Is a Pag-IBIG Housing Loan Co-Maker Included on the Title? Borrower vs Ownership Rules

Introduction

In the Philippines, the Pag-IBIG Fund (Home Development Mutual Fund) plays a pivotal role in making homeownership accessible through its housing loan programs. These loans enable qualified members to purchase, construct, or improve residential properties. However, questions often arise regarding the involvement of co-makers—individuals who co-sign the loan to guarantee repayment—and their relationship to the property's title and ownership. A common inquiry is whether a co-maker automatically becomes a co-owner or is included on the property's title deed.

This article explores the legal framework surrounding Pag-IBIG housing loans, the distinct roles of borrowers and co-makers, and the rules governing property ownership under Philippine law. It delves into the Civil Code, Republic Act No. 9679 (Pag-IBIG Fund Law), and related regulations to clarify that co-makers do not gain ownership rights or inclusion on the title solely by virtue of their role in the loan. Instead, ownership is tied to the borrower as the principal party in the property transaction. We will examine definitions, procedural requirements, potential exceptions, and practical implications for all parties involved.

Overview of Pag-IBIG Housing Loans

Pag-IBIG housing loans are governed by Republic Act No. 9679, which amended the original charter of the Home Development Mutual Fund. The fund provides affordable financing options, including end-user financing for home acquisition, construction loans, and home improvement loans. Eligibility typically requires active membership, sufficient contributions, and compliance with creditworthiness standards.

Key features include:

Loan Amounts and Terms: Loans can cover up to 90% of the property's appraised value, with repayment terms extending up to 30 years.
Interest Rates: Subsidized rates make it attractive for low- to middle-income earners.
Security: The loan is secured by a real estate mortgage on the property being financed.

The borrower is the primary applicant who intends to own and occupy the property. Pag-IBIG requires the borrower to execute a Deed of Absolute Sale (for purchases) or similar documents, ensuring the property is titled in the borrower's name upon loan release.

Defining the Role of a Co-Maker in Pag-IBIG Loans

A co-maker, also known as a co-signer or guarantor, is an individual who agrees to be jointly and severally liable for the repayment of the loan alongside the principal borrower. Under Pag-IBIG guidelines, a co-maker is required when the borrower's income or credit history alone does not meet the fund's risk assessment criteria. This could include scenarios where the borrower's monthly income falls short of the required debt-to-income ratio or when additional security is needed.

Legal Basis:

Civil Code of the Philippines (Articles 2047-2084): A co-maker acts as a surety or guarantor, obligated to pay if the borrower defaults. This creates a solidary obligation, meaning Pag-IBIG can pursue the co-maker directly without first exhausting remedies against the borrower.
Pag-IBIG Circulars: Specific rules, such as those in Pag-IBIG Fund Circular No. 428 (Guidelines on Housing Loan Program), outline that co-makers must be Pag-IBIG members, submit financial documents, and undergo credit evaluation. They do not, however, participate in the property acquisition process.

Co-makers are typically relatives or close associates of the borrower, and their involvement is limited to financial liability. They sign the Promissory Note and Loan Agreement but are not parties to the property sale or transfer documents.

Property Title and Ownership Under Philippine Law

Property ownership in the Philippines is regulated by the Civil Code, the Property Registration Decree (Presidential Decree No. 1529), and the Torrens System of land registration. The title—evidenced by a Certificate of Title (Transfer Certificate of Title or Original Certificate of Title)—serves as conclusive proof of ownership.

Key Principles:

Ownership Acquisition: Ownership is transferred through modes such as sale, donation, or inheritance (Civil Code, Article 712). For Pag-IBIG-financed properties, the borrower acquires ownership via a contract of sale with the seller or developer.
Registration: The Register of Deeds issues the title in the name of the buyer (borrower) upon presentation of the Deed of Absolute Sale and payment of taxes and fees.
Mortgage Annotation: The Pag-IBIG loan results in a mortgage annotation on the title, indicating the fund's lien until full repayment. This does not alter ownership but encumbers the property.

Ownership rights include possession, use, enjoyment, and disposition (Civil Code, Article 428). Only those named on the title hold these rights, subject to encumbrances.

Is the Co-Maker Included on the Property Title?

