TITLE AS COLLATERAL

Once upon a time, a wealthy woman lent a friend money. As collateral, the friend gave her the title to a property he owned.

Three decades passed, and the woman remained unpaid and in possession of the title. With the property now valued at Php 4 billion, she decided to sell it. To prepare for the sale, she requested a certified copy of the title, which was still under the borrower's name.

Upon retrieving the certified copy, she discovered several alarming annotations. One stated that the title in her possession had been reported lost. Another indicated that a new title had been re-issued. Additionally, she found out that certain brokers were marketing the property online, suggesting that her friend was attempting to sell it.

So, does the woman still have a claim over the property now that a new title has been issued?

Lessons will be posted tomorrow.

***

In the Philippines, informal loans are common. Borrowers often resort to these when they cannot secure bank loans, usually due to a lack of stable income.

Instead, they turn to wealthy friends or loan sharks for cash, offering the title of a property as collateral in return.

In the narrative, the commentators were correct—the lender should have annotated the loan on the title. Annotation acts as a warning to potential buyers, indicating that "THIS PROPERTY WAS USED AS COLLATERAL FOR A LOAN."

To annotate a loan, the following are required:

Deed of Mortgage

IDs of the lender and borrower

Payment of Documentary Stamp Tax

Certified Copies of the Tax Declaration and Title

Tax Clearance

Special Power of Attorney or Secretary's Certificate to Process

Original Title

This story illustrates the risks associated with informal loans. If you're entering the lending business, ensure it's done properly.