Amended Implementing Guidelines for the Pag-IBIG Developmental Housing Loan Program for Local Government Units

 

April 20, 2009

HDMF CIRCULAR NO. 254-09

 

A. RATIONALE

Under Section 8 of RA 7279, or the Urban Development and Housing Act, LGUs were directed to identify lands for socialized housing and resettlement areas in their jurisdiction. This provision is in conjunction with Section 17 of RA 7160, otherwise known as the Local Government Code of 1991, where local government units were mandated to provide for basic services and facilities to their constituencies like low-cost housing and other mass dwellings. Ironically, however, interventions in most cases are provided by national government agencies and the private sector.

LGUs would contend that such endeavors are oftentimes hampered by limited technical capabilities and project funding. Hence, many LGUs look for financial institutions such as the Pag-IBIG Fund to provide the necessary assistance for their projects.

B. OBJECTIVES

The Pag-IBIG Developmental Housing Loan Program for LGUs is geared towards sustaining the capabilities of LGUs to fast-track the development and implementation of housing projects in their respective localities, and to make housing accessible and affordable for its employees and constituents.

Specifically, the Program aims to:

1. enable LGUs to undertake housing development and construction;

2. engage the participation and involvement of LGUs in housing provision;

3. ensure security of tenure for housing among LGU employees and constituents who are also Pag-IBIG Fund members;

4. make home ownership within reach of the greatest number of families in urban and rural areas;

C. FINANCING SCHEME

Financial assistance for site development and house construction shall be in the form of a direct loan to the LGU.

The LGU shall provide counterpart assistance or equity for the project through any, but not limited to the following:

1. Provision of land to serve as project site;

2. Provision of subsidy to project beneficiaries;

3. In-house financing;

4. Free use of LGU's available facilities / resources during site development and construction period. HIaTDS

D. TERMS AND CONDITIONS

1. Loan Purpose

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

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

1.2 Construction of units eligible for mortgage financing under the existing guidelines of the Pag-IBIG housing loan program.

No part of the loan, however, shall be used to purchase or redeem land.

2. Loan Amount

The amount to be granted shall be based on the following, whichever is lower:

2.1 Actual project need as supported by cash flow projections, not to exceed the following:

2.1.1 For horizontal housing construction/development, forty percent (40%) of prudent production cost or TWENTY MILLION PESOS (P20,000,000) per phase, whichever is lower;

2.1.2 For vertical housing construction / development, sixty percent (60%) of prudent production cost or FORTY MILLION PESOS (P40,000,000), whichever is lower.

2.2 The borrowing capacity certified by the Bureau of Local Government Finance (BLGF). The branch/group concerned shall verify with the BLGF if the LGU has pending requests for a new certificate of debt service ceiling concerning loan applications from other entities, as well as the amount being applied for. aAHDIc

Prudent production cost shall mean the project proponent's relevant cost 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 development costs (contractor's overhead, taxes, plans and subdivision, permits, licenses and contingencies), but not including the project proponent's profit or other charges, except for estimated depreciated cost of any existing utilities.

The value of each residential unit that would be constructed under the LGU's housing project, whether said unit is for sale or lease, shall have a selling price (in case of sale) or appraised value (in case of rent/lease) of up to Five Hundred Thousand Pesos (P500,000.00).

3. Interest Rate

The loan shall bear an interest rate of nine percent (9%) per annum.

4. Loan Releases

The Fund shall release the entire amount once the LGU has already infused equity equivalent to twenty percent (20%) land development and house construction cost.

5. Loan Term

5.1 The loan shall be repaid at a maximum loan term of thirty (30) years.

5.2 The LGU shall be allowed to shorten or lengthen the loan term only once during the life of the loan.

6. Loan Payment

6.1 The LGU shall pay in equal quarterly amortizations in such amounts as may fully cover the principal, interest and insurance premiums. It shall be paid from the LGU's annual budgetary appropriations for debt servicing, which the LGU has apportioned in accordance with Section 324 of RA 7160. For this purpose, the LGU shall annually submit to the Fund a certificate on the appropriation.

Payments shall be made through auto-debit arrangement on the LGU's regular savings account with its depository bank. The first payment shall be due at the end of the first quarter from the date of initial loan release. SDITAC

6.2 The LGU shall be allowed to make accelerated payments on its loan through the assignment of takeout proceeds, sales and/or rental income generated from the project to be financed. The assigned amount shall be applied automatically to the principal, unless otherwise expressly requested by the LGU.

The treatment of excess payment the LGU prefers must be noted on/properly disclosed in the Pag-IBIG Fund Receipt (PFR).

6.2.1 Takeout Proceeds — The LGU shall assign to the Fund the total proceeds of accounts that have been financed through the prevailing Pag-IBIG housing loan program, thereby authorizing the Fund to apply the said amount to the LGU's outstanding principal.

6.2.2 Sales/Rental Income — The LGU shall assign to the Fund the income from sales and/or rentals from the project to be financed, thereby authorizing the Fund to apply the said amount to the LGU's outstanding principal.

 The assignment of sales and/or rental proceeds, however, does not relinquish the LGU's obligation to collect the proceeds from buyers/renters/lessees and to remit the same to Pag-IBIG Fund.

