NHMFC sells P13.4-B housing NPLs

The National Home Mortgage Finance Corp. (NHMFC) said yesterday it has sold P13.4-billion worth of non-performing residential mortgage loans to DB Real Estate Global Opportunities, an investment fund affiliated with the Deutsche Bank AG.

The sale of the NHMFC assets was done through a competitive bidding held yesterday.

The Deutsche Bank fund agreed to purchase a 51-percent interest in the loans from NHMFC and to form a Special Purpose Entity (SPE) to manage the restructuring and collection of the loans.

Based on the agreed-upon sale structure, NHMFC will retain a 49-percent interest in the loans through SPE and share in the future loan collection and recovery proceeds.

"This sale is a landmark transaction for the Philippines in terms of its size and importance," NHMFC president Angelico T. Salud said yesterday.

"For the first time, both Filipino and international investors were publicly invited to participate in a transparent competitive auction process to purchase non-performing loans from a Philippine financial institution. We believe that this successful sale lays the foundation for other government-owned corporations and private sector financial institutions to begin disposing their non-performing during the balance of this year," Salud said.

The portfolio of loans sold by the NHMFC include the residential mortgage loans from the most delinquent borrowers under the United Home Lending Program (UHLP).

All the UHLP loans sold were originated by NHMFC between 1987 and 1996 to borrowers who were members of either the state-owned Social Security System (SSS) or the Home Development Mutual Fund (HDMF).

Salud said approximately 15 percent of the loans sold were cases where NHMFC established that the original borrowers had abandoned their homes, about 30 percent were loans to borrowers that moved into their homes but never made any of their scheduled payments and the remaining loans (nearly 55 percent) were to borrowers who on average have made only seven percent of their scheduled payments.

According to Salud, the sale of the NHMFC’s assets will provide greater opportunity for most delinquent borrowers to restructure their loans while at the same time providing the Fund the ability to reduce its outstanding debt obligations to its funding agencies.

NHMFC was established in 1979 to serve as the country’s secondary mortgage institution and to act as the government sector’s primary issuer of mortgage loans.