Do borrowers continue to pay the National Housing Authority (NHA) for housing loan amortization if the principal borrower dies?
In the Philippines, when the principal borrower of a housing loan from the National Housing Authority (NHA) passes away, the responsibility for continuing the loan amortization generally falls on the legal heirs or co-borrowers. The continuation of payments is essential to avoid default, which could lead to the forfeiture of the property.
Loan Agreements and Insurance Coverage
Typically, housing loans are covered by mortgage redemption insurance (MRI) or similar insurance policies. MRI is designed to pay off the remaining balance of the loan in the event of the borrower's death. If the loan is insured, the insurance proceeds will be used to settle the outstanding loan, thereby relieving the heirs or co-borrowers from further financial obligation concerning that specific loan.
However, it is crucial to verify the specifics of the insurance coverage. Some loans may not include MRI, or the insurance might cover only a portion of the outstanding loan. In such cases, the heirs or co-borrowers may still need to pay any remaining balance.
Legal Heirs and Co-Borrowers' Responsibilities
If the principal borrower dies and the loan is not fully covered by insurance, the legal heirs, who inherit the property, may be responsible for continuing the amortization payments. The legal obligation to pay the loan may also depend on whether the borrower had a co-borrower. If a co-borrower exists, they are typically equally responsible for the loan, and this responsibility continues even after the death of the principal borrower.
For heirs, the property and the obligation attached to it (i.e., the unpaid loan) generally pass to them through inheritance. The heirs must ensure that payments continue to prevent the NHA from initiating foreclosure proceedings.
Foreclosure and Property Forfeiture
If loan payments are not continued after the death of the principal borrower, the NHA may declare the loan in default. This can lead to foreclosure, where the NHA repossesses and sells the property to recover the unpaid loan amount. To prevent this, heirs or surviving co-borrowers must take immediate action to address the outstanding balance.
Conclusion
In summary, the continuation of housing loan amortization after the death of the principal borrower in the Philippines depends on various factors, including the existence of a mortgage redemption insurance, the role of co-borrowers, and the actions of legal heirs. It is essential for the heirs or co-borrowers to verify the loan’s terms and ensure that payments are maintained to avoid the risk of foreclosure and loss of the property.