1 HOME DEVELOPMENT MUTUAL FUND Corporate Headquarters The Atrium of Makati Makati Avenue, Makati City HDMF CIRCULAR NO. 258 TO : ALL CONCERNED SUBJECT : REVISED GUIDELINES ON THE HOUSING RECEIVABLES FINANCING FACILITY Pursuant to the approval by the HDMF Board of Trustees during the 256 th Board Meeting on 20 April 2009, the Revised Guidelines on the Housing Receivables Financing Facility is hereby issued: A. OBJECTIVE The financing facility aims: 1. To provide developers with a liquidity mechanism through the financing of their receivables from housing loans to enable them to continue developing housing projects, and; 2. To provide Pag-IBIG Fund with complementary housing related investment program with competitive yield. B. ELIGIBILITY CRITERIA FOR DEVELOPERS The facility shall be made available to any developer who satisfies the following criteria: 1. Must be duly registered with the Securities and Exchange Commission (SEC) and the Department of Trade and Industry, and licensed with the Housing and Land Use Regulatory Board (HLURB). 2. Must have at least three (3) years experience in subdivision housing development. 3. In the case of new corporations or partnerships, the principal officers must have at least three (3) years experience in subdivision housing development. 4. Must have a good repayment history with its creditors and favorable credit and background investigation report. 5. Must show profitable operations during the last 2 years preceding the date of application based on audited financial statements. 6. The Debt to Equity Ratio should not exceed 70:30 at the time of availment and during the term of the financing facility. The proposal of developers which shall not meet the criteria on Debt-to-Equity Ratio but with substantial “Advances from Stockholders”, may be given due consideration, provided such advances are covered by a financial covenant which classifies the advances as a subordinated debt to any amount due the
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HOME DEVELOPMENT MUTUAL FUND Corporate Headquarters
The Atrium of Makati Makati Avenue, Makati City
HDMF CIRCULAR NO. 258
TO : ALL CONCERNED
SUBJECT : REVISED GUIDELINES ON THE HOUSING RECEIVABLES
FINANCING FACILITY
Pursuant to the approval by the HDMF Board of Trustees during the 256th Board Meeting on 20 April 2009, the Revised Guidelines on the Housing Receivables Financing Facility is hereby issued: A. OBJECTIVE The financing facility aims:
1. To provide developers with a liquidity mechanism through the financing of their receivables from housing loans to enable them to continue developing housing projects, and;
2. To provide Pag-IBIG Fund with complementary housing related investment
program with competitive yield. B. ELIGIBILITY CRITERIA FOR DEVELOPERS
The facility shall be made available to any developer who satisfies the following criteria: 1. Must be duly registered with the Securities and Exchange Commission (SEC)
and the Department of Trade and Industry, and licensed with the Housing and Land Use Regulatory Board (HLURB).
2. Must have at least three (3) years experience in subdivision housing
development.
3. In the case of new corporations or partnerships, the principal officers must have at least three (3) years experience in subdivision housing development.
4. Must have a good repayment history with its creditors and favorable credit
and background investigation report.
5. Must show profitable operations during the last 2 years preceding the date of application based on audited financial statements.
6. The Debt to Equity Ratio should not exceed 70:30 at the time of availment
and during the term of the financing facility.
The proposal of developers which shall not meet the criteria on Debt-to-Equity Ratio but with substantial “Advances from Stockholders”, may be given due consideration, provided such advances are covered by a financial covenant which classifies the advances as a subordinated debt to any amount due the
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Pag-IBIG Fund during the applicable term of the financing facility with respect to payment rights.
A proponent-developer who fails to meet the aforementioned criteria on profitability and debt to equity ratio (B.5 and B.6) may be considered subject to the conditions mentioned in Item E.7.
7. Must be an active Pag-IBIG employer-member. C. ELIGIBILITY CRITERIA FOR RECEIVABLES FOR FINANCI NG
1. The receivables shall consist of installment/amortization payments for residential lots, house and lot packages, townhouse units, or condominium units covered by Contract to Sell (CTS) or Real Estate Mortgages (REM) entered into between the proponent and the buyers of such residential lots, house and lot packages, townhouse units, or condominium units, with at least twenty percent (20%) principal payment inclusive of down payment or seasoning period of at least two (2) years; provided further that the residential lots and/or house and lot packages must be located in a subdivision wherein at least seventy percent (70%) of the total units have a housing component .
Account seasoning period shall mean a period within which the borrowers
have shown record of regular monthly installment / amortization payments. 2. The receivables must be in current status (without arrearages) as of end of
the month preceding the date of receipt of proposal and the date of receipt of request for drawdown/availment.
