TWG on Funding Sources

July 16, 2012

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The following is a summary of CREBA’s comments submitted to Ms. Ophelia L. Dela Cerna, Senior Vice-President for Housing Operations of the Home Development Mutual Fund (HDMF) as a result of the TWG consultation held last April 25, 2012:

  1. On Item 2.2.4 under Loan Purpose for retail housing
CREBA clarified if by the term “completely developed”, the developer would be required to submit a Certificate of Completion (CoC) issued by the HLURB. The Chamber recommended said term to mean simply the delivery of required facilities pursuant to P.D. 957 and B.P. 220.

  1. Item 3.1.3 on Borrower’s Eligibility
a.    To facilitate and make more affordable for borrowers of economic and low-cost housing packages to avail of HDMF loans, CREBA proposed that they be required a lesser number of months of membership contribution or payment made in lump sum, compared to borrowers of higher amounts. Hence, borrowers shall be classified as follows:

            For loans Php 3,000,000 and below   -        12 months
For loans over Php 3,000,000            -        24 months

b.  For the guidance of all stakeholders, including employees and employers, CREBA recommended that the guidelines likewise explicitly indicate that in case a member decides to augment his monthly contributions in order to qualify for higher loan packages, the employer is not obligated to match the member’s contribution by 50%.

Hence, an employer can continue to comply with the minimum employer’s contribution of Php100 while the rest shall be borne by the borrowing member.

  1. Item 4.1.2: Loan Amount vis-√†-vis Borrower’s Gross Monthly Income
CREBA supported the substitution of capacity to pay as determinant of loan entitlement rather than the member’s or family’s net disposable income previously used. However, we propose for the adjustment of loan entitlement ceilings as follows:

Php 1,250,000 and below    - monthly repayment not to exceed 35% of gross income
Php 3,000,000 and above    - monthly repayment not to exceed 30% of gross income

For consistency, we propose the same qualifications for the availment of additional loans under Item 14.4.

  1. Item 4.2.1 on Loan-to-Appraisal Value Ratio
As an added incentive for borrowers of lower loan packages, CREBA proposed that Loan-to-Appraisal Value Ratio be raised as follows:
For loans up to Php 1,250,000                        -        95%
For loans over Php Php 1.25M up to Php 3M -        90%
For loans over Php 3M                                   -        85%

  1. Item 5 on Interest Rates
To CREBA’s mind, HDMF housing loans are not akin to bank loans in that interest on bank loans is driven by market forces, while the former is not. CREBA therefore strongly suggested that the previous mechanism for graduated interest rates be maintained, with a revision that the rates be fixed for 30-years, as follows:

Socialized Housing (up to Php400,000)                           -        4%
Economic Housing (over Php400,000 up to Php1.25M)  -        6%
Low-Cost Housing (over Php1.25M up to Php3M)         -        7.5%
Open Market (over Php3M up to Php6M)                       -        9.5%

  1. Item 8.1.1 on Collateral for Developers’ Accounts
CREBA proposed that the mechanism of having a Third Party Real Estate Mortgage to secure housing loans covered by properties bought from developers be clearly defined.

  1. On Item 8.1.3 on the validation by the Fund of appraisal
CREBA recommended that the services of licensed Real Estate Appraisers be tapped in view of the professionalization of the real estate service practice by virtue of the 2009 Real Estate Service Act (RESA).

  1. Item 9 on Insurance
    1. On the requirement to submit a Health Statement Form, CREBA requested for the clarification on whether the coverage under 9.5.2 for loans between Php2M and Php6M is relative with the preceding condition for borrowers over 60 years old, or if the said requirement is applicable for borrowers of the amount cited regardless of their age at the time the loan was made.
    1. On 9.6, the Fund may consider other forms of insurance already prevalent, timely and available, such as flood insurance on areas designated as flood-prone, and the likes.

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Please click links below to download files:

Draft Amended PagIBIG Guidelines on End-user Financing

Capacity to Pay

Comparative Matrix