Press Release
August 19, 2008

Bicam passes loan restructuring bill to benefit 300,000 families -Zubiri

Senator Juan Miguel F. Zubiri, chairman of the Senate Committee on Urban Planning, Housing and Resettlement, smoothed out contentious issues in the loan restructuring bill and in the end crafted a more beneficial bill awaited by 300,000 borrowers and 849 community associations.

"Through this bill we will prevent massive ejectment of delinquent borrowers and in parallel allow our government financial institutions with housing loan portfolio to collect over a longer period of time. We help families hold on to their homes, such as Pag-ibig borrowers of which 90 percent housing borrowers are delinquent," Zubiri said.

"The most benefit will be felt by the poorer sectors. The average amortizations of informal settlers or who have been resettled or relocated will be reduced radically. The Pag-ibig borrower who pays P3,700 now and has become delinquent and qualifies in this bill will be paying only around P2,400. that difference will be a very big help."

An important feature is that this authorizes all government housing agencies to run their own loan restructuring program even after the life of this law, which is 18 months, runs out. Likewise, the National Housing Authority, Socialized Housing Finance Corporation and National home Mortgage finance Corporation will now be empowered to restructure delinquent loans which had been restricted by the Commission on Audit.

In the US case, lenders were allowed by government to tempt borrowers to borrow more. Even if the borrowers were already neck-deep in debt. First, they offered deceptively low rates and low amortizations in the first few months. Later, they sprung up the hidden cost of high interest rates in succeeding amortizations. What followed is historical foreclosures with many being ejected out of their homes. Some lenders also lost their shirts in the process.

"We managed to secure the commitment of the government financial institutions (GFIs) to relax the rules. At the same time, we ensured that this will not unduly set back the actuarial security of the funds especially Pag-ibig which depends on member-contributions and originally borrowerd loanable funds at a higher interest rate," Zubiri said.

"This legislation will help borrowers more than the GFIs. We're happy that the GFIs promise not to close the doors on borrowers who are merely having a hard time paying up. They will initiate collection of delinquent payments after the issues are clarified. We want GFIs to collect as well as assure that our housing problems will not be compounded with housing ejections."

Zubiri acknowledged that various GFIs already implement their respective restructuring programs, but "bringing them together as a group had forced them to compare their programs with others. Many relented to the more accommodating terms to help their borrowers."

The bill's coverage are delinquent socialized and low-cost housing accounts with the Government Service Insurance System, Social Security System, Home Development Mutual Fund, National Home Mortgage Finance Corporation, Social Housing Finance Corporation, Home Guaranty corporation and housing agency National Housing Authority. Qualified accounts are those where the original principal does not exceed P2.5 Million.

"We define delinquent accounts as those with 3 months unpaid amortizations. We chose to be liberal and went beyond business-as-usual."

Highlights are, as follows:

Starting the coverage of delinquent accounts to those that have three months of unpaid monthly amortizations, down from six months;

Extending the maximum term of the restructured loan up to the difference between the borrower's age at the time of application and 70 years, up from 65 years.

Benefits:

Condonation of all penalties and surcharges;

Condonation of a reasonable portion of the interest of the housing loan, as determined by respective GFIs and agencies, of which

All accrued interests shall be treated as non-interest bearing principal to be equally repaid,

Extension of loan restructuring payment period in order to lower the monthly amortization;

Incentives e.g. reasonable discount on interest for prompt payment of monthly amortization on restructured loan.

Disqualified accounts are:

- Account without a single payment since take out;

- Account wherein the housing unit is abandoned for one year: and

- Foreclosed account, the title of which had already been consolidated/transferred in the name of the GFI and housing agency.

News Latest News Feed