HOME GUARANTY CORPORATION

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HOME GUARANTY CORPORATION

Historical Background

1950 1978 1986 2000

R.A. No. 580Home Financing Commission

E.O. No. 535 Became Corporation & placed under the Ministry of Human Settlements

E.O. No. 90Renamed Home Insurance and Guaranty Corporation

R.A. No. 8763 Renamed Home Guaranty Corporation

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Members of the BoardSECRETARY OF FINANCE

Ex-officio ChairmanSecretary Cesar Purisima

HUDCC CHAIRMANEx-officio Vice-chairman

Vice President Jejomar Binay

NEDA DIRECTOR GENERAL Ex-officio Member

Dr. Arsenio Balisacan

HGC PRESIDENTEx-officio Member

Atty. Manuel R. Sanchez

Three (3) other members appointed by thePresident of the Philippines

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MANDATES

To mobilize private funds for home lending

Promote homebuilding and land ownership through self-help and cooperativism

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Guaranty Concept

Subdivision Development Home Acquisition

Developers

Guaranty

HomebuyersFinancingInstitution

DevelopmentalLoans

HomeLoans

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Benefits of the HGC Guaranty

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Risk Cover

100% on outstanding principal obligation

+interest and yields up to 11%

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Exemption from BSP Capital Reserve Requirement

for Credit Risk

Guaranteed Loans are Zero-Risk (BSP Circular 280 s.2001)

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1. Limit on REL (Sec. 1. c. BSP Circular 600 s. 2008)2. Loanable amount may be increased up to 90% of appraised

value of collateral (BSP Circular 343 s. 2002)3. SBL (Sec. 1.E BSP Circular 425 s. 2004)

Exemption from BSPRequirements on Real Estate Loans

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on interests and yields earned on guaranteed loans

Up to 11%

Tax exemption

Simulation of Tax Savings

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Assumptions: Loan Amount P 1,000,000.00 Interest Rate 10%

With HGC' Guaranty No HGC Guaranty Tax Exemption 10.00% - Premium Fee (Bond Coverage) 1.15% -

Interest Income (P1.0m x 10%) P 100,000.00 10.00% P 100,000.00 10.00%Less: Tax Exempt Interest Income 100,000.00 10.00% - - Taxable Interest Income P - 0.00% P 100,000.00 10.00%Less: Deduction/Expenses 5% Gross Receipt Tax P - 0.00%(a) P 5,000.00 0.50% Premium Fee 11,500.00 1.15% - 0.00% Total 11,500.00 1.15% 5,000.00 0.50%

Interest Income Subj. to Income Tax P - -1.15% P 95,000.00 9.50%Less: 30% Income Tax - (c) 28,500.00 2.85%Interest Income Net of Income Tax P - -1.15% P 66,500.00 6.65%Add: Tax Exempt Interest Income 100,000.00 10.00% - -

NET INTEREST INCOME P 88,500.00 8.85% P 66,500.00 6.65%

COMPARISON: With HGC Guaranty vs. No HGC Guaranty Tax Payment for account with No HGC Gty. P 33,500.00 3.35%Tax Payment for account with HGC Gty. P - 0.00%TAX SAVINGS P 33,500.00 3.35%

Improvement(Decline) in Net Income P 22,000.00 33.08%

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Tax Exemption and Maximum LCR

Housing Package Tax Exemption and

Guaranteed Interest

Maximum LCR

(BSP Cir. 343)

Socialized (Up to P400,000) 11% 90%Low Cost Housing (Above P400,000 to P3M)

10% 90%

Medium Cost (Above P3M to P4M) 9.5% 80%Open (Above P4M) 8.5% 70%

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Collection, Foreclosure & TCT Transfer are shifted to HGC

Easing of Administrative Burden (in the event of call on the guaranty)

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Confers classification and other advantages

Sovereign Guaranty

Guaranty Programs

• Retail Guaranty Program – covers individual housing loans secured by:– Real Estate Mortgage– Contracts-to-Sell

• Developmental Guaranty Program – covers developer’s loan for: – Development of Residential Subdivision, Condos, Apartment– Working Capital

• Guaranty for Securitization Program – ensures financial instruments issued for housing-related purposes, such as: – Bonds, Commercial Papers, A/MBS

• Guaranty for Small Loans for Housing – ensures unsecured housing-related loan transactions, such as: – Microfinance Housing Loans– Salary Loans, Multi-purpose loans to be used for housing 14

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1. Purchase of house & lot, townhouse, condominium unit and any other single family dwelling;

