NHMFC to sell P14 billion of delinquent home loans

The National Home Mortgage Finance Corp. (NHMFC) plans to sell by January next year some P14-billion worth of highly delinquent housing loans, as part of its rehabilitation plan and to provide affected borrowers a more flexible loan restructuring terms that will enable them to keep their homes than are available at the housing agency.

Housing Secretary Michael Defensor, concurrent chairman of the Housing and Urban Development Coordinating and Urban Development Coordinating Council (HUDCC), announced that the proposed sale was reached by a multi-agency task force on NHMFC rehabilitation, which includes officials from HUDCC, Department of Finance, NHMFC, Social Security System, and the Home Development Mutual Fund (HDMF).

The upcoming sale, which will include approximately 57,000 single-family home loans earlier funded by SSS and HDMF, is based on the results of an 18-month study conducted with the assistance of NHMFC's financial advisor for mortgage disposition, Ernst & Young/Punongbayan & Araullo, Defensor said.

"We have made sure that the rights of affected housing loan borrowers will be protected, by making that one condition of the sale is to impose on winning bidder the implementation of NHMFC’s existing borrower restructuring program for a period of six months following the closing of the sale transaction," Defensor pointed out.

Based on the experience of other countries in the sale of delinquent housing loans, the winning bidder is expected to develop more creative and flexible loan restructuring program, which may include reduction of interest rate, condonation of penalties and use of the current market value of the homes, which will greatly benefit the affected borrowers, according to Defensor.

These measures, such as condonation of accrued loan interests; or the use of the current market value of homes, as basis of loan restructuring, is legally not available to NHMFC, he further clarified.

Investors interest in the Philippines economic recovery is on the rise. It is estimated that almost $20 billion of investment capital has been assembled by foreign investors to purchase non-performing financial assets in Asia.

A number of prominent foreign investors have indicated an interest in participating in the UHLP sale transaction including Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley.

Foreign investment in the Philippines is expected to increase sharply in the second half of 2004 as the financial sector begins to dispose of its troubled assets. Based on the recent experience of other Asian countries, foreign investment initially attracted to the distressed financial sector has expanded rapidly into many other parts of the economy.

For his part, lawyer Angelico T. Salud, NHMFC president, said that the housing agency had to adopt a rehabilitation plan, when starting in 1996, NHMFC began to fall behind in its payment on its debt to its program funding institutions – the SSS, HDMF and the Government Service Insurance System.