Amended Implementing Guidelines on the Rehabilitation and Disposal of Pag-IBIG Fund ROPOA Through a MOA with Developers

February 22, 2010

HDMF CIRCULAR NO. 279-10

 

Pursuant to Item J of HDMF Circular No. 246, which allows the Senior Management Committee to amend, modify or revise certain provisions of the said guidelines, the Amended Implementing Guidelines on the Rehabilitation and Disposal of Pag-IBIG Fund Real and Other Properties Owned or Acquired (ROPOA) through a Memorandum of Agreement with Developers are hereby issued:

A. Objectives

1. To ensure recovery of Pag-IBIG Fund's investments through effective marketing and prompt disposal of Pag-IBIG Fund real and other properties owned or acquired (ROPOA).

2. To dispose acquired assets promptly at the highest value possible through a Memorandum of Agreement with an accredited developer.

B. Coverage

1. These guidelines shall involve the disposal of all the ROPOA acquired from the retail financing and wholesale lending operations of the Fund, regardless of whether they are occupied. Acquired assets shall include the following:

1.1 Those accounts with cancelled Contract to Sell (CTS)

1.2 Those that are consolidated in the name of Pag-IBIG Fund

1.3 Those that are yet to be consolidated in the name of Pag-IBIG Fund, such as properties that are foreclosed or are subject of Dacion en Pago.

2. Every agreement between the Fund and the developer shall entail the rehabilitation and sale of all the ROPOA within a subdivision, as well as any other property within it that will be acquired by the Fund after signing a Memorandum of Agreement (MOA). ECaAHS

 However, properties within the subdivision subject of the MOA that will be acquired by the Fund within the last six months prior to the expiration of the said agreement will not be included in the developer's inventory.

C. Eligibility Criteria for Developers

To qualify, the developer must meet the following criteria:

1. Developer with previous dealings with the Fund

1.1 For a developer transacting with the NCR Housing Operations Sector, the developer has at least taken out five hundred (500) accounts with Pag-IBIG Fund at the time of application. A developer transacting with a Regional Group must have at least taken out three hundred (300) accounts with Pag-IBIG Fund at the time of application.

1.2 Have ninety percent (90%) Performing Accounts Ratio, covering the performance of accounts that are taken out within the last twenty-four (24) months prior to evaluation.

1.3 In case the developer has an outstanding institutional loan with the Fund, it must be a performing loan.

1.4 Has no record of Cease and Desist Order at the time of evaluation, as certified by the Housing and Land Use Regulatory Board.

1.5 If applicable, has a ninety percent (90%) Buyback Performance as of the quarter prior to date of evaluation, i.e., the number of accounts that are bought back are at least ninety percent (90%) of total accounts due for buyback.

1.6 If applicable, has a ninety percent (90%) Conversion Performance as of the quarter prior to date of evaluation, i.e., the number of accounts that are already converted or are substantially converted should be at least 90% of all accounts due for conversion.

1.7 The developer shall show proof of sufficient funding to finance the improvements on the units for two cycles of scheduled delivery, as evidenced by any of the following:

a. Cash Deposits

b. Bank Guaranty/Stand-by Letter of Credit

c. Bank Credit Line STcEIC

d. Agreement with Suppliers/Contractors

e. Other documents acceptable to the Fund

 A cycle shall refer to a quarterly delivery of accounts for takeout.

1.8 The developer must comply with nationality and ownership requirements under the Constitution and other applicable laws and issuances.

2. New Developer wherein any of its Key Officers previously dealt with the Fund

 The key officers being referred herein shall include the board of directors, president/general manager/chief executive officer, corporate secretary and corporate treasurer.

2.1 The key officer/s have facilitated the takeout of at least five hundred (500) accounts, in case of dealings with NCR Housing Operations Sector, or three hundred (300) accounts, in case of dealings with a Regional Group.

2.2 The developer shall show proof of sufficient funding to finance the improvements on the units for two-cycles of scheduled delivery, as evidenced by any of the following:

a. Cash Deposits

b. Bank Guaranty/Stand-by Letter of Credit

c. Bank Credit Line

d. Agreement with Suppliers/Contractors

e. Other documents acceptable to the Fund

2.3 The developer must comply with nationality and ownership requirements under the Constitution and other applicable laws and issuances.

3. Developer with track record in project development but without any dealings with the Fund

3.1 Has been in the business of developing residential real estate properties for at least three years.

3.2 Has developed and sold at least five hundred (500) housing units at the time of application.

3.3 The developer shall show proof of sufficient funding to finance the improvements on the units for two-cycles of scheduled delivery, as evidenced by any of the following: cTSHaE

a. Cash Deposits

b. Bank Guaranty/Stand-by Letter of Credit

c. Bank Credit Line

d. Agreement with Suppliers/Contractors

e. Other documents acceptable to the Fund

3.4 The developer must comply with nationality and ownership requirements under the Constitution and other applicable laws and issuances.

D. Mechanics

1. The program shall be open to all developers who intend to enter into an agreement with the Fund for the rehabilitation/improvement and sale of the Fund's ROPOA, as well as able to meet the eligibility criteria prescribed in Item C hereof. For this purpose, the Pag-IBIG Fund shall extend an invitation to developers to submit proposals to develop and sell Pag-IBIG Fund ROPOA. Said invitation shall be published once in a newspaper of general nationwide circulation and posted continuously in the HDMF website.