2. Purchase of lot and construction of house; 3. Purchase of lot only; 4. Purchase of lot on which the house of the Borrower/Mortgagor presently

stands;5. Major repair, improvement or expansion of an existing house or dwelling

unit; 6. Refinancing of an existing loan, which was principally used for any of

the above-mentioned purposes;7. Financing of Contracts-to-Sell executed by Developers in favor of its

buyers covering purchase of residential units in a developed subdivision or condominium; and

8. Purchase of residential farm lot

Retail Loans Eligible for Guaranty

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Types of Guarantee Coverage(Form of Guaranty Call Payment)

STANDARD COVERAGE• Call Payment is in the form of HGC Debenture Bond if default occurs

within the 1st five (5) years of guarantee coverage• Call Payment is Cash if default occurs after five (5) years of

guarantee coverage

BOND COVERAGE• Call Payment is in the form of HGC Debenture Bond regardless of

the period or timing of the default.

MODIFIED CASH PAYMENT• Call payment is in cash based on a scheduled monthly amortization.• Payment shall commence on the first month that the loan becomes

delinquent until the loan maturity.

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Classification : Government Securities

Term : 3 to 5 years

Face Value : OB + accrued interest (Max of nine months)

Coupon rate : The lowest of Market Rate, Mortgage/CTS Rate, or 8.5% p.a.

Tax exemption : Up to the coupon rate of the bond

Interest Servicing: Semi-annual

Bond Redemption: Principal payable at maturity

Tradability : Traded in the market

Features of the HGC Debenture Bond

Annual Guaranty Fee(Retail Housing Loan)

Types of Housing Package

*Premium Rate – Standard

(% to outstanding principal

obligation)

*Premium Rate – Bond


obligation)

*Premium Rate –Modified Cash


obligation)

Socialized housing 1.40 1.20 1.25

Low cost housing 1.45 1.15 1.25

Medium cost housing

1.50 1.10 1.25

Open housing 1.70 1.50 1.25

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Types of Housing Package *Premium Rate –Bond (% to outstanding principal

obligation

Socialized housing 1.25

Low-cost housing 1.50

Medium cost housing 1.75

Open housing 2.00

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Annual Guaranty Fee(Developmental Housing Loan)

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GUARANTY FOR SMALL LOANS FOR HOUSING

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Guaranty for Small Loans for Housing

Guaranty

FinancingInstitution

Borrowers for home improvement and repairs

Lends to individual borrowers

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Risk Cover Covers outstanding principal balance Guaranteed interest of up to 11%.

Zero-Risk Classification

HGC-guaranteed loans have zero risk weight. Banks are exempt from providing risk capital on HGC-guaranteed loans

Tax incentive Interest income on housing loans up to

the extent of 11% is exempt from all forms of taxation.

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Simulation of Tax Savings (For Small Loans for Housing)

ASSUMPTIONS: Housing Loan Portfolio 10,000,000 Interest Rate per annum (%of portfolio) 10% Tax free interest with HGC Guaranty 10% Premium Fee (%of portfolio) 2% No HGC Guaranty With HGC GuarantyInterest Income 1,000,000 1,000,000 Less : GRT (5%) 50,000 - Taxable Income 950,000 1,000,000 Less : Income Tax (30%) 285,000 - Premium Fee - 200,000 Net Income 665,000 800,000

Savings/ Improvement in Income P135,000 per P10 million worth of loans

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Sovereign Guaranty HGC guarantees carry the sovereign

guaranty

Funding Benefit

FI can leverage for lower cost of borrowings

Long-term funds may be made available by some funders

Assignability of Guaranty The guaranty may be assigned to

assignee of guaranteed loans


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TERMS AND CONDITIONS OF GUARANTY

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Eligibility of FIs:• Track record of at least three (3) years in implementing sustainable

microfinance programs; • Capital Adequacy Ratio (CAR) of not lower than 12% for BSP-

supervised FIs;• Latest CAMELS rating of at least “3” for BSP-supervised FIs;• With collection efficiency of at least 95%;• Capacity and technical capability to offer small loans for housing;

and• No arrearages in borrowings from wholesale lenders.

Loan Value Eligible for Guaranty: •Maximum of P400,000.00[1] per borrower

[1] Loan amount may be adjusted/increased upon the approval of the HUDCC and the BSP

Terms and Conditions of the Guaranty

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Purpose/s of the Loan:

•House and/or lot acquisition for housing;•House construction; and•Home improvement/repairs.