3. The individual TCTs/CCTs must be free from any lien and/or encumbrance
except the real estate mortgage constituted in favor of the developer/seller. D. AMOUNT OF FINANCING LINE
1. The Financing Line allowed per qualified developer shall be up to One Hundred Million Pesos (P100.0M) but in no case shall it exceed the single borrower’s limit prescribed by the Fund . The Line is valid for one year from the date of the execution of the Memorandum of Agreement by and between Pag-IBIG Fund and the Developer. It may be increased, subject to financial evaluation and availability of funds. The HDMF’s exposure inclusive of the outstanding obligations in other programs shall not, at any time, the single borrower’s limit prescribed by the Fund .
2. A Memorandum of Agreement (MOA) between HDMF and the developer shall
be executed to cover the housing receivables financing line applied. The financing line shall be made available for a maximum of one (1) year from the date of execution of the MOA.
E. TERMS AND CONDITIONS FOR AVAILMENT
1. The maximum term of the financing shall be the weighted average remaining term of the aggregate portfolio accounts but in no case shall exceed ten (10) years.
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If the developer opts for a shorter period only, regardless of the average remaining term of the portfolio accounts, the applicable interest rate of the actual period shall apply.
2. The maximum amount of financing for each receivable account shall be P5.0
Million, provided it shall not exceed the following:
- outstanding principal balance - 70% of the appraised value of the subject property
3. The amount of financing shall be the aggregate value of the receivables for
financing, consisting of principal and interest amounts payable for the period covered by the financing line computed to the present value using the applicable interest rate provided in E4.
4. At the option of the developer, the loan shall bear an interest rate defined as
the prevailing market rate (on Friday preceding the date of release of proceeds) of either of the following or 8.5% whichever is higher:
a. 364-day Treasury Bills plus three percent (3%), subject to annual re-
pricing; or b. Available prevailing market rate of the applicable Treasury Notes plus
three percent (3%), as follows:
Loan Term Applicable Interest Rate
2 years 2 year T Notes + 3% 3 years 3 year T Notes + 3% 4 years 4 year T Notes + 3% 5 years 5 year T Notes + 3% 7 years 7 year T Notes + 3%
10 years 10 year T Notes + 3% 5. The financing of the receivables shall be on a “with recourse basis” to the
developers.
5.1. The developer shall substitute or replace any account that will be in arrears for more than three (3) months during the term of the receivables, fully paid, for bank refinancing, or for Pag-IBIG housing loan take out, with an account acceptable to Pag-IBIG Fund. In case of failure to substitute the accounts, the developer shall redeem the accounts subject to the provision of E12.5.
5.2. The developer shall provide a cash flow guarantee that ensures full
remittance of the monthly principal and interest due Pag-IBIG Fund regardless of actual payments made by the buyers.
5.3. The developer shall substitute any account that may have material
defects in the loan documentation as may be found by Pag-IBIG Fund with an account acceptable to Pag-IBIG Fund.
6. The developer shall act as Collecting Agent for Pag-IBIG Fund for the
applicable term of the receivables, which shall include ledgering, billing and collection, insurance servicing and other related loan administration activities. Post-dated checks (PDCs) corresponding to the recei vables shall be placed in an escrow account in a designated bank mu tually agreed upon
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by the developer and the Fund. Monthly loan servici ng shall be drawn from the said account. The corresponding collection and administration costs shall be for the account of the developer.
The developer shall pay a penalty for late remittance of principal and interest due Pag-IBIG Fund equivalent to 1/20 of 1% of the amount due per day of delay.
7. If the developer fails to meet the criteria on profitability and debt-to-equity ratio
at the time of availment and within the term of the financing per item B.5 and B.6, the developer shall be required to:
7.1. Maintain a Reserve Fund with a Trustee Bank acceptable to Pag-IBIG
Fund, equivalent to three (3) months of average amount of scheduled remittance to Pag-IBIG Fund to cover any temporary arrearages on the accounts and,
7.2. Maintain a Reserve Fund with the same Trustee Bank, equivalent to two
percent (2%) of aggregate receivables financed to cover any obligation to substitute or redeem defaulting accounts.
