Untainted blood

Back in 2018, then president Duterte via Executive Order 58 consolidated the different guarantee funds and entities and created a new entity called the Philippine Guarantee Corp. (Philguarantee) whose portfolio the following year amounted to a staggering P216 billion.

The Home Guaranty Corp. was merged with the Philippine Export-Import Credit Agency (PhilEXIM) while the guarantee functions, programs and funds of the Small Business Corp. (SB Corp.) and the administration of the Agricultural Guarantee Fund Pool and the Industrial Guarantee and Loan Fund were transferred to PhilEXIM.

PhilEXIM was then renamed as Philguarantee in 2019 after which EO 58 mandated the creation of a single guarantee entity which was Philguarantee.

Then finance secretary Carlos Dominguez, who also chaired Philguarantee, said that the consolidation resulted in total assets of P55.5 billion, equity of P24.5 billion, and investment funds of P28 billion. The state guarantee fund was also able to recover P37.2 billion worth of non-performing loans and sold P291.76 million of non-performing assets in 2019.

Philguarantee’s total guaranty portfolio for 2020 meanwhile was estimated to amount to P241 billion, with P220 billion in the housing sector, P6 billion for agriculture, and P15 billion for the corporate sector including small and medium enterprises. Additional credit guarantee portfolio was also expected to be generated with the designation of the entity as administrator of different programs including the World Bank’s Clean Energy Fund/Philippine Renewal Energy Development Project and the transfer of P800 million of the Electric Cooperative-Partial Credit Guarantee Program from the LGU Guarantee Corp.

Meanwhile, Philguarantee in 2021 reported an increase in its net income to P1.37 billion from P487 million in 2020. Income from loan guarantees dropped by two percent to P1.59 billion while earnings from investments and other channels increased by over 176 percent to P2.32 billion. As a result, its guarantee portfolio was at P182.9 billion in 2021.

Philguarantee extends credit guarantee to priority areas like agriculture, housing and MSMEs. Sources of guarantee income were guarantee fees from loans given out to mostly MSMEs and premiums collected from housing loans.

It now performs the functions of the defunct Home Guaranty Corp. (HGC) which used to guarantee the payment of mortgages, loans, and other forms of credit facilities and receivables arising from financial contracts exclusively for residential purposes and the necessary support facilities.

The HGC may have been a little-known government agency, except among housing developers. But it had its share of big-time controversies.

In 2014, newspapers reported that plunder and graft charges were filed against then incumbent HGC president Manuel Sanchez and former president Gonzalo Bongolan at the Office of the Ombudsman for allegedly mismanaging the agency’s finances, causing losses amounting to P1.9 billion from 2009 to 2011 alone based on separate COA reports.

Sanchez was a former representative of Rizal province who was removed by the House Electoral Tribunal in 1994 for allegedly faking his citizenship. He was appointed to the HGC by then president Benigno Aquino III in 2010 to replace Bongolan.

In the case of Sanchez, the COA reports revealed that HGC’s accumulated deficit ballooned to P12.8 billion as of 2011 while HGC’s liabilities of more than P7.1 billion exceed its current assets of P3.17 billion by the end of 2011, casting doubt on HGC’s ability to provide a viable shelter program for the homeless and under privileged sectors of society.

COA also questioned the HGC retirement plan approved by Sanchez including the failure of the HGC to consolidate in its name the title of acquired assets valued at more than P7 billion thereby depriving the agency of the opportunity to sell and recover these properties.

It was claimed that the HGC under Sanchez failed to protect and preserve some 11,903 housing units resulting in their further destruction, fast deterioration, and further loss of possible income due to illegal occupants.

HGC guarantees loans of housing developers for a fee and in case of default by the borrower, it will purchase the debt from the lending financial institution and take on responsibility for the loan. The secured loan is backed by the properties built which serve as collateral, which HGC will then seize in case of failure to repay.

Even employees of the HGC back then wrote then president Aquino about alleged anomalous transactions by Sanchez, including appointment of fraternity brothers without the required qualifications and without prior Civil Service Commission approval, purchase of luxury vehicles, purchase by him of HGC paintings including works of national artist Jose Joya without the benefit of public bidding and for prices as low as P2,500, among others.

It was claimed that Sanchez was able to acquire nine works of national artists for P70,000, when the prices of these works run into billions of pesos.

There are now reports that Sanchez wants to make a comeback by heading Philguarantee.

Philguarantee provides, among others, guarantees to real estate developers, banks, and other financial institutions which grant loans, credits, and financing for housing acquisition and development.

It has a number of programs but very important and controversial at that is the housing developers credit guarantee facility which covers loans to developers for their permanent working capital and development expenses. A pool of contract to sell receivables and their underlying properties serves as collateral for the loan. Philguarantee shall pay the defaulting accounts from the pool of CTS receivables.

Then there is this cash flow guarantee on asset-backed securities which covers securities or financial instruments for financing of housing developments. Philguarantee pays the defaulting accounts from the pool of assets such as receivables from loans/mortgages and/or real estate properties backing up the securities.

According to the Department of Human Settlements and Urban Development, the housing backlog in the country is estimated at 6.5 million homes.

One way to encourage developers to build and sell more housing units of course is for banks, financing institutions, and developers providing in-house financing to be able to secure guarantees from Philguarantee so that in the event that the individual borrowers default on their payment, in exchange for a guarantee fee, then they can call on these guarantee and be paid the loan.

In the hands of the wrong individual however, this guarantee program can go haywire.

We do not have anything about the government rehiring old hands but isn’t it time for the state to infuse fresh faces and new and untainted blood into the system?

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