|
The NHMFC embarked on a financial rehabilitation/re-engineering program in 2002 to perform its primary mandate of being the premier Government Secondary Mortgage Institution. The rehabilitation included the categorization, restructuring and disposition of its Unified Home Lending Program (UHLP) portfolio. The following activities were successfully completed: a) Restructuring of the balance of the obligations of NHMFC from the loans with its Funders, the Social Security System (SSS) and Home Development Mutual Fund (HDMF or Pag-Ibig Fund). This was accomplished in 2003; b) Classifying the UHLP portfolio into Low delinquent (0-3mths in arrears), Moderate delinquent (3-48 months in arrears), and High delinquent (more than 48 months in arrears). This was accomplished in 2004; c) Resolution/Disposition of its highly delinquent/non-performing loans. The closing of this transaction, culminating in the payment by the buyer of the NPLs and the turnover of the proceeds to the funders SSS and HDMF, was in October 2005 The NHMFC successfully bid out the sale of its highly delinquent or non-performing loans (NPLs) to DB Global Opportunities Group (DBGO). The NPLs that numbered more than 52,000 accounts has an outstanding principal balance of 12.8 Billion. These are accounts where total payments are 20% or less of their original loan; where the outstanding balance at time of sale was more than 200% of their original loan amount; and/or where the borrower is more than four years in arrears. In fact, nearly 30% of the loans sold are classified as accounts with No Payments Since Take-Out (NPSTO). To guide the corporation in the NPL Sale, NHMFC hired Punongbayan and Araullo/Ernst & Young (P&A/E&Y) as its Financial Advisor. The competitive bidding process conducted was multi-departmental, with HUDCC and DOF taking the lead as Co-Chair of the Bids and Awards Committee, and with NHMFC officers as members.
The following are the benefits of the NPL Sale: · Maximizes cash recovery to NHMFC · Minimizes losses from non-collection and infuses needed liquidity · Mitigates criticism about Fire Sale Price · Reduces NHMFCs obligations to its Funders · Reduces Funders claims against the RP Guaranty upon sale of the assets · Bulk Sale strategy provides immediate cash flow relief · Permits disposition with delay · Private sector can assist in borrower restructuring of the loan · NHMFC can impose similar terms of payment or restructuring on the Joint Venture Partner · Greater economic benefits for NHMFC in terms of administration, foreclosure expenses versus the price sale.
The NPL sale was through a Joint Venture agreement between the buyer (DBGO) and NHMFC. The accounts were transferred to a Special Purpose Corporation that was created for the purpose and named Balikatan Housing Finance Inc. (BHFI) which is 51% owned by DBGO, 44% by NHMFC and 5% owned by the International Finance Corporation (IFC). The servicer for the NPL loans sold is Bahay Financial Services (BFS), an entity wholly owned by DBGO. The NPL Sale also provides protection to the loan borrowers:1) Through the SPC/Balikatan, NHMFC can impose the same or better terms to the borrower on a case-to-case basis.2) Balikatan, thru its servicer, BFS may offer condonation of penalties as well as interest, which cannot be extended by NHMFC as a government corporation. | 
|
d) Also in CY 2005, almost concurrently with the sale of NPLs, NHMFC transferred its non-SMI related functions to its wholly owned subsidiary. The funds and assets of the Community Mortgage Program and the amortization support fund of the Abot-Kaya Pabahay Fund were transferred to the Social Housing Finance Corporation (SHFC). With this move, NHMFC can now fully focus on the SMI operations. e) In CY 2007, NHMFC implemented its Rationalization program and streamlined the Corporation from an 850-strong plantilla down to 300 plantilla positions. Correspondingly, its manpower complement was reduced from almost 700 to the present 270 personnel. The NHMFC also embarked on a capability-building program for the officers and staff, and intends to update its systems and procedures, geared towards SMI operations. f) In CY 2008, NHMFC hired the services of Earnst & Young Transaction Advisory Services Inc. to guide the corporation in its securitization plan. Also on the same year, the underwriter and lead arranger Standard Chartered Bank was engaged for the maiden securitization issue. The Trustee DBP and the Special Purpose Trust Bank PNB are likewise on board.With all these in place, NHMFC expects the maiden issue to close on the third week of March CY 2009. This historic transaction shall mark the start of the Residential Mortgage Backed Securities in the Philippines, and jump start the operations of NHMFC as a Secondary Mortgage Institution.
|
