Transcript GUARANTY ON MICROFINANCE HOUSING

HOME GUARANTY CORPORATION
1
Historical Background
1950
R.A. No. 580
Home Financing
Commission
1978
E.O. No. 535
Became
Corporation &
placed under the
Ministry of
Human
Settlements
1986
2000
E.O. No. 90
Renamed Home
Insurance and
Guaranty
Corporation
R.A. No. 8763
Renamed Home
Guaranty
Corporation
2
Members of the Board
SECRETARY OF FINANCE
Ex-officio Chairman
Secretary Cesar Purisima
HUDCC CHAIRMAN
Ex-officio Vice-chairman
Vice President Jejomar Binay
NEDA DIRECTOR GENERAL
Ex-officio Member
Dr. Arsenio Balisacan
HGC PRESIDENT
Ex-officio Member
Atty. Manuel R. Sanchez
Three (3) other members appointed by the
President of the Philippines
3
MANDATES
 Promote homebuilding and land
ownership through self-help and
cooperativism
 To mobilize private funds for
home lending
4
Guaranty Concept
Guaranty
Developmental
Loans
Home
Loans
Homebuyers
Developers
Financing
Institution
Subdivision Development
Home Acquisition5
Benefits of the HGC Guaranty
Risk Cover
100% on outstanding principal obligation
+
interest and yields up to 11%
6
Benefits of the HGC Guaranty
Exemption from BSP
Capital Reserve Requirement
for Credit Risk
Guaranteed Loans are Zero-Risk (BSP
Circular 280 s.2001)
7
Benefits of the HGC Guaranty
Exemption from BSP
Requirements on Real Estate Loans
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)
8
Benefits of the HGC Guaranty
Tax exemption
on interests and yields earned on guaranteed loans
Up to 11%
9
Simulation of Tax Savings
Assumptions:
Loan Amount
Interest Rate
P
1,000,000.00
10%
With HGC' Guaranty
10.00%
1.15%
Tax Exemption
Premium Fee (Bond Coverage)
Interest Income (P1.0m x 10%)
Less: Tax Exempt Interest Income
Taxable Interest Income
Less: Deduction/Expenses
5% Gross Receipt Tax
Premium Fee
Total
P
P
11,500.00
11,500.00
Interest Income Subj. to Income Tax
Less: 30% Income Tax
Interest Income Net of Income Tax
Add: Tax Exempt Interest Income
P
100,000.00
-1.15%
10.00%
P
NET INTEREST INCOME
P
88,500.00
8.85%
P
COMPARISON:
Tax Payment for account with No HGC Gty.
Tax Payment for account with HGC Gty.
TAX SAVINGS
Improvement(Decline) in Net Income
P
P
100,000.00
100,000.00
-
No HGC Guaranty
10.00%
10.00%
0.00%
P
P
100,000.00
100,000.00
10.00%
10.00%
0.00% (a) P
1.15%
1.15%
5,000.00
5,000.00
0.50%
0.00%
0.50%
95,000.00
28,500.00
66,500.00
-
9.50%
2.85%
6.65%
-1.15%
P
(c)
66,500.00
With HGC Guaranty vs. No HGC Guaranty
P
33,500.00
P
P
33,500.00
P
22,000.00
6.65%
3.35%
0.00%
3.35%
33.08% 10
Tax Exemption and Maximum LCR
Housing Package
Tax Exemption
and
Guaranteed
Interest
Maximum
LCR
(BSP Cir. 343)
Socialized (Up to P400,000)
Low Cost Housing (Above
P400,000 to P3M)
Medium Cost (Above P3M to P4M)
11%
10%
90%
90%
9.5%
8.5%
80%
70%
Open (Above P4M)
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Benefits of the HGC Guaranty
Easing of Administrative Burden
(in the event of call on the guaranty)
Collection, Foreclosure & TCT
Transfer are shifted to HGC
12
Benefits of the HGC Guaranty
Sovereign Guaranty
Confers classification and
other advantages
13
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 housingrelated loan transactions, such as:
– Microfinance Housing Loans
– Salary Loans, Multi-purpose loans to be used for housing
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Retail Loans Eligible for Guaranty
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
15
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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Features of the HGC Debenture Bond
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
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Annual Guaranty Fee
(Retail Housing Loan)
Types of Housing
Package
*Premium Rate –
Standard
(% to outstanding
principal
obligation)
*Premium Rate –
Bond
(% to outstanding
principal
obligation)
*Premium Rate –
Modified Cash
(% to outstanding
principal
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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Annual Guaranty Fee
(Developmental Housing Loan)
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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GUARANTY FOR SMALL
LOANS FOR HOUSING
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Guaranty for Small Loans for Housing
Guaranty
Financing
Institution
Lends to individual borrowers
Borrowers for home
improvement and repairs
21
Benefits of the HGC Guaranty
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 HGCguaranteed loans
Tax incentive
 Interest income on housing loans up to
the extent of 11% is exempt from all
forms of taxation.
