Introduction

In the Philippines, the foreclosure of real estate mortgages securing loans from banks and quasi-banks is governed primarily by Act No. 3135 (An Act to Regulate the Sale of Property Under Special Powers Inserted in or Annexed to Real Estate Mortgages), as amended, the General Banking Law of 2000 (Republic Act No. 8791), the Civil Code provisions on pledge and mortgage (by analogy), Rule 68 of the Rules of Court for judicial foreclosure, and settled Supreme Court jurisprudence.

The right of redemption after foreclosure is one of the most important remedies available to a defaulting mortgagor. When the foreclosing mortgagee is a bank or banking institution, special rules apply that significantly lengthen (for natural persons) or shorten (for juridical persons) the redemption period compared to ordinary non-bank mortgagees.

This article exhaustively discusses the law and jurisprudence on redemption of bank-foreclosed properties in both extrajudicial and judicial foreclosure settings.

I. Extrajudicial Foreclosure (The Most Common Mode Used by Banks)

Banks almost invariably resort to extrajudicial foreclosure because it is faster, cheaper, and does not require court confirmation of the sale.

A. Governing Law

Act No. 3135, as amended
Section 47, Republic Act No. 8791 (General Banking Law of 2000)
Special power of attorney clause in the real estate mortgage contract
A.M. No. 99-10-05-0 (Procedure for Extrajudicial Foreclosure of Mortgages), as amended

B. Redemption Period When Mortgagee Is a Bank

The redemption period differs radically depending on whether the mortgagor is a natural person or a juridical person.

1. Natural Person Mortgagors (Individuals)

The mortgagor has one (1) year from the date of the auction sale to redeem the property.

Key points established by jurisprudence:

The one-year period commences from the date of the foreclosure sale (auction), not from the registration of the certificate of sale (GSIS v. CFI of Iloilo, reiterated in innumerable cases).
During this one-year period, the bank-purchaser is prohibited from consolidating ownership or registering the sale in its name.
The certificate of sale may be registered only after the expiration of the one-year period if no redemption is made.
The one-year period is counted in calendar days and is excluded from the operation of the Equity of Redemption rule under ordinary Act 3135 cases.

Supreme Court rulings consistently upholding the 1-year period for individuals:

Nepomuceno v. Rehabilitation Finance Corporation (1954)
Raymundo v. Sunico (1968)
Medida v. Court of Appeals (1990)
China Banking Corp. v. Ordinario (2004)
Goldenway Merchandising Corp. v. Equitable PCI Bank (2013) – reaffirmed that natural persons retain the full 1-year period even after RA 8791.

2. Juridical Person Mortgagors (Corporations, Partnerships, Cooperatives, etc.)

The mortgagor has the right to redeem only until, but not after, the registration of the certificate of foreclosure sale, which in no case shall be more than three (3) months after the foreclosure sale, whichever is earlier (Section 47, par. 2, RA 8791).

Consequences:

The bank may register the certificate of sale immediately after the auction if the mortgagor is a corporation.
The absolute maximum redemption period is 90 days from the date of auction sale.
After registration (or after 90 days, whichever comes first), the title is consolidated irrevocably in favor of the purchaser.

Landmark cases shortening the period for juridical persons:

First Planters Pawnshop, Inc. v. Development Bank of the Philippines (2007)
Pentacapital Investment Corp. v. Makilito Mahinay (2009)
Spouses Sy v. Hon. Discaya (2014)
Goldenway Merchandising Corp. v. Equitable PCI Bank (2013) – the Court explicitly ruled that the shortened period applies retroactively only to sales after the effectivity of RA 8791 (June 2000), but prospectively thereafter.

C. Computation of the Redemption Period

Starts: Date of the auction sale (the fall of the hammer, as published).
Ends: Exact corresponding date one year later (for individuals) or 90 days later (for corporations).
The period is material and mandatory. It is not extended by weekends, holidays, or force majeure unless a law specifically says so (e.g., Bayanihan Acts during COVID-19, now expired).
If the last day falls on a non-working day, it is extended to the next working day only if the act to be done is filing with a court or government office (not mere tender to the bank).

D. Redemption Price

Section 47, RA 8791 explicitly provides:

The mortgagor shall pay:

The amount due under the mortgage deed (outstanding obligation as of foreclosure),
Plus interest thereon at the rate specified in the mortgage,
Plus all costs and expenses incurred by the bank from the sale and custody of the property (publication, notary, sheriff fees, etc.),
Less the income derived by the bank from the property (rents, fruits) during the redemption period.

In practice and per mortgage contract stipulations upheld by the Supreme Court:

If the bank is the purchaser (which is almost always the case), redemption price = bid price (usually the total outstanding obligation) + 1% per month interest from date of auction sale until full payment + any realty taxes or assessments paid by the purchaser + costs of sale.
If a third party purchased at auction, the redemption price is the actual bid price + 1% per month interest + taxes/assessments paid.