7. Security

7.1 The loan shall be secured by the assignment of the LGU's IRA and other income for the duration of the term of the loan. For this purpose, the LGU shall execute a Deed of Assignment of IRA and Other Income in favor of the Fund. Said assignment shall be irrevocable.

In the event the LGU is not able to pay a quarterly amortization, the Fund shall call on the IRA to settle the required amortization/s from the time such payment/s fall due until the end of term of the loan.

7.2 The LGU agrees not to sell, lease or encumber the property/ies used in the housing project without the prior written consent of the Fund. For this purpose, the LGU shall execute a Deed of Negative Pledge with an undertaking that in the event that the subject property/ies is/are sold/leased/encumbered, the proceeds thereof shall be assigned to Pag-IBIG Fund as payment of the LGU's outstanding loan. In connection thereto, the LGU shall submit the OCTs/TCTs of the subject properties to the Fund.

8. Project Criteria

8.1 Technical

8.1.1 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. With legitimate title/s, free from liens and encumbrances. The subdivided / individual titles shall be eligible for conversion to end-user financing;

b. Site suitability;

c. Accessibility;

d. Availability of electrical / water facilities;

e. Must be within a distance of ten (10) kilometer radius from urban infrastructures such as schools, commercial centers, churches, etc.

8.1.2 Project Development

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

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

8.1.3 Balanced Housing

 The project must comply with the twenty percent (20%) balanced housing requirement in accordance with Section 18 of RA 7279.

8.2 Market

 The prospective buyers must preferably be Pag-IBIG members and must qualify to avail of a loan under the prevailing Pag-IBIG Housing Loan Guidelines.

8.3 Financial Viability

8.3.1 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%.

8.3.2 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.

8.3.3 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.

9. Warranties

The LGU shall provide the following warranties:

9.1 Documentation — The LGU warrants that all documents submitted to Pag-IBIG Fund relative to the program are valid, binding and enforceable in all other respects that they purport to be;

9.2 Project Development — The LGU warrants that the project shall be developed and completed in accordance with the developmental plans approved by the government agencies and other regulatory bodies concerned;

9.3 House Construction — The LGU warrants that the residential units have been constructed in accordance with the plans and specifications approved by the concerned regulatory agencies, as well as with the local ordinances, and that there are no hidden defects whatsoever in the construction of the said units;

9.4 Misrepresentation — The LGU warrants that any person or agent employed by the LGU, or allowed to transact or do business in its behalf, has not committed any act of misrepresentation;

9.5 Compliance with Laws, Rules and Regulations — The developer warrants that all pertinent laws, rules and regulations (such as but not limited to RA No. 7160 or the Local Government Code of 1991, RA No. 7279 or the Urban Development and Housing Act, and RA No. 9184 or the Government Procurement Reform Act) have been complied with. caIETS

9.6 Delivery of Accounts and Occupancy of Units — Accounts delivered by the LGU to Pag-IBIG Fund shall be free from lien and encumbrances. The LGU shall turn over the properties to the member-buyers upon release of the takeout proceeds, and the member-buyers can occupy these properties immediately.

E. OTHER PROVISIONS

1. Documentation

In the implementation of this program, the following documents shall be executed:

1.1 Resolution passed by the Sangguniang Panlalawigan / Panlungsod approving, confirming, and ratifying the following:

• Authorization for the Local Chief Executive to secure loans from HDMF and to sign all documents pertaining to the loan;

• All previous representations and warranties made by the local chief executive;

• All the terms and conditions of the loan;

• All documents executed and signed by the Local Chief Executive in connection with the loan;

• Directive for the LGU's Treasurer and Accountant to enter the loan in the LGU's books;

• Appropriation for debt servicing in LGU's annual budget;

• Re-alignment of budget for debt servicing, when no appropriation has been made, subject to the approval of the Sangguniang Panlalawigan;

• Authorization for the Auto-Debit of the quarterly amortization from the LGU's regular savings account with its depository bank until full payment of the loan.

1.2 Deed of Assignment of IRA and other Income/Revenues

1.3 Authority to Debit from the LGU's regular savings account with its depository bank

2. Project Appraisal

Appraisal shall be conducted 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.

3. Project Timetable

The construction of the project must commence within ninety (90) days from the receipt of the Notice of Approval (NOA) and must have units ready for occupancy within a period of twelve months thereof. Moreover, the project must be fully completed within a maximum period of three (3) years.

Failure to comply within the specified time shall constitute default and shall be grounds for the cancellation of the loan facility.

4. Loan Processing Fee

A loan processing fee equivalent to P100 per project beneficiary or P10,000, whichever is higher, shall be charged to the LGU, to be paid as follows:

• P7,000 upon filing of application (non-refundable); and

• Balance upon loan approval.

5. Penalties

The LGU 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. Default

The LGU shall be considered in default if it fails to pay one (1) quarterly amortization (principal and/or interest) and other obligations on the loan. Likewise, the LGU shall be considered in default for failure to complete land development and house constructions within the specified period;

At point of default, the outstanding loan, together with accrued interest, penalties, fees and other charges, shall become immediately due and demandable.

F. APPROVING AUTHORITY

Applications under the program shall be evaluated by the respective group credit committee and shall be submitted to the Senior Management Committee and the HDMF Board of Trustees for approval.

G. AMENDMENTS

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

These guidelines shall take effect immediately.

Makati City, April 20, 2009.

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