REQUIRING GOVERNMENT FINANCIAL INSTITUTIONS TO FORECLOSE MANDATORILY ALL LOANS WITH ARREARAGES, INCLUDING INTEREST AND CHARGES, AMOUNTING TO AT LEAST TWENTY PERCENT (20%) OF THE…

WHEREAS, the government financial institutions, particularly
the Philippine National Bank and its subsidiary, the National
Investment and Development Corporation, the Development Bank of the
Philippines, the Government Service Insurance System, and the Social
Security System, are the largest individual mobilizers of savings and
investment capital in the country;

WHEREAS, these institutions have a large and important role
to play in the economic development of the country by reason of the
magnitude of the resources they command for financing essential and
high-priority programs and projects;

WHEREAS, the loans and investments made by these
institutions in favor of private projects and enterprises reflect the
trust and confidence placed by these institutions in the ability and
willingness of the recipients to use such funds efficiently and
faithfully in pursuing the projects being financed and to manage their
affairs in such a manner as to enable them to pay back their loans and
investments to these institutions on due dates together with the income
and charges thereon;

WHEREAS, borrowing or obtaining investment funds from these
government financial institutions is not a demandable right but is a
privilege enjoyed by the recipients of such funds;

WHEREAS, borrowers or recipients of investment funds from
these financial institutions have a clear, legal and moral obligation to
repay their obligations to these institutions on due dates;

WHEREAS, a number of large borrowers from these institutions
have long records of failure to pay their obligations when due;

WHEREAS, said long-standing delinquencies deny said
financial institutions of substantial cash inflow which could otherwise
be used to finance other development projects for the benefit of the
whole country;

WHEREAS, borrowers who accumulate large arrearages have
already received to the fullest extent the most lenient and patient
consideration that government financial institutions can afford to give;

WHEREAS, the government financial institutions prejudiced by
such borrowers should not be unreasonably hampered in their efforts to
recover their loans and investments in order to rechannel the same to
new or additional projects that further enhance the development of the
country;

WHEREAS, it has been the experience of government financial
institutions that their efforts to recover their large loans and
investments are frequently prevented or delayed by action brought to the
courts by such borrowers;

WHEREAS, in many of foreclosure/collection cases brought to
court, legal niceties and technicalities are invoked in their own favor
by delinquent borrowers to cover and distract the court’s attention away
from the undeniable and compelling fact of their delinquencies with
government financial institutions;

WHEREAS, one of the grounds usually invoked by delinquent
borrowers in seeking restraining orders and/or injunctions from the
courts to block the foreclosure by government financial institutions on
their loans are alleged discrepancies between the accounting records of
the creditor and the debtor with respect to the amount of the
outstanding obligations of the debtor, when as a matter of fact the
arrearages have reached such proportions as to render said discrepancies
insignificant;

WHEREAS, it has been shown by the experience of government
financial institutions that in instances where extrajudicial foreclosure
on large loans is successfully pursued, the assets, aside from land,
that form part of the foreclosed collaterals, including buildings,
machinery, equipment, materials, furniture and fixtures, are usually
pilfered or lost rendering it necessary that the foreclosing government
creditor have a writ of possession issued in its favor without delay
after the foreclosure auction sale; and

WHEREAS, the accumulation of such large delinquencies by
borrowers from government financial institutions are not in accord with
the principle of discipline being instilled in the people and promoted
by the New Society;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers in me vested by the Constitution as
Commander-in-Chief of all the Armed Forces of the Philippines, and
pursuant to Proclamation No. 1081, dated September 21, 1972, as amended
by Proclamation No. 1104, dated January 17, 1973, as amended, in order
to effect the early collection of delinquent loans from government
financial institutions and enable them to continue effectively financing
the development needs of the country; and in accordance with desired
policies of achieving changes and reforms in the social and economic
structure of our society, hereby order and decree:

