MANILA, Philippines - Vice President and Housing and Urban Development Coordinating Council Chairman (HUDCC) Noli de Castro has called on developers and banking institutions to exercise greater prudence in conducting credit investigation of housing loan borrowers to prevent the repetition of the subprime crisis that hit the Philippine housing sector in 1996.
In a speech during the Housing and Real Estate Investment Summit held recently at the World Trade Center in Pasay City, the Vice President also observed that the housing crisis in the Philippines predated the subprime crisis in the United States by more than a decade.
“In the 1990’s, the take-out process for housing loans was marked by unusual laxness. Housing loans were approved even for those who would not pass usual credit reviews . . . Eventually, many of the borrowers started to default on their monthly amortizations and the lending agencies were left with housing loans that were not repaid,” the Vice President said.
De Castro observed that in the United States, government funding was used to bail out distressed financial institutions. He said that “in our case, the government did not have the funds nor the capacity to generate more resources. Hence, the entire housing sector had to take the long and painful road to restructuring and rehabilitation.”
He expressed confidence that the Philippines has learned its lessons from the sub-prime crisis “Pinoy style” of the 1990s and “from that catastrophe rose a stronger housing sector . . . a sector that, this time around, was able to survive a much bigger crisis.”
The Housing and Investment Summit is a major highlight of the third Philippine Real Estate Festival organized by the private sector in partnership with the Department of Tourism. The festival is attended by around 500 participants from different sectors of Philippine society and the foreign community.