 (Maceda Law)	Gives buyers a right to refund & grace periods	Excessive fees may be treated as unlawful charges affecting the refund due.
RA 7394 (Consumer Act) + DTI’s IRRs	Prohibits deceptive, unfair sales practices	Hidden LMA fees violate full disclosure standards.
HDMF Circular No. 343 & 368	Requires developers to submit a Schedule of Fees to Pag-IBIG	Pag-IBIG may suspend accreditation for over-charging.
DHSUD (formerly HLURB) Resolution No. 922 (2013)	All “other charges” must be itemised in the buyer’s information sheet	Post-take-out fees never disclosed = administrative liability.

C. Jurisprudence & HLURB Precedents

Spouses Cruz v. Sta. Lucia Realty (HLURB Case REM-072001-843) – developer barred from collecting “post-title” charges not stipulated in CTS.
Esguerra v. Fil-Estate (HLURB Arb. Case HLURB LMB-C-0475-02-05) – “handling fees” after Pag-IBIG take-out declared void for lack of consideration.
Gotesco Properties v. Conejero (CA-G.R. SP 116684) – Court sustained HLURB finding that unilateral imposition of transfer fees breached PD 957.

5. How the LMA Cost Components Are Normally Allocated

Cost Item	Default Legal Rule	Who Usually Pays in Practice
DST on LMA & REM	BIR Rev. Regs. – borrower is liable (loan document)	Borrower (passed on)
Registration Fee (Sec. 113, PD 1529)	Person requesting registration (here, Pag-IBIG’s counsel)	Borrower (developer recovers)
Transfer Tax (LGC 1991)	Seller prior to transfer, unless contract stipulates otherwise	Developer (rarely re-billed)
Notarial Fee	Whoever benefits – both parties	Borrower
VAT / Creditable Withholding	Seller’s account	Developer (cannot legally charge buyer)

Key Point: Developers may reimburse only those charges (a) borne for the buyer’s account by contract and (b) disclosed in the CTS or official HDMF disclosure forms.

6. Borrower’s Options When Faced with a Post-Take-out Demand

Review Your Paper Trail
- CTS, Reservation Agreement, Official Pag-IBIG disclosure sheet, marketing brochures.
- Check if the specific LMA fees are itemised.
Ask for an Official Billing Statement
- Require ORs, BIR payment forms, RD payment slips – Section 232 of the Tax Code grants right to official receipts.
Negotiate or Escalate
- Many developers waive or reduce fees once confronted with HDMF & PD 957 rules.
- Bring the matter to the Pag-IBIG Servicing Department—their circulars prohibit “non-allowable” charges.
- File a complaint with DHSUD Adjudication Commission (RA 11201). Filing fee is ₱1,000; decision within 60 days.
Refuse Payment of Unlawful Charges
- A developer cannot cancel the sale once Pag-IBIG has taken out the loan; title is already mortgaged to the Fund.
- Threats to withhold move-in permits or IDs constitute constructive eviction—actionable under PD 957.
Seek Refunds & Damages
- Actual damages – Art. 2199, Civil Code.
- Attorney’s fees – Art. 2208(1) if compelled to litigate.
- Administrative fines – DHSUD can fine developers up to ₱50,000 per violation plus daily penalties.

7. Developer Perspective: Risk Management Tips

Disclose early. Provide a one-page breakdown of “closing costs” at reservation.
Use HDMF’s standard CTS templates. They already allocate expenses clearly.
Avoid “processing/handling” labels. Instead, cite specific legal fees.
Keep receipts. Buyers increasingly demand documentary proof.
Align with RA 9679 Circulars. Non-compliance risks accreditation suspension and loss of take-out privileges.

8. Best Practices for Buyers

Ask for the Full “Estimated Loan Proceeds” Sheet before paying equity.
Keep a Duplicate of the LMA once notarised—many borrowers forget to request a copy.
Verify with RD that the mortgage has actually been annotated under Entry Number / Doc. No. / Page No.
Monitor Pag-IBIG Online Portal – reflects amortisation schedule and outstanding principal; discrepancies often expose unlawful developer collections.

9. Frequently Misunderstood Points

Myth	Legal Reality
“Pag-IBIG allowed the developer’s fee, so it must be legal.”	HDMF focuses on loan eligibility; it does not bless every incidental fee a developer charges.
“I signed the CTS, so I have to pay anything listed later.”	Only fees disclosed at the time of signing bind you; hidden or subsequently invented charges are void.
“Developer can rescind the sale if I refuse.”	After Pag-IBIG take-out, rescission is practically impossible without Pag-IBIG’s consent and court approval, because the Fund now holds the REM.

10. Conclusion

A developer may legitimately demand reimbursement of LMA-related expenses only when:

The cost items are lawful (taxes, registration, DST);
They were fully disclosed in writing before the buyer bound themself; and
The charges are supported by receipts issued in the buyer’s name.

Otherwise, post-take-out demands run afoul of PD 957, RA 7394, HDMF Circulars, and basic contract principles. Borrowers confronted with surprise LMA billings have a full arsenal of contractual, administrative and—even criminal (estafa under Art. 315 par. 2(a) PC if deceit is proven)—remedies.

This article is for general information only and is not a substitute for personalised legal advice. For concrete disputes, consult a lawyer and, where appropriate, file with DHSUD within the prescriptive periods (one year for administrative cases under its 2016 Rules).