Sale of soured housing loans urged

The financial advisor of the National Home Mortgage Finance Corp. (NHMFC) is reportedly recommending the immediate sale or disposal of roughly 30 percent of the delinquent housing loans worth at least P17 billion.

NHMFC adviser Ernst & Young (E&Y) reportedly said that there were interested buyers among foreign asset management companies (AMCs) as long as these non-performing loans are sold at a 70 to 80 percent discount.

The NHMFC is the conduit of the housing loans, while three government financial institutions (GFIs) are the source of the funds. The housing agency in turn re-lends to property developers as well as individuals.

The amount of loans by the housing agency since 1988 had ballooned to over P53 billion in principal, interest and penalties early this year. The loans were extended to the NHMFC by the Social Security System (SSS), the Government Services Insurance System (GSIS), and the Home Mutual Development Fund or the Pag-IBIG Fund.

The SSS accounted for loans (including interest and penalties amounting to P39 billion, while the GSIS and Pag-IBIG, roughly P7 billion apiece. Twenty percent of the total amount has a sovereign guarantee through the Department of Finance (DOF).

E&Y also recommended that the housing debts be restructured then securitized. It strongly recommended that government immediately complete collections of those capable of paying. The NHMFC is reportedly in the market for a collecting agent.

Meanwhile, SSS reported that the NHMFC has paid some P27.1 billion in end September this year representing P2.135 billion on principal payments, P18.763 billion in interest payments, and P6.258 billion in penalties.

SSS assistance vice president Luz Generoso, reacting to the proposed discount, said that the pension fund was not in a position to grant a huge discount. It also rejected a bid by the housing agency for a waiver on all penalties.

"The loans come from the SSS members and thus we cannot take a loss," Generoso said. "There are also debt servicing costs which we have to shoulder aside from consideration for future obligations and lost opportunities."

Complete payment of the housing loans would ease the financial burden of the pension fund, which has been seeking an increase in membership premiums. Without the premium rate increase, the pension fund’s reserve would be depleted in less than a decade.

Early this year, the SSS had wanted to increase the premium from the present eight percent of the member’s basic salary to 14 percent. One proposal was to increase by one percent the premium every year.

President Arroyo had approved the rate hike in principal, but sought further consultation with the SSS membership.

Finance Secretary Jose Isidro Camacho, meanwhile, revealed that the National Government has tapped the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) as financial advisers for a P7-billion bond float of the National Development Co. (NDC).