Multi-sectoral approach needed to address housing GAP—NHFMC
THE National Home Mortgage Finance Corporation (NHMFC), established in 1977, is tasked to increase the availability of affordable housing loans. The agency finances Filipino homebuyers in their acquisition of housing units through the development and operation of a secondary market for home mortgages.
As the major government home mortgage institution, NHMFC is also mandated to monitor the performance and implementation of the Community Mortgage Program (CMP) by its owned subsidiary, the Social Housing Finance Corporation (SHFC).
NHMFC’S securitization program is among the innovative programs being implemented by the agency as one of the key shelter agencies (KSAS) of the Department of Human Settlements and Urban Development (DHSUD).
In plain language, securitization means pooling together several types of debt instruments and selling them as bonds to investors to enhance liquidity.
Rundstedt B. Jalbuna, NHMFC’S Chief of Processing and Pricing Division, Securitization Group, guested during the recent Businessmirror Coffee Club webinar titled, “Solving the Philippine Housing Problem: An Update,” to discuss the agency’s functions and role in the country’s housing programs.
NHMFC’S engagement in securitization is aimed at fueling housing finance, which is among the three core functions of DHSUD—THE two others being regulation and production.
It is also in line with the corporation’s mandate, as the secondary mortgage institution (SMI), to accelerate the recycling of funds in the housing sector through the purchase of mortgages from originators or developers, banks, and other home lending institutions to serve as an asset pool for future securitization.
With this mission, NHMFC has evolved through the years in developing groundbreaking financial instruments that enhance liquidity in the housing sector.
NHMFC’S housing finance programs cater to the growing needs of the different segments of our society. There are currently four programs, according to Jalbuna, as detailed below.
HLRPP 1-Home Program
IN 2009, NHMFC launched the Housing Loan Receivables Purchase Program (HLRPP), which is no0w called the Purchase of Originated Economic/low-cost Housing Receivables Program (HLRPP 1-HOME Program). It is a liquidity facility for economic and low-cost housing loans which originators find more attractive due to a fixed interest rate of as low as 4.7 percent for a term of seven years and 6.2 percent for 30 years with no institutional membership requirement.
Added to this is the high loan-to-value ratio. Housing loan portfolios purchased under this program are pooled and subsequently used by NHMFC for bond issuances under the securitization framework. The securities from the bond issuance are eventually offered to the capital market as an alternative investment facility for retail and institutional investors.
SHELTER PROGRAM (HLRPP-2)
SEVEN years later, the NHMFC conceptualized and rolled out the HLRPP-2 Socialized Housing Loan Take-out of Receivables Program (HLRPP 2-Shelter Program). This is a take-out window for originators of socialized housing. It encourages developers to continuously produce quality socialized housing projects that NHMFC can eventually purchase for securitization.
The loanable amount is up to P750,000 starting at a three percent interest rate for the first five years, and 5.5 percent on the remaining years, for a maximum term of 30 years.
Like the framework of the HLRPP 1-HOME Program, housing receivables from the Shelter Program are pooled for purposes of securitization, and securities from bond issuance are offered to housing developers. The purchase of these securities by developers or originators is deemed as full compliance with the Balanced Housing Development Program, which is a requirement for the issuance of a license to sell.
With the introduction of this liquidity mechanism, NHMFC expanded the capital market for asset-backed securities.
With these programs in place, the NHMFC reiterated its commitment to stimulate the capital market by strengthening the operation of the secondary mortgage market to help realize the lifelong dream of some 81 percent of Filipino families to have a house of their own.
MABUHAY PROGRAM (HLRPP-3) FOR FILIPINO SENIOR CITIZENS
THE increasing aging population in the country prompted the NHMFC to establish a new scheme that will help support the financial needs of the underserved Filipino senior citizens. Considering that there are housing finance programs that do not explicitly cater to the elderly’s needs for additional funds, NHMFC officially launched in 2016 its version of the Reverse Mortgage Program dubbed as “Magandang Buhay sa Bahay (Mabuhay) Program” (HLRPP 3-Mabuhay).
This is a new product in the Philippine capital market designed to help provide additional funds for Filipino senior citizens’ snowballing cost of living.
The NHMFC’S Mabuhay Program is a type of mortgage where a homeowner senior citizen can borrow money against the value of his or her home, receiving funds in the form of a fixed monthly payment, a line of credit, or both. No monthly payment of the mortgage is required until the borrower dies, moves away permanently, or sells the home. It allows senior citizens to convert a portion of their home equity into cash to pay for their medical and health care expenses, cost of travels or vacations, financial obligations, or other existing loans. It can also provide additional capital for their planned or existing business and other ventures.
The Mabuhay Program, as a social welfare instrument for older persons who play vital support to the development of the capital market, is also NHMFC’S way of supporting Republic Act No. 9994 or the “Expanded Senior Citizens’ Act of 2010.”
BALAI BERDE PROGRAM (HLRPP-4)
THE BALAI Housing Program was conceptualized and formally launched on Oct. 18, 2017, with the key shelter agencies committing to engage in building sustainable Filipino communities.
Under this program, direct housing production, housing loans, mortgage programs, land registrations, and other various housing assistance shall be branded as “BALAI,” which stands for Building Adequate, Livable, Affordable, and Inclusive (BALAI) Filipino Communities.
As part of NHMFC’S commitment to contribute to the BALAI Housing Program, the Philippine Development Plan (PDP) 20172022, Ambisyon Natin 2040, and the Sustainable Development Goals (SDG), another liquidity facility for housing loan originators called the BALAI BERDE Program (HLRPP 4-BERDE) was created.
This is consistent with NHMFC’S objective to support communities, marginalized sectors, local government units and the private sector in building safe and secure communities. The goal was to help the housing sector in its efforts to deliver green housing projects. BERDE stands for Building Eligible Resilient Dwelling for Everyone.
BALAI BERDE is the first program of DHSUD that promotes sustainable housing development in safe and secure communities. It advocates quality of life in a society that contributes to the economy while preserving the environment. It promotes the reduction of community risks and vulnerabilities to disasters as well as encourages energy efficiency, the building of resilient housing units, water conservation, and the use of low carbon materials.
As a new financial instrument, this program was designed to increase capital allocations for green projects that contribute to environmental sustainability and resiliency. It offers a loan not exceeding 100 percent of appraised value or up to P3 million, with a term of five to 35 years and a fixed rate of three to six percent.
In his presentation, Jalbuna clarified that PAG-IBIG members may avail of the services of the NHMFC, and that the agency does not require membership for Filipino buyers.
He also encouraged more developers to go into green housing so that sustainability and resiliency in the country can be promoted and their receivables can be sold to the NHMFC to generate more funds. He also said that NHMFC’S plans include improving its guidelines for operation and for originators to sell their receivables, as well as expanding the BERDE program.
“Addressing the country’s housing gap needs a multi-sectoral approach. NHMFC |cannot solve it alone. Let us all help together to provide affordable housing for all,” he concluded.