Cases on redemption price:

Development Bank of the Philippines v. West Negros College (2007) – 1% monthly interest is penal and may be reduced if unconscionable.
Spouses Rosario v. BPI Family Savings Bank (2018) – bank must deduct actual income received from the property.
Hi-Yield Realty v. Court of Appeals (2008) – redemptioner must pay the full amount in cash or manager’s check; partial payments do not stop consolidation.

E. Who May Redeem

The mortgagor or his/her successors-in-interest (heirs, assignee, transferee).
Any person having a lien or interest subordinate to the mortgage (junior mortgagee, attachment creditor, judgment creditor) – Section 6, Act 3135.
Redemption by one redounds to the benefit of all (solidary).

F. Manner of Exercising Redemption

Actual tender of the full redemption price to the purchaser or the notary public/sheriff who conducted the sale.
If the purchaser refuses tender, the amount must be consigned/deposited in court (Article 1256-1258, Civil Code; Rule 39, Sec. 28, Rules of Court by analogy).
Mere written offer to redeem without actual tender or consignation is insufficient (Spouses Rosario v. BPI, supra).

G. Possession During the Redemption Period

Section 47, RA 8791 expressly grants the purchaser (bank or third party) the right to immediately enter and take possession of the property after the auction sale, even during the redemption period, and to administer it (lease it out, collect rents).

The bank may file a petition for writ of possession ex-parte (A.M. No. 99-10-05-0, as amended by A.M. No. 01-9-08-SC).

Income derived by the bank must be credited against the redemption price.

H. Effect of Valid Redemption

Certificate of sale is cancelled.
Ownership reverts to the mortgagor as if no sale occurred.
All subsequent liens are revived.

I. Effect of Non-Redemption Within the Period

Purchaser may consolidate ownership.
Register the Affidavit of Consolidation + Certificate of Sale with the Register of Deeds.
New TCT issued in the name of the purchaser free from all liens except those annotated as non-extinguished (e.g., Section 8 easements).

II. Judicial Foreclosure

Banks rarely use judicial foreclosure because it is slower and, traditionally, there is no right of redemption after confirmation of the sale.

A. Governing Law

Rule 68, 1997 Rules of Civil Procedure
Articles 2085–2125, Civil Code
Section 47, RA 8791 (partially applicable)

B. Equity of Redemption vs. Right of Redemption

The debtor has only an equity of redemption that must be exercised before the court confirms the foreclosure sale.
Once the sale is confirmed by final order, the sale becomes absolute. There is no right of redemption after confirmation (Bozal v. Calhoun, 1923; reiterated in countless cases).

C. Does Section 47 of RA 8791 Grant a Post-Confirmation Right of Redemption in Judicial Foreclosure by Banks?

The Supreme Court has consistently answered NO.

Cometa v. Intermediate Appellate Court (1987)
Sulit v. Court of Appeals (1997)
China Banking Corp. v. Lozada (2008)
Lorbes v. Bank of the Philippine Islands (2013)

The first paragraph of Section 47 referring to redemption applies only to extrajudicial foreclosure or to the equity of redemption in judicial foreclosure. There is still no statutory right of redemption after judicial confirmation even when the mortgagee is a bank.

Thus, judicial foreclosure remains unattractive to banks precisely because the debtor has no post-sale redemption right, but the process is lengthier.

III. Special Situations and Exceptions

Spouses acquiring property during marriage – Both spouses must consent to the mortgage; otherwise, the foreclosure may be partially annulled, and one-half share may be redeemed separately (Spouses Aggabao v. Parulan, 2010).
Properties under CARP/CLOA – Special rules; foreclosure does not automatically cancel the CLOA.
Properties under rehabilitation (FRIA – Republic Act No. 10142) – Stay order suspends foreclosure and redemption periods.
Dacion en pago as alternative to foreclosure – Extinguishes the loan without foreclosure.
Third-party purchasers at foreclosure sale – The redemption rules under banking laws apply equally even if the winning bidder is not the bank.
Multiple mortgagors – Redemption by one benefits all; but if one redeems, others must reimburse pro-rata.
Fraud or irregularity in the foreclosure sale – May justify equitable redemption even after the period (rarely granted; must be gross irregularity amounting to jurisdictional defect).

IV. Practical Advice for Mortgagors Wishing to Redeem

Immediately after receiving notice of sale, negotiate restructuring or refinancing with the bank.
Upon auction, request a Statement of Redemption Amount from the bank within 30 days.
Prepare the full redemption amount in cash or manager’s/cashier’s check.
If the bank refuses tender, file a petition for consignation in the RTC where the property is located.
Do not wait until the last day – banks routinely consolidate title the day after the period expires.

Conclusion

The right of redemption in bank-foreclosed properties remains one of the strongest protections afforded to borrowers under Philippine law, particularly for natural persons who enjoy a full one-year period after the auction sale. Juridical persons, however, have been stripped of this protection since 2000 and now have only a maximum of three months.

Understanding the distinction between natural and juridical mortgagors, the exact reckoning date of the period, the correct redemption price formula, and the bank’s immediate right to possession is crucial for any borrower facing foreclosure. Failure to comply strictly with the requirements almost invariably results in permanent loss of the property.