Home > Benefits and Programs > Wholesale Lending > Purchase of Housing Receivables

OBJECTIVE

To provide developers with a liquidity mechanism through the purchase by HDMF of their receivables from housing loans to enable them to continue developing housing projects, and;

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 (DTI), and licensed with the Housing and Land Use Regulatory Board (HLURB).
2. Must have at least 3 years experience in subdivision housing development.
3. In the case of new corporations or partnerships, the principal officers must have at least 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 receivables.

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 HDMF during the applicable term of the receivables with respect to payment rights.

7. Must be an active Pag-IBIG employer-member.

A proponent-developer who fails to meet the aforementioned criteria on profitability and debt to equity ratio may be considered subject to the terms and conditions for purchase and availment.

ELIGIBILITY CRITERIA FOR RECEIVABLES FOR PURCHASE

1. The receivables for purchase shall consist of installment/amortization payments for residential lots, house and lot packages, townhouse units, or condominium units covered by CTS or 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 20% principal payment inclusive of down payment or seasoning period of at least 2 years.

Account seasoning period shall mean a period within which the borrowers have shown record of regular monthly installment/amortization payments.

2. The accounts to be purchase must be in current status (without arrearages) as of end of the month preceding the date of receipt of proposal and the date of release of proceeds.
3. The individual TCTs/CCT must be free from any lien and/or encumbrance except the real estate mortgage constituted in favor of the developer/seller.

AMOUNT OF FINANCING

1. The maximum financing line allowed per qualified developer shall be up to P100.0 Million.
2. The financing line shall be made available for a maximum term of one (1) year from the date of execution of the MOA between HDMF and the developer, renewable for another year thereafter.
3. The maximum amount of financing (purchase price) for each receivable account for purchase shall be P2.0 Million, regardless of the amount of selling/contract price.
4. The purchase price shall not exceed 70% of the appraised value of subject property and 100% of the account principal balance.

TERMS AND CONDITIONS FOR PURCHASE AND AVAILMENT

1. Receivables for Purchase:

The amount of receivables for purchase, consisting of principal and interest amounts payable, shall depend on the average remaining term of the aggregate portfolio accounts per availment, as follows:

Average Remaining Term	Receivables for a Period of:*
Below 3 years	2 years or actual remaining receivables
Not exceeding 5 years	3 years
Not exceeding 6 years	4 years
Not exceeding 8 years	5 years
Over 8 years	7 years

* reckoned from date of purchase of receivables

The proponent-developer shall retain the receivables on each of the Accounts outstanding as of the termination of the stipulated period up to the date of maturity or full payment of each Account, whichever is earlier.

2. The Purchase Price shall be the aggregate value of the receivables for purchase, consisting of principal and interest amounts payable for the period covered by the purchase, discounted to the present value using the applicable discount rate provided in item #3.
3. Discount Rate – The discount rate to be charged by HDMF shall be the available prevailing market rate of the applicable Treasury Notes at point of release of proceeds, plus 3% or 14%, whichever is higher.

Receivables for Purchase	Applicable Discount Rate
2 years and below	2 year T Notes + 3%
3 years	2 year T Notes + 3%
4 years	3 year T Notes + 3%
5 years	4 year T Notes + 3%
7 years	5 year T Notes + 3%

If the developer opts to sell receivables for a shorter period only, regardless of the average remaining term of the portfolio accounts, the applicable discount rate shall apply.

4. The purchase of receivables shall be on a "with recourse basis" to the developers.

4.1 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 with an account acceptable to HDMF. In case of failure to substitute the accounts, the developer shall buy-back the accounts.

4.2 The developer shall provide a cash flow guarantee that ensures full remittance of the monthly principal and interest due HDMF regardless of actual payments made by the buyers.

4.3 The developer shall substitute any account that may have material defects in the loan documentation as may be found by HDMF with an account acceptable to HDMF.

5. The developer shall act as Collecting Agent for HDMF for the applicable term of the receivables. The Collection Agency Agreement shall include ledgering, billing and collection, insurance servicing and other related loan administration activities. The corresponding account collection and administration costs shall be for the account of the developer.

5.1 The developer shall pay a penalty for late remittance of principal and interest due HDMF equivalent to 1/20 of 1% of the amount due per day of delay.

6. 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 receivables, the developer shall be required to:

6.1 Maintain a Reserve Fund with a Trustee Bank acceptable to HDMF, equivalent to 3 months of average amount of scheduled remittance to HDMF to cover any temporary arrearages on the accounts; and,

6.2 Maintain a Reserve Fund with the same Trustee Bank, equivalent to 2% of aggregate receivables purchased to cover any obligation to substitute or buy-back defaulting accounts.

The assets of both Reserve Funds may be in the form of Pag-IBIG Housing Bonds.

To the extent that amounts are withdrawn from the Reserve Funds to cover shortfall in the amount of remittance to HDMF or failure to buy-back 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 receivables or full payment of the receivable amounts due HDMF, whichever comes first.

7. A MOA between HDMF and the developer shall be executed to cover the purchase of receivables.
8. The developer shall execute a Deed of Assignment in favor of HDMF for each individual REM/CTS covered by the receivable purchase, which shall be registered with the Registry of Deeds and duly annotated on the corresponding TCT / CCT.
9. The underlying documents such as TCTs, CCTs, Tax Declaration, REM/ CTS, and updated Real Property tax payment and insurance documents shall be delivered and deposited with HDMF.
10. The developer shall comply with the technical requirements of HDMF on the projects.
11. The proceeds from the sale of receivables to HDMF shall be used by the developer exclusively for housing projects or refinance housing-related obligations.
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 HDMF.

12.2 Payment of the annual property taxes shall be the obligation/ responsibility of the individual buyers of the property covered by REM or CTS.

12.3 Defects of Construction and Development – 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 HDMF free from any liability arising from said defects.

12.4 Refund Provision under Maceda Law – 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 HDMF of substantially equivalent value.

12.5 If a developer buys back an account due to full payment by the buyer/ borrower or as a result of arrearages for more than 3 months, the buy-back value shall be equivalent to the aggregate value of the remaining unpaid receivables due HDMF, consisting of principal and interest amounts payable, discounted to the present value using the discount rate applied at the time of purchase by HDMF, plus accrued interest charges computed from the last amortization payment due date to the actual date of buy-back. A pre-payment penalty of 1% shall be imposed the developer if the reason for buy-back is other than full payment or due to arrearages on the account.

12.6 Upon full payment of the receivable amounts due HDMF, substitution and/or buy-back of accounts assigned to HDMF, the HDMF shall execute the necessary deeds/documents in favor of the developer for the transfer of the accounts back to the developer. All expenses related to the transfer and delivery of such accounts shall be for the account of the developer.

12.7 Expenses – The taxes and other expenses such as appraisal fee necessary and incidental to implement the purchase of receivables shall be for the account of the developer.

12.8 The developer shall encourage the housing loan beneficiaries to enroll with HDMF.

12.9 Commitment Fee – The developer shall pay a commitment fee equivalent to 1/4 of 1% of the amount of financing line approved by HDMF. If availments are made within the term of the facility, the amount of fee paid by the developer shall be refunded. Otherwise, it shall be forfeited.

12.10 Processing Fee – The developer shall pay a non-refundable processing fee equivalent to 0.1% of total purchase price of receivables.