Borrowers with delinquent loans from any housing agency may now apply for loan restructuring or condonation and save their homes from foreclosure.

The loan relief is available under a new law that came into force just the other day, according to Vice President Noli “Kabayan” de Castro, chairman of the Housing and Urban Development Coordinating Council.

The law, known as the Socialized and Low-Cost Housing Loan Restructuring Act and signed by President Arroyo October last year, covers home borrowers and installment buyers of the Government Service Insurance System, the Social Security System, the Home Development Mutual Fund or Pag-IBIG Fund, the National Home Mortgage Finance Corp., the Social Housing Finance Corp., the Home Guaranty Corp. and the National Housing Authority.

It seeks to provide relief to borrowers whose original loan accounts do not exceed P2.5 million and are in arrears of at least three months.

“This was created to help those borrowers who have fallen behind on their mortgage payments and are in danger of losing their home because of financial difficulties,” De Castro said.

The program eases the borrowers’ burden by condoning all penalties and surcharges that have been imposed from unpaid amortizations.

It also allows the lender or government agency to condone a “reasonable portion” of the unpaid interest, the amount or percentage of which shall be determined by the respective boards of the lending institutions.

“This is a provision that was not present in previous loan restructuring and condonation programs, where only penalties are condoned,” De Castro said. “This gives leeway to the lending GFI or agency, without jeopardizing their long-term financial stability, to further reduce the financial burden on the borrowers.”

The remaining accrued interest shall be paid in equal installments during the term of the restructured loan without any interest.

The unpaid principal of the loan shall be imposed an interest rate not higher than that of the original loan, or 12 percent, whichever is lower.

To lower the monthly amortization, the payment period of the restructured loan may be lengthened to a maximum of 30 years from the approval of the application, without exceeding the borrower’s age of 70, De Castro said.

Borrowers who promptly pay their loan amortizations may also be given incentives, such as reasonable discount on interest, to be determined by the GFI or housing agency.

De Castro hailed the program as a benefit for both borrowers and lending institutions, “especially in this time of economic downturn.”

“On the one hand, it saves borrowers from joining the ranks of the homeless. On the other hand, the GFIs and lending agencies can get their non-performing loans moving again and improve their cash flow,” he said.