TRANSCRIPT OF INTERVIEW OF SEN. SERGE OSMEÑA III
after the PagIBIG-GA housing mess hearing.

Serge: Nakita po natin na nagkaroon ng maraming lapses in management operations, loopholes in policy, na siguro kung hindi ito nahuli earlier enough, magkakaroon tayo ng systematic threat sa housing, sa low-cost housing construction. Sa ngayon na nga, hinigpitan na ng Pag-IBIG ang lending window nila at nagmamakaawa ang ibang developer na hindi naman kasangkot dito sa isyu na ito. We are trying to solve the problem because one of the major issues here is, the safety of capital of the Pag-Ibig fund and the 8.5 million members in Pag-Ibig. Hindi puwedeng mangyari uli yung nangyari sa SSS and GSIS under the Unified Home Lending Program of 1991, 1992, 1993, 1994, 1995 na nagpahiram nga sila ng P47 billion sa mga developer pero ang binayaran po, ang payback was onyl 30%, ang 70% nawala. Then lately in America, affecting the rest of the world, is the subprime crisis in the last 2 to 3 years. And up to now, the rest of the world still has pneumonia because of the subprime crisis. We caught this early enough so we are not going to have a subprime crisis. But we know that it can happen unless we change certain policies and rules. And unless we do whatever we can to harmonize the construction industry, lalong-lalo na iyong what we call the low-cost housing or socialized housing sector, which is loans of up to P3 million, which means P400,000 to P700,000, or P700,000 to P1 million, P1 million to P1.3 million hanggang sa P3 million ang limit. Iyong above P3 million, the big boys can take of themselves and I don't worry about them. The ones taking care of that particular sub-sector are the commercial banks and the insurance companies, kasi malalaki na iyon, mayayaman na iyon at talagang may history of paying, of being good payers.

But this sub-sector is particularly dangerous kasi very risky nga eh. Walang downpayment. They don't have a credit history. These are tricycle drivers, farmers. Mabuti iyong mga OFW meron silang income, kayang-kaya nila. But the others categorized under a new group called the Other Working Groups, that's the riskiest in the industry. So it is easy to see this particular sub-sector suffer very high default rates. If you see that the default rate is higher than historical default rates, like 10%, new lenders will not come in. Masyadong risky iyan. Hindi ako babayaran. Or else, if they do that, they will lend money at 20%. Eh sino ang hihiram kung 20%? So, it's a situation that we can see a lot of potential in. Malaki ang potential lalong-lalo na kung papasok ang mga rural banks, pasok mga commercial banks and universal banks and insurance companies. And we are seeking also to expand the attraction of the sector so that other institutions will come into play and make more solid the development and the future of an industry that really needs to be supported.

....

Q & A

Q: In the particular case of the Globe Asiatique, is it correct to say that you have already narrowed down the bad loans?

Serge: No. Earlier sinabi nga ni Ms. Faria aabot nga ng P4B yan. So P4B out of 9.6B is a terrible number, that's 40%. That's over 40%.

Now, what is even more worrisome is the over 40% is not really a bad loan. It's a non-existent loan. It's fraudulent.

Q: Iyon yung P1.9B, yung fraudulent?

Serge: No. P1.9B is just attributable to what Delfin Lee admits. The others, he does not admit. Hindi daw ma-trace. So hindi ma trace, he does not admit either that they're non-existent borrowers so who can prove that? Hindi namin ma-prove kasi hindi naman makita. Sasabihin niya, you have not found him, so he might exist. Eh si Delfin Lee naman ang bumabayad.

Q: But he's not allowed to do that di ba so he can escape responsibility?

Serge: No more, he's already been suspended. Globe Asiatique has already been suspended by the Pag-Ibig so they're not releasing anymore funds to them.

Q: Iyong buyback, di ba it's one of the remedies for the developer to buyback?

Serge: Yes. Buyback means bayaran mo en toto yung pinahiram ko, PagIBIG, dun sa unit na iyon. That's the buyback.

Q: Pero hindi sila pinapayagan to do that?

Serge: No, Globe will not do that. They already said they will not buyback, they'll just find a new buyers.

Q: They're allowed replacement buyers?

Serge: Wala na. The buyers will have to go now directly to Pag-Ibig.

Q: Ano ang culpability ng PagIbig and HUDCC?