The assets of both Reserve Funds may be in the form of Pag-IBIG Housing Bonds, Retention Fee, Escrow Account, Savings Deposit, Certificate of Time Deposit, Investments in Government Securities with the Pag-IBIG Fund’s depository banks for the account of the developer. To the extent that amounts are withdrawn from the Reserve Funds to cover shortfall in the amount of remittance to Pag-IBIG Fund or failure to redeem accounts, such Reserve Funds will be replenished by the developer up to the initial Reserve Fund Amounts. The balance of the Reserve Fund shall revert back to the developer after the term of the financing or full payment of the receivable amounts due Pag-IBIG Fund, whichever comes first.
8. The developer shall execute a Deed of Assignment (DOA) with Special Power
of Attorney (SPA) in favor of Pag-IBIG Fund covering the receivables to secure availments under the financing facility.
The DOA with SPA shall be registered with the Registry of Deeds and duly annotated on the corresponding TCT / CCT.
9. The underlying documents such as PN, TCTs, CCTs, Tax Declaration, REM /
CTS, and updated Real Property Tax Receipts and insurance documents shall be delivered to and deposited with Pag-IBIG Fund.
10. The developer shall comply with the technical requirements of Pag-IBIG Fund
on the projects.
11. The proceeds from receivable financing facility shall be used by the developer for housing-related obligations / projects.
12. Other Provisions
12.1. Each assigned REM or CTS account shall be covered by Mortgage or
Sales Redemption Insurance (MRI) and Fire Insurance duly endorsed in favor of Pag-IBIG Fund.
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12.2. The developer shall ensure the payment of the annual property taxes
covered by REM or CTS assigned to Pag-IBIG Fund and submit the Updated Realty Property Tax Receipts on or before April 30 of the following year.
12.3. The Developer shall commit to answer for any complaint from the
buyer / borrower for defect (except normal wear and tear) on land development and construction of houses and shall hold Pag-IBIG Fund free from any liability arising from said defects.
12.4. The developer shall refund the amount which may become due to the
buyer / borrower who avails of the refund provision of the Maceda Law (RA 6552). Upon such refund, the subject assigned account shall be substituted with another account acceptable to Pag-IBIG Fund of substantially equivalent value.
12.5. If a developer redeems an account due to full payment by the buyer /
borrower or as result of arrearages for more than three (3) months, bank refinancing or Pag-IBIG Fund take-out, the redemption value shall be equivalent to aggregate value of the remaining unpaid receivables due Pag-IBIG Fund, consisting of principal and interest amounts payable, computed to the present value using the interest rate applied at the time of release by Pag-IBIG Fund, plus accrued interest computed from the last amortization payment due date to the actual date of redemption. A pre-payment penalty of 1% shall be imposed to the developer unless the reason for full payment is conversion of the account to Pag-IBIG Fund take-out under the End-User Financing Program.
12.6. Upon the full payment of the amounts due Pag-IBIG Fund, substitution
and / or redemption of accounts assigned to Pag-IBIG Fund, the Pag-IBIG Fund shall execute the Deed of Release of Assignment in favor of the developer for the transfer of the accounts back to the developer. All expenses related to the release and delivery of such accounts to the developer shall be for the account of the latter.
12.7. The taxes and other expenses such as appraisal fee necessary and
incidental to implement the financing of receivables shall be for the account of the developer.
12.8. The developer shall encourage the housing loan beneficiaries to enroll
with Pag-IBIG Fund.
12.9. The developer shall pay a commitment fee equivalent to one-fourth of one percent (1/4 of 1%) of the amount of financing line approved by Pag-IBIG Fund.
The developer shall submit a quarterly schedule of drawdowns for the term of the financing facility, the first of which shall not be later than forty five (45) calendar days after the execution of the Memorandum of Agreement. If availments or drawdowns are made within the quarter as scheduled, the applicable commitment fees shall be refunded. Otherwise, it shall be forfeited.
12.10. The developer shall pay a processing fee of ¼ of 1% of the approved
housing financing facility or fifty thousand pesos (P50,000.00),
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whichever is lower, inclusive of a non-refundable filing fee of ten thousand pesos (P10,000.00).
12.11. The developer shall pay a non-refundable service fee equivalent to
0.1% of the total amount for release.
F. APPROVING AUTHORITY
1. Applications for new financing facility of up to P20.0 Million shall be approved by the Senior Management Committee, and submitted to the Board of Trustees for notation. Renewal of unavailed financing facility shall be approved by the Senior Management Committee.
2. Application for a new Financing Facility over P20.0 Million shall be subject to
Board approval. G. AMENDMENTS These guidelines may be amended, revised or modified by the Senior Management
Committee in furtherance of the objectives of the program, provided that the amendments, revisions or modifications herein adopted are consistent with the mandate of the Fund under its charter and existing laws.
