Paying housing loans helps beneficiaries, government, pension funds

Wednesday, 21 January 2009 18:54

HOW sacred are your housing-loan obligations? If you’re a homeowner who took out a loan to purchase a house and lot, you know you can’t miss this critical monthly obligation. You do not want to be like others constantly under legal threat of foreclosure for failing to meet housing-loan obligations for years. Of course, if you have witnessed some people getting away with not paying their housing amortizations, even enjoying some measure of protection along the way, you may resent it. After all, you have had to sacrifice your own critical needs perhaps in education, health or lifestyle, and even defer necessary home improvements just to pay your dues. On the other hand, your deadbeat colleague or neighbor may have just been able to renovate his house and otherwise enjoy the benefits of possession practically rent-free! Over the past few years, the government has sought to reckon with highly delinquent borrowers, while educating the market on its obligations. Landmark pioneering transaction In a pioneering transaction in 2005, the National Home Mortgage Finance Corp. (NHMFC) transferred 52,000 highly delinquent housing loans to Balikatan Housing Finance (BHFI). Bahay Financial Services (BFS), as Balikatan’s service provider, offered reasonable financial-resolution options to the delinquent borrowers. Thousands of BHFI account holders were able to settle their long-outstanding debts, some of which had ballooned to 400 percent of the original loan amount due to interests and penalties incurred for the past 10 to 15 years. More than just turning highly delinquent accounts into performing accounts, however, BFS fostered better understanding and appreciation of the benefits of paying housing-loan obligations. Peace of mind Settling housing loans gives a sense of security to homeowners. Ceno Gulatchino, a Balikatan account holder from San Mateo, Rizal, said, “What drove me to settle my account is for me to have peace of mind . . . .Though it’s hard for me to pay up my loans, it is still an advantage on my part since I get to keep my house.” Borrower Norberto Teves of Upper Rapnaga, Davao City, shared , “I am really happy that I paid my loan. Even if I haven’t paid my housing amortization for 11 years, BFS still gave me a reasonable price.” Good credit record Paying housing-loan obligations also helps borrowers keep their credit record in good standing. This helps facilitate their future applications for loans should they need them. Beneficial to the government and pension funds Borrowers who regularly pay their housing loans also help ensure liquidity in the housing-finance market, allowing creditors to continue issuing housing loans. As a result of the NHMFC-Balikatan transaction, the government received not only P5.12 billion as purchase price (which met the floor price fixed by relevant financing institutions) for the highly delinquent portfolio, but NHMFC, likewise, retained 49-percent equity interest in BHFI, assuring it of an equitable share of future collections as a stockholder. Moreover, the creditors of NHMFC—the Social Security System and Pag-IBIG Fund—will continue to reap the benefits of BHFI’s collection efforts from the Balikatan portfolio. As pointed out by Pag-IBIG, a steady flow of payment from borrowers will help keep the provident fund intact and protect its more than 7 million members. The NHMFC-Balikatan transaction was cited by the Department of Finance as a “model NPL [nonperforming loan] resolution transaction” for distressed assets and by the Asian Development Bank as “a highly visible, precedent-setting transaction [that] will send a clear signal to the global community that the Philippine government is committed to resolving its . . . . nonperforming- loan problem. . . . “