Serge: Culpability? There's nothing that points to that. What im saying is, if the system is too lax and in this case the system was too lax, then these are bound to happen. You're opening it up. Parang may restaurant at pinapabayaan mo iyong cash sa isang open drawer, that's inviting trouble. One of these days, one customer will come in and steal the money.

Q: So GA was favored?

Serge: Yes, it seemed so. It seemed that they were favored--no, that was another part. Aside from being lax in their policy, the new policy implementation, it seemed that it was Delfin Lee who was favored because the others were not even told of the relaxation either on borrowing limits, funding commitment limits or exemptions from certain good conditions in Circular 259.

Q: What does that tell you?

Serge: It tells me that there's some stupidity here or that there's some criminal minds remains to be proven by the NBI and the DoJ. But definitely you will never see this kind of arrangement in a sophisticated economy. They're so strict in the other countries, you will never even get to step one here.

Q: Bakit napaboran ang GA? Malakas ba siya?

Serge: You are trying to get...

Q: Is it clear sino yung agency, or official, who gave preferential treatment to GA?

Serge: Pag-Ibig. The other agencies, he was not dealing with the other agencies. He did not go to the other agencies. The Home Guaranty Corporation, that's broke. Congress will give it P500 million in order to fund the Community Housing Program, but that's broke. The National Housing Administration, we give them P2.5 billion to P3 billion budget a year but that's housing for the poorest of the poor. So iyong mga nakatira sa may Pasig River, ipapadala sila sa Palawan and they will build a national housing for them. I think they don't even have to pay anything.

Q: Satisfied ba kayo sa definition ng role ng HUDCC council?

Serge: They admitted they only met 2x in 10 yrs, which means there's no use for it.

Q: What can you do about it? Dapat na bang ma-abolish?

Serge: For a long time there's been a bill which never passed into law proposing that the HUDCC be converted into a line department, so it wld be the Department of Housing, or in the US, it's called the Department of Housing and Urban Development or HUD. So maybe we need to finally pass that into law.

Q: Bakit pinaboran Pagibig si Delfin Lee?

Serge: I don't think it starts with friendship. I think it starts with money.

Q: Please elaborate.

Serge: Well, if somebody is willing to pay enough under the table, you'll get the favorable deal di ba? That's the way the country works.

Q: Nalaman kanina may umaapela pa sa HUDCC, ang HUDCC ang nagbigay ng pabor?

Serge: No. HUDCC nga does not operate as HUDCC. I settled that kanina. They don't meet. They have no supervisory nor control over, no supervision or control over the individual agencies. It just so happens that under an Executive Order, I think this happened pa in Erap's or Ramos' time,... It was not well-thought out that the concept never worked. It was supposed to be a council of all the housing agencies but wala naman, iba-iba naman ang ginagawa nila. Kanya-kanya sila, one is into guarantee, 2nd one is into secondary mortgage financing etc. It's like mixing apples and oranges.

Q: May kumita ba sa Pag-Ibig?

Serge: Ah, sigurado ako. But I don't have the...

Q: The money in exchange for the favored treatment, it did not go up all the way to the HUDCC?

Serge: No I'm not saying that. I have no direct proof because nobody will talk. In this country every clams up, if you put them in open hearing, they will disappear.

Q: May info kayo na meron?

Serge: Ah yeah, but that's standard naman. Parang Customs, parang BIR, standard, SOP.

Q: Mga magkano?

Serge: Depende. It depends on the amount.

Q: Iyong sa GA lang?

Serge: That's very easy to...in the amount of funding, that you will get about P5 billion? You'd be happy to give out 2% to 3% of that, it would be easy. Let's see. P5 billion times 3%, that's P150 million. Divide between...

Q: Cleared na ba si Noli? Hindi na ba siya suspect?

Serge: Suspect in what? We're not looking for suspects. I already said in the beginning of the hearing that I'm looking to amend the law, and leave it to the NBI and the DOJ, who are also conducting an investigation, to determine the culpability on criminal and administrative matters. Pero, wala naman tayong order...para kaming Truth Commission dito eh. We cannot arrest anybody. We cannot force anybody.

Q: Hindi kayo magre-recommend na kasuhan sa Ombudsman?