Eligible Borrowers:

• Existing depositor/client/member;

• Borrowers who are determined by the FI to be eligible for small loan for housing, provided that: (a) they do not have an existing small loan for housing; and (b) loan payments should not exceed 60% of their income as determined by the FI’s cash flow analysis;

• With verifiable source of income; and

• With good track record of loan repayment for the last three (3) loan cycles of any loan type from the FI.

Terms and Conditions of the Guaranty (cont.)

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Payment:

• Frequent amortization (daily, weekly, monthly); and

• Loan payments should not exceed 60% of client’s net disposable income as determined by the FI’s cash flow analysis.

Loan Term:

• Up to 15 years for loans above P150,000 and/or for lot acquisition and house construction; and

• Up to 5 years for loans not exceeding P150,000 availed for home improvement and repairs.


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Event of Default:

• Consecutive non-payment of loan amortization by the borrower depending on the payment schedule as follows:

Premium Structure:

• The guaranty premium is two percent (2%) per annum of the outstanding loan balance.


Mode of Payment Default Weekly 4 weeks non-payment Monthly 2 months non-payment

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Maximum Allowable Guaranty Call:

• The FIs may call on the HGC guaranty to the extent of 1.2% of the total enrolled account.

Premium Refund:

• In case there is no call on the guaranty at the end of the guaranty period, the FI shall be entitled to a premium refund of up to 1% of the guaranteed loans.

Other conditions:

• Within one (1) month from release of the loan, the FI shall submit to HGC a proof of the borrower’s utilization of the proceeds as specified in the loan application;


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GUARANTY OPERATIONS

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Guaranty Line Application

1 Applies for guaranty lineSubmits:• Application letter• Company Profile• Profile of Stockholders & Key Officers• Audited F/S (for the last 3 years)• Credit Policies & Guidelines• Prospective Enrollments• CAMELS Rating (Banks)/PESO Rating (Coop)• Application Fee (P10,000)

HGC

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Evaluates application

Elevates to HGC Board for approval3

Sends notice of approval/disapproval

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Executes Contract of Guaranty5Guaranty

Contract

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FinancialInstitution

Enrollment Procedure

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COG

Enroll accounts for guaranty coverage, submits:Enrollment Letter containing warranties that: 1.Bank has undertaken credit evaluation of

account 2. Loan documents are valid 3. TCT is clean, free from lien 4. All loans are within LTV limits

Batch List 1. At least P 1.0 M or 10 accounts 2. Information about the borrower, the loan,

and collateral

Premium Payment

Processes Certificate of

Guaranty

Issues Certificate of Guaranty(signed by HGC President)

Post Audit of Guaranteed Loans

HGC validates sufficiency and orderliness of loan documentation with the FI

HGC inspects housing unit of the borrower

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Call Procedure

BORROWER

Borrower defaults(6 mos. Non-payment ofmonthly amortization)

Option FORECLOSURE

Option Notice of call30 calendar days

from date of default

Pays Call30 calendar days from conveyance of original

loan documents

Loan documents

Evaluates Call30 calendar daysfrom receipt of notice of callIF

VALID

1

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Call Documents

Documents to be submitted upon call on the guaranty within 30 calendar days from default date:

- Notice of claim- Demand letter of bank to borrower-Statement of account and ledger-Copies of TCT, Tax Declaration, vicinity map, lot plan and house plan - Bank appraisal report- Audit evaluation sheet

Documents to be submitted after receipt of Notice of Claim Approval within 30 to 180 calendar days from receipt of notice of approval :

- Registered Deed of Assignment and Conveyance- TCTs, tax declaration, tax receipts- PNs, Loan Mortgage Agreement, REM- Fire Insurance Policy duly assigned to HGC-Bank Certification that all taxes and Homeowners Association dues are updated

Performance Indicators

Outstanding Guaranty as of Dec. 2012 P 82.40B

Guaranty Capacity as of Dec. 2012 P 145.39B

Net Income from Operations as of Dec. 2012 P 457.59M

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Top 10 Client- Banks

BPI FAMILY SAVINGS BANKRCBC SAVINGSPS BANKMETRO BANKEASTWESTPLANTERS BANKUNIONBANKSTERLING BANKMALAYANPHILIPPINE NATIONAL BANK

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Top 10 Client - Developers

AYALA LANDCITYLAND GROUPCENTURY PROPERTIES PRO-FRIENDSFILINVESTSUNTRUST PROPERTIESPUEBLO DE OROROBINSONS LANDNGG PROPERTIESCITYSTATE PROPERTIES

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Visit us at:

Home Guaranty Corporation335 Sen. Gil Puyat Avenue, Makati City

Tel. No. +63 2 8964116www.hgc.gov.ph

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Date post:	25-Feb-2016
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