The million peso low-cost house

It’s not only Delfin Lee’s Globe Asiatique that wreaked havoc on the housing scene. There’s another insidious scandal-in-the-offing that has been simmering awhile under the radar.

The story of Cora and Demy Doromal (not their real names) is a sad but all-too-familiar tale. They belong to the 4th quintile in terms of socio-economic classification – in other words almost poor, but not poor enough to be a beneficiary of free housing by either GK or the government. Since Cora had her own little business and Demy was a municipal clerk, their conjugal income was around P30,000/month. But they had five children who were all married with their own families, but were still dependent on Cora and Demy.

In 1993, the couple bought a house and lot in Palmera VI, Antipolo. The 84-square meter property’s tag price was P346,000 with a down payment of P70,000 and a monthly payment of P5,200 payable in 25 years. When the house was turned over to the couple, it had no ceiling, no water and electricity. By a linear calculation, the house would have cost P1,560,000 by the time the Doromals or their heirs owned the title.

Cora and Demy managed to scrounge for the downpayment and faithfully paid their monthly installments for six years. Then the husband became seriously ill from diabetes, was in and out of the hospital for two years before passing away in 1999. The bills mounted and the couple fell into debt. To make matters worse, the Asian crisis struck and the economy took a downturn, shrinking Cora’s income pitifully. The widow began defaulting on her payments, as did her other neighbors. They were now under threat of losing their homes through foreclosure.

This scenario was the same in 57 provinces — where the original loans were with the National Home Mortgage and Finance Corporation (NHMFC). Drowning with 52,289 high-delinquency mortgage loans, a “disposition strategy” was cooked up by NHMFC with the blessings of former NEDA Director-General Augusto Santos, former President Gloria Arroyo and former VP and HUDC head, Noli de Castro.

In 2005 NHMFC and DB Real Estate Global Opportunities established a joint venture company. It was called Balikatan Housing Finance Inc (BHFI). The non-performing loans were transferred to BHFI, which then engaged Bahay Financial Services (BFS), a collection firm, to manage the portfolio amounting to more than P13 billion. These accounts were delinquent by 10 to 15 years and the original principal was yet to be repaid.

The move was hailed as a “landmark and groundbreaking transaction” which in the context of the GMA regime should already have raised the alarm. Balikatan’s mandate was to facilitate collection supposedly for its shareholders including NHMFC and the original funders, SSS and Pag-ibig. Apparently the contributions from pension fund members were used to fund the troubled housing loans.

The Senate and the House of Representatives conducted investigations to probe the legality of the joint venture. But the hearings were abruptly terminated without resolution.

In Davao, the borrowers raised the issue with Mayor Rodrigo Duterte who said, “Fraudulent practices of low-cost housing developers in Davao City is behind the problem now faced by around 6000 homeowners who are facing foreclosure by BFSI... From the very beginning there was fraud in the contract because the developers constructed substandard homes.” He called on BFSI to dissolve the arrears and advised homeowners to resist foreclosures of their houses legally.

Cora said she began getting persistent calls from various collectors using all kinds of pressure techniques. Some seemed sympathetic and helpful while others were aggressive and threatening. There also seemed to be a revolving door so that the account manager she was talking to was gone the next month, replaced by another that would also went a couple of months later. In one year, she had about five different contact persons come and go. Apparently listening to tragic stories while trying to get back payments wasn’t an easy job.

Letters threatening Cora with foreclosure, eviction and legal action came regularly. There were men taking pictures of her house. The widow was completely terrorized. When she was summoned for a face-to-face meeting, the BFS “deal” was announced to her. She had six months to pay P548,000 in full, plus legal and collection fees. Cora pleaded for a monthly amortization payment as was the original agreement, but she was advised to beg, steal or borrow from anyone, anywhere instead. After some tearful pleading, she was granted an extension to one year.

The Doromals had paid a total of P190, 464.76 in the three years that they could afford it. With the Balikatan cash requirement — the ceiling-less, waterless, powerless, rotting 19-yr-old 84sqm property, now cost P738,464.76. Needless to say, Cora was unable to raise half-a-million pesos despite help from relatives and friends. She offered the amount she was able to raise. It was turned down and she received another letter from the Sheriff’s office for possible eviction in the near future.

In their website, BFS President Federico Y. Cadiz Jr. states, “Foreclosure is always a last resort and the least preferred option. But rather than see people lose their homes through foreclosure, we counsel them and help them arrive at the best settlement arrangement. Of course, the onus is always on the part of the borrower, to show sufficient proof that he or she is really in dire financial need...We have given 100% principal and 100% interest condonation for many cases. These discounts are even better than the government’s... We have also given extra special consideration when these were warranted.”

The deadline given to Cora passed last July 2011. She was warned that her debt was now raised to P770,000++.

After July 2012, she was told that the price was now P3 million! Cora stopped talking and taking the calls of BFS. The last agent told her that not even VP Binay could make them lower the price.

(Efforts to get the side of BFS were unsuccessful.)

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