SECTION 1. It shall be mandatory for government financial
institutions, after the lapse of sixty (60) days from the issuance of
this Decree, to foreclose the collaterals and/or securities for any
loan, credit, accommodation, and/or guarantees granted by them whenever
the arrearages on such account, including accrued interest and other
charges, amount to at least twenty percent (20%) of the total
outstanding obligations, including interest and other charges, as
appearing in the hooks of account and/or related records of the
financial institution concerned. This shall be without prejudice to the
exercise by the government financial institutions of such rights and/or
remedies available to them under their respective contracts with their
debtors, including the right to foreclose on loans, credits,
accommodations and/or guarantees on which the arrearages are less than
twenty percent (20%).

SEC. 2. No restraining order, temporary or permanent
injunction shall be issued by the court against any government financial
institution in any action taken by such institution in compliance with
the mandatory foreclosure provided in Section 1 hereof, whether such
restraining order, temporary or permanent injunction is sought by the
borrower(s) or any third party or parties, except after due hearing in
which it is established by the borrower and admitted by the government
financial institution concerned that twenty percent (20%) of the
outstanding arrearages has been paid after the filing of foreclosure
proceedings.

In case a restraining order or injunction is issued, the borrower
shall nevertheless be legally obligated to liquidate the remaining
balance of the arrearages, paying ten percent (10%) of the arrearages
outstanding as of the time of foreclosure, plus interest and other
charges, on every succeeding thirtieth (30th) day after the issuance of
such restraining order or injunction until the entire arrearages have
been liquidated. These shall be in addition to the payment of
amortizations currently maturing. The restraining order or injunction
shall automatically be dissolved should the borrower Tail to make any of
the above-mentioned payments on due dates, and no restraining order or
injunction shall be issued thereafter. This shall be without prejudice
to the exercise by the government financial institutions of such rights
and/or remedies available to them under their respective charters and
their respective contracts with their debtors, nor should this provision
be construed as restricting the government financial institutions
concerned from approving, solely at its own discretion, any
restructuring, recapitalization, or any other arrangement that would
place the entire account on a current basis: Provided, however. That at
least twenty percent (20%) of the arrearages outstanding at the time of
the foreclosure is paid.

All restraining orders and injunctions
existing as of the date of this Decree on foreclosure proceedings filed
by said government financial institutions shall be considered lifted
unless finally resolved by the court within sixty (60) days from date
hereof.

SEC. 3. Upon the application for foreclosure of
the collateral of delinquent borrowers, whether judicially or extra
judicially, by any government financial institution, the court and/or
officials concerned shall immediately act and give priority to the same
and schedule the publication thereof within five (5) days from receipt
of the application, the auction sale to be held not later than ten (10)
days from the date of the last publication. The Certificate of Sale must
be issued on the date of sale and the same must be registered by the
Register of Deeds concerned not later than five (5) days after
submission of the Certificate of Sale.

SEC. 4. As a result of foreclosure or any other legal
proceedings wherein the properties of the debtor which are foreclosed,
attached, or levied upon in satisfaction of a judgment are sold to a
government financial institution, the said properties shall be placed in
the possession and control of the financial institution concerned, with
the assistance of the Armed Forces of the Philippines whenever
necessary. The Petition for Writ of Possession shall be acted upon by
the court within fifteen (15) days from the date of filing.

SEC. 5. The government financial institutions are
hereby directed to report to the Office of the President any official
who delays the proceedings as provided herein or who violates any of the
provisions of this Decree. Actions taken pursuant to the provisions of
this Decree shall, likewise, be reported by the government financial
institution concerned to the Monetary Board, through the Governor,
Central Bank of the Philippines, in accordance with such schedule, forms
and procedures as the Governor may prescribe for the purpose.

SEC. 6. This Decree shall take effect immediately.

Done in the City of Manila, this 31st day of January, in the
year of Our Lord, nineteen hundred and seventy-four.