Shaping a sustainable housing finance system

Since 1977, the National Home Mortgage Finance Corporation (NHMFC) has conformed to its mandate of increasing the availability of affordable housing loans for Filipinos. As it plays its role as a secondary mortgage institution (SMI), NHMFC is able to finance homebuyers on their acquisition of housing units.

As an SMI, the primary purpose of NHFMC is to attract long-term investments through the issuance of housing bonds or other securities in order to increase liquidity in the housing sector and to purchase residential loans, mortgages or receivables originated by public and private institutions and developers.

Through NHMFC’s commitment to actual purchase of mortgages and housing loan receivables, originating institutions have the assurance for an immediate recovery of their assets. In this case, these institutions are effectively reinforced and enabled to lend to more home borrowers. The process is also helping them as they earn fees for the monthly servicing of loan repayments.

As the NHFMC trades the asset-backed and government guaranteed housing bonds or securities, funds are generated that are again flowed back into home financing. The process is overcoming fund volume limitations, letting borrowers avail affordable home loans with lower interest rates and longer repayment periods.

Over the decades, the NHMFC has developed several programs to cater the housing needs of Filipinos. To name a few are the Community Mortgage Program and the “Abot-Kaya Pabahay Fund Program”, which are now administered by its subsidiary, the Social Housing Finance Corporation (SHFC). The SHFC was created by the virtue of Executive Order No. 272.

The Community Mortgage Program is a mortgage financing program funded by the government to improve the living conditions of homeless and underprivileged citizens. Those who are qualified to apply in the program are provided with a loan to finance the acquisition of an undivided tract of land which they are currently occupying or where they are resettled.

The maximum amount of loan that qualified informal settlers can apply depends on the location of the land. As NHMFC’s noted on its Web site, the loan ceiling for highly urbanized areas is P120, 000 per beneficiary or family, while P100,000 per beneficiary or family for other areas. The loan under this program has a maximum repayment period of 25 years at an interest rate of 6% per annum.

Meanwhile, the “Abot-Kaya Pabahay Fund Program” was created to implement a continuing program of social housing and enhance government’s efforts to make low-cost housing affordable to low income families. It focuses on: making the funds available for low income families to assist them in paying their housing loans; and utilization of funds to support private developers, nongovernment organizations and landowners in providing affordable housing packages to low-income families.

To further perform its mandate in operating a viable housing finance system through the securitization of the residential home mortgages, the NHMFC has established the Housing Loan Receivables Purchase Program (HLRPP), which aims to purchase valid loans, mortgages or receivables from the originating institutions.

On Nov. 19, 2009, the proposed guidelines on the Housing Loan Receivable Purchase Program (HLRPP) that granted authority for the NHMFC president to approve all purchases under the HLRPP was approved. Under the new guidelines, NHFMC is allowed to purchase housing loan receivables from the originating institutions that can be turned into an asset pool for eventual issuance of securities or bonds for sale in the capital market.

Housing developers, government financing institutions, banks, cooperatives and corporate employers with housing program may apply to HLRPP as originators. Meanwhile, the housing loan accounts qualified for the purchase under this program are existing residential loans from qualified housing loan originators and loans with lot only as collateral.

With the aim of expanding the target market of HLRPP, NHMFC launched the Socialized Housing Loan Takeout of Receivables (SHeLTeR) program and the Reverse Mortgage Program, in the second and last quarter of 2016, respectively.

The SHeLTeR program aims to purchase socialized housing loan receivables from socialized housing developers, microfinance institutions, cooperatives, LGUs, national government agencies and civic organizations. It offers more affordable terms as it targets the socialized housing market.

The first-ever Reverse Mortgage Program in the country by NHMFC was launched through the “MAginhawang BUhay dahil sa baHAY (MABUHAY)” program. MABUHAY allows senior citizens to convert a portion of their home equity into cash in order to address their various needs. — Mark Louis F. Ferrolino