Amended Guidelines Implementing HDMF Direct Developmental Loan Program ( HDMF Circular No. 253-09 )

 

April 20, 2009

HDMF CIRCULAR NO. 253-09

 

Pursuant to the approval of the HDMF Board of Trustees during the 256th Board Meeting held last 20 April 2009, the Amended Guidelines Implementing HDMF Direct Developmental Loan Program, are hereby issued:

A. OBJECTIVE

The HDMF Direct Developmental Loan Program aims to provide additional housing inventories, by way of developmental financing at easier terms and lower rates to developers or proponents of housing projects.

B. LOAN FEATURES

1. Loan Purpose

The proceeds of developmental loan may be used for any or all of the following purposes:

1.1 development of residential subdivision including medium/high rise residential buildings, provided, seventy (70%) percent of the total lots being developed must have a housing component.

1.2 construction of units eligible for mortgage financing under the Consolidated Guidelines of the Pag-IBIG Housing Loan Program.

No part of the loan, however, shall be used to purchase a parcel of land.

2. Loan Amount

The amount of loan to be granted shall be based on actual project need as supported by cash flow projections, and shall not exceed 40% of prudent production cost* or One Hundred Million Pesos (P100,000,000.00) per phase, whichever is lower. However, in case of medium/high rise residential buildings, the maximum loan amount shall be 60% of land development and building construction cost or Two Hundred Million Pesos (P200,000,000.00), whichever is lower.

* Prudent production cost shall mean, the relevant cost of the developer of the proposed physical improvements, using as basis the standards of HLURB for land development and construction. The improvements shall include buildings and utilities within the boundaries of the subject property, cost of land and construction cost contractor's overhead, taxes, plans and supervision, permits, licenses and contingencies) but not including developer's profit or other charges, except for estimated depreciated cost of any existing utilities.

3. Interest Rate

At the option of the borrower, the loan shall bear an interest rate defined as the prevailing market rate (on Friday preceding the date of release of proceeds) of either of the following: cDCaTS

3.1 3-year Treasury Notes plus three percent (3%)

3.2 91-day Treasury Bills plus five percent (5%), subject to repricing every six (6) months

3.3 In case of an extension of loan term, a 5-year T-Notes plus 3% shall be charged on the outstanding balance. In no case, however, shall the rate be lower than the original interest rate.

3.4 The PDST-F yield rate maybe used as an alternative basis to T-Notes in determining interest rate.

In all cases, the resulting interest rate shall not be lower than 8.5%.

4. Loan Releases

Loan releases shall be based on project need, subject to the following conditions:

4.1 Loan shall be released in tranches. The initial loan release shall not exceed 50% of the loanable value.

4.2 Prior to loan release, the borrower must comply with the following conditions:

4.2.1 New developers shall be required to infuse one hundred percent (100%) equity on the project.

4.2.2 In case of joint venture wherein land was contributed by one of the JV partners other than the developer, the developer-partner must infuse at least 10% of the construction costs regardless of whether the value of the land is enough to cover the equity of the JV. This is to ascertain the commitment of the developer-partner to the project.

4.2.3 Developers with established track record of at least three (3) years in housing development shall be required to infuse the following: aDHScI

a. For horizontal development, the developers must infuse at least 20% of prudent production cost as equity. Raw land value shall be considered as part of the equity.

b. For medium/high rise buildings, HDMF shall only release funds once the proponent had already infused equity equivalent to forty percent (40%) land development and house construction cost, and thirty percent (30%) of the total number of saleable units had confirmed reservation

4.3 Succeeding loan releases shall be made only after 90% of the previous drawdown had been infused in the project, i.e., at least 70% are already in place, while 20% are in the inventory of construction materials.

4.4 The outstanding loan obligation at any given time shall not exceed 70% of the collateral value.

5. Loan Term

5.1 The term of the loan shall not exceed three (3) years. However, HDMF may allow an extension of loan term subject to the approval of the following levels of authority, to wit:

Extended Term	Approving Authority
One year or less	Senior Management Committee
More than one year	Board of Trustees

 

5.2 Subsequent requests for extension where the cumulative extension exceeds one year shall be allowed upon approval of the Board of Trustees.

6. Collateral

6.1 The loan shall be secured by a first real estate mortgage on the real estate property subject of development, which should be free from liens and encumbrances.

6.2 HDMF shall accept additional collateral consisting of undeveloped, partially developed or developed residential lands, either adjacent or contiguous to the project site or located in other projects, provided that the loan-to-value ratio for the additional collateral shall be limited to 50% of the appraised value.

6.3 Contract receivables may also be accepted as additional collateral if these are guaranteed by HGC and subject to such terms and conditions as may be imposed by HGC.

6.4 HDMF shall allow partial releases of collateral provided that the Loan to Collateral Value after the release of collateral is maintained at 70%.

7. Loan Payment

The loan shall be paid as follows:

a. Interest — Interest on the loan shall be paid quarterly, with the first payment due at the end of the first quarter from the date of initial loan release.

b. Principal — Payment to principal shall be made quarterly with the first payment due on or before the end of the eighteenth (18th) month from the date of initial loan release.

c. Application of take-out proceeds — At least 20% of the mortgage take-out proceeds due the developer from HDMF shall be applied to the outstanding principal at any time the initial release of the developmental loan.