22
Benefits of the HGC Guaranty
Simulation of Tax Savings
(For Small Loans for Housing)
ASSUMPTIONS:
Housing Loan Portfolio
Interest Rate per annum (%of portfolio)
Tax free interest with HGC Guaranty
Premium Fee (%of portfolio)
Interest Income
Less : GRT (5%)
Taxable Income
Less : Income Tax (30%)
Premium Fee
Net Income
Savings/ Improvement in Income
10,000,000
10%
10%
2%
No HGC Guaranty
1,000,000
50,000
950,000
285,000
665,000
With HGC Guaranty
1,000,000
1,000,000
200,000
800,000
P135,000 per P10 million worth of loans
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Benefits of the HGC Guaranty
Sovereign Guaranty
 HGC guarantees carry the sovereign
guaranty
 FI can leverage for lower cost of
borrowings
Funding Benefit
Assignability of Guaranty
 Long-term funds may be made
available by some funders
 The guaranty may be assigned to
assignee of guaranteed loans
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TERMS AND CONDITIONS OF
GUARANTY
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Terms and Conditions of the Guaranty
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 BSPsupervised 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
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Terms and Conditions of the Guaranty (cont.)
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.
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Terms and Conditions of the Guaranty (cont.)
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.
28
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Terms and Conditions of the Guaranty (cont.)
Event of Default:
• Consecutive non-payment of loan amortization by the
borrower depending on the payment schedule as follows:
Mode of Payment
Weekly
Monthly
Default
4 weeks non-payment
2 months non-payment
Premium Structure:
• The guaranty premium is two percent (2%) per annum of the
outstanding loan balance.
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29
Terms and Conditions of the Guaranty (cont.)
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
31
Guaranty Line Application
1
Financial
Institution
Applies for guaranty line
Submits:
• 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
2
Evaluates application
3
Elevates to HGC Board for approval
4
Sends notice of approval/disapproval
5
Executes Contract of Guaranty
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Enrollment Procedure
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
Financial
Institution
Batch List
1. At least P 1.0 M or 10 accounts
2. Information about the borrower, the loan,
and collateral
Processes
Certificate of
Guaranty
Premium Payment
Issues Certificate of Guaranty
(signed by HGC President)
33
Post Audit of Guaranteed Loans
Financial
Institution
HGC validates sufficiency
and orderliness of loan
documentation with the FI
HGC inspects housing
unit of the borrower
34
Call Procedure
Option 2
Notice of call
Borrower defaults
30 calendar days
from date of default
(6 mos. Non-payment of
monthly amortization)
BORROWER
Pays Call
Financial
Institution
Evaluates Call
30 calendar days from
conveyance of original
loan documents
IF
VALID
30 calendar days
from receipt of
notice of call
1
Option
FORECLOSURE
Loan documents
35
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
36
Performance Indicators
Guaranty Capacity as of Dec. 2012
P 145.39B
Outstanding Guaranty as of Dec. 2012 P 82.40B
Net Income from Operations as of Dec. 2012
P 457.59M
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Top 10 Client- Banks
BPI FAMILY SAVINGS BANK
RCBC SAVINGS
PS BANK
METRO BANK
EASTWEST
PLANTERS BANK
UNIONBANK
STERLING BANK
MALAYAN
PHILIPPINE NATIONAL BANK
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Top 10 Client - Developers
AYALA LAND
CITYLAND GROUP
CENTURY PROPERTIES
PRO-FRIENDS
FILINVEST
SUNTRUST PROPERTIES
PUEBLO DE ORO
ROBINSONS LAND
NGG PROPERTIES
CITYSTATE PROPERTIES
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Visit us at:
Home Guaranty Corporation
335 Sen. Gil Puyat Avenue, Makati City
Tel. No. +63 2 8964116
www.hgc.gov.ph
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