Serge: Only if we find something in the process. But since we are not really looking for that. What we are looking at is the process. Mabuti nga sila Jojo Binay have investigators looking on it. I don't have investigators. I am just sitting down here, and asking for information and putting pieces together.

Q: Sabi mo kanina, they opened a big window and binulong lang nila kay Lee?

Serge: Yes. Before the limitation on funding commitment lines was P500 million per developer. Then all of a sudden, nagkaroon nitong P5 billion, so times 10, pagkatapos exempt pa from certain requirements. Sabi ko, if you did that, did you also tell the other developers na merong ganyan? That this amount is available if their development is upscale, if it has a swimming pool and a Disney Land. Hindi. EH bakit hindi mo sinabi?

Q: Wala bang kaso iyon kung hindi nila sinabi sa iba?

Serge: No. You cannot say that they put it up only for Delfin Lee. What we can prove is that they did not inform the others. Which is a violation really of good management practice. If I have a new service and I am the one providing that service and I am a public office which is owned by the Filipino people. It will be questionable if I tell only Lynda about it and she will enjoy it for the next 2 years, then all of a sudden magagalit kayong lahat sa akin. Aba, meron palang ganyan bakit hindi ninyo sinabi samin? That's not fair.

Q: Last hearing na?

Serge: It could be the last hearing but we will definitely have a number of Technical Working Group hearings. Mabusisi ito eh. I have to bring in a lot of consultants.

Q: I-abolish na lang ang HUDCC?

Serge: HUDCC as is, yes, walang silbi ang HUDCC eh. But HUDCC can be converted into a line department.

Q: Bakit hindi niyo tinanong si Delfin Lee?

Serge: Because I did not want to ask him questions na I know he would say, he cannot answer because he would incriminate himself. Sumulat na siya eh. I already know what I should not ask him kasi sumulat na siya eh. I told him, never mind, just turn up. He turned up naman.

Q: Anong na-accomplish sa pagdating niya dito? Eh hindi naman siya tinanong?

Serge: Three things were accomplished when he came here: 1. He directly listened to and I gave him the opportunity to rebut. Alam mo, mahirap sa hearing 'yung one-sided lang tapos alam mong merong magre-rebut, o may mag-o-object o mag-de-deny na wala dun. So when Pag-Ibig says something na hindi masyadong accurate, mag-open up si Delfin Lee. Di ba nangyari kanina dun sa P4 billion?

Q: Naniniwala ka sa Pag-Ibig?

Serge: It's somewhere in between. It's what I call a 'No man's land.' If I were an accountant, I will not automatically declare that as accounts receivable. But I will open a special account, contingent.

Q: The other 2?

Serge: I also wanted him to listen to what I had to say and how I conducted the hearing. I don't media saying, 'Ah this is a witchhunt in the committee of the Senate.' He saw that we were really fair in our questioning and we were really looking for answers.

And third, I wanted to watch his body movements while they answer questions. He was good ah. Talagang poker player iyan.

Q: The preferential treatment applied to Xevera and Hanjin?

Serge: The two major preferential treatments that we cared about this afternoon were on the Memorandum of Agreement on the 2 Xevera developments in Bacolor and Mabalacat. And the extension of the facility for domestic standby letters of credit to a horizontal low-cost housing development, yung sa Hanjin. Hanjin has 22,000 employees. Ang laki ano?

Q: Yung MOA sa Xevera?

Serge: Every developer is limited to P500 million, iyan ang commitment ng Pag-Ibig. In this particular case, Pag-Ibig was practically the only lender. No downpayment. They lend at 6% interest rates. They don't care too much about your qualifications, may Other Working Groups nga eh. Sino ba naman ang magpapahiram ng pera sa tricycle driver? Walang proof of income, no monthly checks.

Q: Nawala na iyang OWG?

Serge: Hindi pa. Pero you have to go now directly to Pag-Ibig. And apply there. Tapos may loan counselling pa sila.

Q: ??

Serge: They did only in Xevera. Let's say, they defaulted on P1.9 to P4 billion, depending on how you interpret it. But P4 billion is already more than 40% of what was released for Xevera projects. San ka nakakita nun? Your lender will collapse if you keep on lending that way. Like you're giving away 40% of your money.

But he had this big one in Hanjin. That was another P5 billion commitment. Then there's another one in Mindoro, in partnership with Rep. Rod Valencia. Another one starting up in Bacolod. So there's four already. And I don't know what else.