C. ACCREDITATION CRITERIA

1. FOR PROJECTS

1.1 Technical

1.1.1 Site/Location — the site must be approved for development into a housing project by the LGU and/or the Housing and Land Use Regulatory Board (HLURB), and shall meet the following criteria:

a. Site suitability

b. Accessibility

c. Availability of electrical/water facilities

d. Must be within a distance of five (5) km. radius from urban infrastructures such as schools, churches, commercial centers, etc.

1.1.2 Project Development

1.1.2.1  Project Design — The project design, that is, the type of land development and the type of housing units must conform with the standards of BP 220 and PD 957, whichever is applicable, and must address an identified market.

1.1.2.2  Necessary Support Facilities — The project may include provision for necessary support facilities in accordance with the standards of the HLURB.

1.1.3 Permits/Clearances

 The following permits/clearances muse have been secured prior to loan approval:

a. Development Permit

b. Environmental Clearance Certificate by DENR

c. DAR Conversion or Exemption

d. License to Sell *

1.1.4 Balanced Housing

 The project must comply with the 20% balanced housing requirement under Sec. 18 of RA 7279 otherwise known as the Urban Development Housing Act.

 An alternative compliance to the 20% balanced housing as provided under the Amended Rules and Regulations (IRR) of the said Act is through the purchase of Socialized Housing Bonds or Securities by the developer equivalent to 20% of the total project cost of the main subdivision. The developer may also enter into, a joint project or agreement with either the local government units or any of the housing agencies to develop 20% of the housing project cost or project area.

1.2 Marketing

1.2.1 House and Lot Package — The sales package of the housing units to be generated by the project should not exceed Two (2) Million Pesos (P2.0M)

1.2.2 Market

 The prospective buyers must preferably be Pag-IBIG members.

 To ensure market viability, 30% of the total prospective buyers must be confirmed.

1.3 Financial Viability

1.3.1 Profitability — Financial projections during the term of the loan should reflect the project's ability to adequately service and repay all obligations, and to generate a return on equity of at least 10% after provisions for income tax.

1.3.2 Debt-Service Ratio — Cash flow projections should register positive ending cash balances over the term of the loan, and a debt-service ratio of at least 1.25:1.

1.3.3 Interest Service Coverage Ratio — The net income before interest expense, income tax and other non-cash charges shall be at least equivalent to total interest expense x 1.2.

2. FOR DEVELOPERS

2.1 Track Record

 Proponents must have a proven record of success in undertaking development of real estate projects, which shall be based on assessment of past and current projects, to be conducted through feedback from homebuyers, suppliers and contractors, among others.

 Proponents who are new in the area of housing development shall be assessed on the basis of management's capability and tie-up with other professional groups i.e., project, construction, and marketing management groups which shall provide assistance in project implementation.

2.2 Credit Worthiness

 The proponent must have a good credit standing among banks, financial institutions and other government housing agencies.

2.3 Single Borrower's Limit

 HIDMF's exposure for institutional loans on projects of any one institution or entity shall not, at any time, exceed the single borrower's limit prescribed by the Fund.

D. OTHER PROVISIONS

1. Project Appraisal

Appraisal shall be conducted either by HDMF, private appraisal companies or shelter agencies acceptable to HDMF. In case of the latter, said appraisal should have been conducted not more than six (6) months prior to loan application.

2. Project Timetable

The construction of the project must commence within one (1) year from the receipt of the Notice of Approval (NOA) and must be fully completed within a maximum period of three (3) years. Failure to comply within the specified timeframe shall lead to the cancellation of the loan.

3. Loan Processing Fee

The developer shall pay a processing fee of 1/4 of 1% of the approved loan amount or fifty thousand pesos (P50,000.00), whichever is lower, inclusive of a non-refundable filing fee of ten thousand pesos (P10,000.00).

4. Service Fee

The developer shall pay a service fee equivalent to 0.1% of the amount for drawdown.

5. Penalties

Developer who fails to pay his loan obligations when due shall be charged a penalty of 1/20 of 1% of any unpaid amount for each day of delay.

6. Approving Authority

Applications for developmental financing shall be evaluated by the respective group credit committees and shall be submitted to the HDMF Board of Trustees for approval.

E. REPEALING CLAUSE

All previous Circulars or Memoranda in conflict or inconsistent with the provisions and/or purposes of this Circular are accordingly repealed amended or modified.

F. AMENDMENTS

The Senior Management Committee may amend, modify or revise certain provisions of these guidelines in furtherance of the objectives of the program, provided, that the amendments, revisions or modifications herein adopted are consistent with the mandate of the Fund under its charter and existing laws. HEacAS

This Circular shall take effect immediately.

Makati City, April 20, 2009.

 

(SGD.) JAIME A. FABIAÑAOfficer-In-Charge

 

 

* May be submitted within six (6) months upon receipt of Notice of Approval (NOA), otherwise, the loan application shall be deemed cancelled.