No, a Pag-IBIG housing loan co-maker is not automatically included on the property title. The title is issued solely in the name of the borrower (or borrowers, if joint), as they are the purchaser and intended owner. The co-maker's role is confined to the loan obligation and does not extend to property rights.

Reasons and Legal Rationale:

Separation of Loan and Ownership: The loan agreement is a financial contract distinct from the property transfer. Pag-IBIG's housing loan policies emphasize that the borrower must be the title holder to ensure the property serves as primary residence and collateral.
No Equitable Interest for Co-Makers: Unlike co-borrowers (who share ownership and liability), co-makers do not contribute to the purchase price or equity. They lack any claim to the property unless separately agreed upon in a private contract (e.g., a deed of co-ownership).
Pag-IBIG Requirements: Application forms and loan release procedures specify that only the borrower's name appears on the title. If a co-maker wishes to be on the title, they must apply as a co-borrower, which involves different qualifications and shared ownership implications.

Exceptions:

If the Co-Maker is Also a Co-Owner: In rare cases, if the co-maker is a spouse or family member already holding joint ownership (e.g., under community property rules for married couples), their name may appear on the title independently of the loan. However, this stems from marital property laws (Family Code, Articles 90-104), not the co-maker status.
Post-Loan Arrangements: Parties could execute a separate deed to add the co-maker as co-owner, but this requires Pag-IBIG's consent due to the mortgage and may trigger tax implications (e.g., donor's tax if gratuitous).

Borrower vs. Co-Maker: Rights and Obligations

Understanding the distinctions is crucial to avoid misconceptions:

Aspect	Borrower	Co-Maker
Ownership Rights	Full ownership; named on title; can possess, use, and sell (subject to mortgage).	No ownership; no title inclusion; no rights to possess or sell.
Loan Liability	Primary obligor; responsible for repayments.	Solidary liability; must pay if borrower defaults.
Tax Implications	Pays capital gains tax, documentary stamp tax on sale/loan.	No property-related taxes; may face income tax if reimbursing defaults.
Default Consequences	Risks foreclosure and loss of property.	Risks credit damage and legal action for repayment, but not property loss.
Inheritance/Succession	Property passes to heirs upon death.	No inheritance claim unless separately owned.

Borrower's Protections: Under the Magna Carta for Homeowners (Republic Act No. 9904), borrowers enjoy rights against unfair collection practices.
Co-Maker's Recourse: If paying on default, the co-maker can seek reimbursement from the borrower (Civil Code, Article 2071) but cannot claim the property without a separate legal basis.

Legal Implications and Risks

Involving a co-maker carries implications for all parties:

For the Borrower: Reliance on a co-maker may indicate financial strain, potentially leading to default risks. Borrowers should ensure clear agreements to avoid disputes.
For the Co-Maker: Exposure to full loan amount without ownership benefits. Co-makers should review credit reports and consider legal advice before signing.
Disputes and Litigation: Misunderstandings can lead to civil suits. For instance, if a co-maker claims ownership post-default, courts would uphold the title's primacy unless fraud or separate contracts prove otherwise (e.g., Supreme Court rulings in cases like Republic v. Court of Appeals, emphasizing Torrens title indefeasibility).
Foreclosure Scenarios: Upon default, Pag-IBIG forecloses on the property (Extrajudicial Foreclosure Act, Act No. 3135). Proceeds satisfy the debt, with any surplus to the borrower—not the co-maker.
Tax and Compliance: All transactions must comply with Bureau of Internal Revenue rules, including withholding taxes on loan releases.

Parties are advised to consult lawyers or Pag-IBIG counselors for personalized guidance, as individual circumstances (e.g., marital status) can influence outcomes.

Conclusion

In summary, a co-maker in a Pag-IBIG housing loan does not get included on the property title, as their role is strictly financial and does not confer ownership rights. The borrower remains the sole or primary owner, aligning with Philippine laws that separate loan guarantees from property transfers. This distinction protects the integrity of housing programs while ensuring accountability in repayments. Prospective borrowers and co-makers should thoroughly understand these rules to make informed decisions, fostering responsible homeownership in the Philippines. For specific cases, engaging legal professionals is essential to navigate any complexities.