Terms and Conditions of Guaranteed Loans
- Maximum loan amount per individual is ₱10,000.
- Loan repayment term ranges from a minimum of 5 to a maximum of 15 years.
- Interest rate is capped at 8% per annum.
- Loan amount must be between 60% and 80% of the fair market value of the real estate security.
- Proof of ownership includes assessment for taxation purposes in the borrower’s or predecessor’s name for at least 10 years with corresponding tax payments and continuous possession.
- Only one loan may be granted per borrower.
- Guarantee covers up to 50% of the uncollectible portion of the loan.
- If the appraised land value or down payment is at least 20% of the loan for construction, the full loan amount needed may be granted.
Certification and Oversight by PHHC
- Government liability attaches solely to loans certified by PHHC as compliant with the Act and carrying its written guarantee.
- PHHC has the authority to access records and examine officers and employees of lending institutions to prevent fraud or collusion.
Establishment and Management of Loan Guarantee Fund
- An initial appropriation of ₱5,000,000 is allocated from government funds to create the Loan Guarantee Fund.
- The Fund serves as a trust fund for settlement of obligations arising from the guarantee.
- The President may release funds from this appropriation in amounts he deems appropriate.
Interest Premium Contributions to the Fund
- Lending institutions must contribute a portion of the interest earned on guaranteed loans to the Fund as follows:
- 1% if interest is 8%
- 0.75% if interest is between 6% (inclusive) and less than 8%
- 0.25% if interest is less than 6%
- These premiums must be borne by the lending institutions and not charged to borrowers.
Investment of Fund Assets
- Surplus funds not needed to cover liabilities may be invested in government bonds or other obligations guaranteed by the Republic of the Philippines.
Rulemaking Authority
- PHHC, with the President’s approval, is empowered to formulate rules and regulations necessary for the proper implementation and enforcement of the Act.
Penalties for Fraud and Violations
- Individuals knowingly contracting fictitious or fraudulent guaranteed loans, and responsible officers or employees of lending institutions or PHHC, are subject to:
- A fine up to ₱5,000
- Imprisonment for up to 2 years
- Or both penalties at the court’s discretion
- Similar penalties apply for violations of the Act or its implementing rules.
Applicability and Effectivity
- The Act applies only to loans contracted after its approval.
- Conflicting laws or provisions are modified to conform with this Act.
- The Act took effect immediately upon approval on June 15, 1948.