Sale of mortgages part of housing cleanup–VP

THE sale of mortgages by the National Home Mortgage Finance Corp. (NHMFC) to Deutsche Bank Real Estate Global Opportunities (DBGO) was part of the cleaning up that had to be done to the housing sector, according to Vice President and Housing and Urban Development Coordinating Council Chairman Noli de Castro. The Vice President said the sale was the first step in turning around NHMFC so it can perform its mandate of developing the secondary mortgage market and promoting the growth of a sustainable source of funding for the housing sector. The revitalized NHMFC recently issued P2.1 billion worth of “Bahay bonds,” which was accepted enthusiastically by local investors. De Castro also noted the need to remind borrowers to repay their loans. “A substantial number of borrowers have not been paying regularly the loans they obtained from the NHMFC under the Unified Home Lending Program [UHLP]. The issues with the sale came out when the servicing corporation, Balikatan Housing Finance Corp. [BHFC), started to undertake serious efforts to collect from the borrowers. Now the borrowers realized that they have to pay their loans, which some of them were not accustomed to. We should change that mentality among our borrowers that just because it is a government loan, they can ignore payment or take it for granted. A loan must be repaid. Borrowers signed a loan-and-mortgage agreement, stating the terms and conditions of payment, and saying what will happen if payment is not made,” the Vice President said. “Remember that the P42 billion borrowed by NHMFC from SSS, GSIS and Pag-Ibig has to be paid as well with corresponding interest and penalties. Imagine, the P42-billion NHMFC loan has ballooned to more than P80 billion inclusive of principal, interest and penalties. What happened was that because borrowers did not pay through the years, NHMFC defaulted also on its payment to these funders. At least the individual borrowers can seek a condonation of penalties and interests. But NHMFC does not have this recourse, even in the ensuing restructuring agreements with the funders. NHMFC has to settle soonest, otherwise, the government will be forced to bail out its loans because the funds lent by the funders are private funds coming from the contributions of the members of these pension and provident fund agencies,” de Castro added. The UHLP was a financing program implemented by the government from 1988 to 1996 catering to individual borrowers. Because the UHLP’s repayment record was a low 40 percent, NHMFC piled up nonperforming loans in its portfolio. These nonperforming loans were classified by NHMFC according to degree of delinquency, and the most delinquent accounts were sold to DBGO. Most of these delinquent accounts have not been paid for 10 to 15 years and have a collection efficiency of less than 10 percent. Deadbeats criticized Meanwhile, NHMFC president Joseph Peter Sison has challenged borrowers complaining about the aggressive collection efforts of Bahay Financial Services (BFS) to pay their obligations to avoid further problems. “We should pay what we borrowed. It is not a good practice to borrow from government financial institutions and then complain to politicians when they encounter problems in repaying,” Sison commented. NHMFC was recently questioned by the Senate blue-ribbon committee on the sale of delinquent mortgages to DBGO. In May 2004, the NHMFC board approved the award of the sale of NHMFC’s high delinquent accounts with a joint-venture structure to DBGO. The sale covered 52,000 accounts with an outstanding principal balance of P12.8 billion. A bidding process was conducted by NHMFC following Commission on Audit Circular 89-296 for the sale of assets. The ensuing joint-venture structure was called Balikatan Housing Finance Corp., where NHMFC has a 49-percent share and DBGO has a 51-percent share. BHFC created another corporation, known as Bahay Financial Services, to serve as its servicing arm. BFS manages the collection and restructuring of the accounts sold to DBGO. The complaints regarding the sale emerged when Bahay Financial started implementing aggressive collection strategies. “Some of the accounts sold to DBGO have not been paid for 10 to 15 years, while others were not paid at all. But in the inspection that was conducted, some of these units are occupied, being rented out or whose rights were sold. So, some borrowers are even earning from it, and yet they are not paying. The concerned borrowers have already benefited from their loans and it is about time that they come forward to pay what they borrowed. Of course, those who are found to have legitimate concerns are being given due consideration. Bahay Financial is willing to sit down with them and discuss the options available to them,” Sison explained.