Q: You said palakasan. Pano yung sabi nyo malakas siya dahil nakuha nya to? Kanino?

SERGE: Oo unahan yan. Well he was the one who proposed such a project. Ah ganun ba?

Q: So si Mr. Fabiano po?

SERGE: Yah. If I go to you and say I will build five whore houses - it's beautiful for all the husbands there whose wives were abroad...

S: So kanino sya malakas sir?

SERGE: Di ko alam pa.

Q: If you are looking at policy, ano po ang tututukan nyo... sa anong department? Sinong mga tauhan?

SERGE: Ang dami niyan. Believe me it's so complicated we have to go from top to bottom. There are certain best practices that they keep on missing out on but it's hard to implement because they already said 'we're going to lend even if there is no income tax statement... even if it's tricycle driver'. I said all the five conditions... there were four C's of lending, now they're five. Four C's--credit history. Anong credit history? So walang credit history. Capital, then collateral, character. Character actually is number 1. Character, capital, collateral, conditions and the equivalent of cash flow. Anyway, they missed out on all of that. They don't have the capital to assure the bank. They don't have the income to assure the lender na 'kayang kaya kng bayaran yan'. Pagkatapos walang safety factor ang lender. Normally if you remove the moral hazard so that it would be painful for the buyer to abscond or repudiate his debt is nakataya rin sya. So in the United States, they'll ask you for a 30% downpayment. So pag hindi ito nabayaran kukunin rin yung 30% ko oh di ang sakit non. Di ba?

Q: Iibahin mo yung validation process ng Pag-Ibig at iibahin mo yung qualifications ng buyers?

SERGE: I don't know how much we can tighten up on eh. That's why I want to meet with those who already have experience like the small developers. I want the see the mentality of the buyers because eto binibigyan mo na ng credit. It's like going out now in the street... balut vendor and humiram ng P700,000.

Q: This is moral hazard uli?

SERGE: Moral hazard essentially is what happens when you don't have to take the blame, risk or penalty for doing something that is wrong. Here's one example: Bumili ka ng auto, walang insurance, oh di very careful ka mag drive kasi kung bungguin mo ikaw magbabayad. Then finally a friend told you there's a company they will insure you. 'How much?' '100%' Eh di daredevil ngayon mag drive yan kasi babayaran naman eh di naman niya auto eh. That's moral hazard. So usually what the insurance companies do is to limit the moral hazard. May deductible at may co insurance. Anong deductible? Pag ang damage $10,000 for example, oh di up to $10,000 sagot mo. At least only up to $5,000. It's a moral hazard for the guy in a position. The guy does not have to make too much of a hit.

Q: Moral hazard on the part of the lender?

SERGE: I think moral hazard applies to a particular situation. In this case it's the borrower. Supposing walang nakataya sa condo, I go in with no downpayment so parang umuupa lang ako di ba? I cannot afford it, so what? Take the place. Moral hazard yon because the guy doesn't care. He is not penalized, he's not at stake.

Q: What remedial legislation do we need?

SERGE: I'm going to look at the charter of Pag Ibig. I'm going to look at the charters of HGC, NHMFC. First is Pag Ibig because that's the problem, then all the other agencies, lending agencies and probably some of the banks. Because I would like to know also if it is not too risky for them to participate in the socialized housing program in this country. The banks would always participate in the housing program because it's a good market and they're getting paid back and there's not so much moral hazard because they're asking for a 30% downpayment, and then they check out a guy who has big income may capital nay an. Na remata yung bahay makukuha mo yung auto at yung isang bahay niya sa Baguio. So ganun. The risk of somebody taking your money without paying you is so low. That's why they do not want to go into low cost housing because walang capital, walang credit history.

Q: Will you overhaul the existing housing program?

SERGE: It's gonna take long. I hope I can finish the Pag Ibig in six months but I would like to coordinate with the House because they're also beginning to conduct hearings in the House.

Q: Six months? Baka sumabog na ulit yun?

SERGE: No Pag-Ibig already instituted reforms in their measures like temporarily sinasara yung Window 1 at umiiyak yung mga developers sa akin like 'Boss'. Hindi ito Window ito ni Lee. Window 1 is the normal window used by developers.

Q: Since when it has been closed yung window 1?

SERGE: It's not closed.