Section 1. Section Sixty-two of Republic Act Numbered Three Thousand Eight Hundred and Forty-four, as amended, otherwise known as the Code of Agrarian Reform of the Philippines, is hereby amended to read as follows:
"Sec. 62. Limitation of Land Rights. Except in hereditary succession by one heir, landholding acquired under this Code shall not be sold or transferred except in favor of the Government, valued at its acquisition cost plus cost of improvements. Said landholding may be mortgaged or encumbered in favor of any financing or banking institution up to the original cost of acquisition thereof to be guaranteed by the Samahang Nayon or duly recognized farmers cooperative where the farmer is a full-pledged member; Provided, That in case of default, the loan becomes immediately due and demandable and the mortgagor is given a grace period of one year within which to settle his obligation: Provided, Further, That in case of non-payment within one year grace period, the landholding shall be disposed of only in favor of the Government which shall endeavor to substitute the defaulting farmer-beneficiary preferable with a new one who does not own any land duly certified by the Ministry of Agrarian Reform and who shall be subrogated to the rights and shall assume the obligations of the replaced farmer-beneficiary, subject, however, to the preferential, right of first refusal of the other heirs of the latter: Provided, Further, That a purchaser who acquired his landholding under a contract to sell from Land Bank, or has been issued an Order of Award, may also secure a loan from any financing or banking institution in an amount not exceeding his equity on said landholding.