2. Developers shall be given thirty (30) calendar days from date of publication to apply for eligibility and to submit a proposal, which must meet the following minimum criteria:

2.1 The Fund would be able to at least recover the book value of the ROPOA that would be subject of the agreement, plus any of the following applicable percentages representing insurance premiums, foreclosure expenses and capitalized tax payments (i.e., Capital Gains/Expanded Withholding Tax and documentary Stamp Tax) advanced by the Fund:

2.1.1 Fifteen percent (15%) of the sum of the outstanding principal and three months accrued interest, for REM accounts;

2.1.2 Seven and a half percent (7.5%) of the sum of outstanding principal and three months accrued interest, for REM accounts that already has capitalized tax payments when booked.

2.1.3 Five percent (5%) of the sum of outstanding principal and three months accrued interest, for CTS accounts. SEDIaH

2.2 At least thirty percent (30%) of the profit in the sale of the ROPOA shall accrue to the Fund.

3. If a single proponent offered to rehabilitate and sell the ROPOA in a particular subdivision by the end of the thirty (30)-day submission of proposals, the same shall be awarded to him, subject further to the conditions stipulated in these guidelines. If more than one proponent made an offer on one subdivision, the selection of the developer shall be subject to the parameters to be established by the Management.

4. Eligible developers shall be required to enter into a Memorandum of Agreement (MOA) with the Pag-IBIG Fund, providing among others:

4.1 The Pag-IBIG Fund shall provide the inventory of acquired assets as equity.

4.2 The developer shall be responsible for the rehabilitation/improvement of units, security, marketing and documentation of acquired assets for disposal. If necessary, he shall likewise carry out the completion of land development.

4.3 The developer shall rehabilitate and sell the ROPOA subject of the agreement for a maximum period of three years.

5. The following documents shall form an integral part of the MOA:

5.1 Scope of Work/Improvement

5.2 House Specifications

5.3 Approved Standardized Cost Estimates

5.4 Rehabilitation Schedule

5.5 Delivery Schedule

6. The developer shall take over the administration of the subdivision subject of the MOA not later than the second week of the month following the signing of the MOA.

7. The selling price shall be based on the appraised value of the improved/refurbished unit or at a price mutually agreed by the Fund and the developer.

8. The profit in the sale of acquired assets shall be equivalent to the total contract price net of the book value, applicable percentages representing insurance premiums, foreclosure expenses and capitalized tax payments advanced by the Fund and pre-agreed expenses, which shall include the following: EcaDCI

8.1 Cost of improvement of each unit

8.2 Cost of completion of land development, if necessary

8.3 Permits and licenses, if necessary

8.4 Marketing cost for project selling of 7% of the total contract price

8.5 Eviction costs of at most Ten Thousand Pesos (P10,000.00) for acquired assets occupied before the signing of the MOA

8.6 Real estate tax incurred after signing of the MOA

8.7 Unpaid utility bills, i.e., water and power supply, if applicable

8.8 Cost of security, if applicable

9. A ROPOA may be sold through cash, installments or Pag-IBIG housing loan. Buyers of properties disposed through this program shall not be entitled to the discount under the "Magaang Pabahay, Disenteng Buhay" Program.

 Installment sale shall refer to instances wherein the buyer pays on a staggered basis to purchase a ROPOA. In implementing this program, the buyer shall pay the ten percent (10%) down payment to the Fund. The remaining balance shall be charged with an interest similar to those charged to a Pag-IBIG Housing Loan. Installments shall be made in equal monthly payments for a period of twelve months. 

 A Deed of Conditional Sale shall be executed between the Fund and the buyer once a down payment has been made. Upon full payment, a Deed of Absolute Sale shall then be issued to him.

10. The sale of the ROPOA through Pag-IBIG Housing Loan by developers shall not be subject of a Funding Commitment Line.

11. The title to the ROPOA sold through cash/installment sale shall be released to the buyer once the selling price has been fully paid.

12. The developer's share in the profit, based on total sales made on or before the 25th of every month, as well as the refund on the pre-agreed expenses shall be payable to him not later than the last working day of the following month. The cash bond corresponding to the units sold for the period shall also be refunded to the developer. ADcSHC

 However, in the case of installment sales, the refund on the pre-agreed expenses shall be made upon payment by the buyer of at least fifty percent (50%) of the selling price. The developer's share in the profit, on the other hand, shall be released upon full payment by the buyer.

 In all cases, the amount to be released to the developer shall be net of the allowable fees and charges collected by him.

13. The developer shall only be allowed to submit a new proposal to manage another inventory of Pag-IBIG ROPOA if he is able to sell at least fifty percent (50%) of the ROPOA either through cash/installment sales or Pag-IBIG takeout, subject to the considerations presented herein. At any one time, the aggregate number of units shall be at most five thousand (5,000).

14. If there are still unsold units in the developer's inventory at the end of the administration period, said units including their improvements shall be reverted to the Fund. Their corresponding cash bond shall be likewise forfeited in favor of the Fund.

 However, the Developer shall be given the option to purchase the remaining units in his inventory based on the book value plus a percentage markup of twenty percent (20%). Consequently, the cash bond shall be released to him once he pays the purchase price.

E. Role of Pag-IBIG Fund

1. The Pag-IBIG Fund shall provide the inventory of acquired assets as equity.

2. The Fund shall monitor the progress of rehabilitation/improvements of units on all approved proposals in line with the provisions of these guidelines.

3. The Fund shall grant the developer with the authority to market the ROPOA and undertake eviction proceedings on occupied properties subject of the MOA.

4. The Fund shall grant the developer with the authority to collect fees and other charges as prescribed in Item F Section 5 hereof.

5. In case eviction actions are to be taken against illegal occupants, the Fund shall provide the developer with the necessary documents related thereto.

6. The Fund shall pay for the real estate property taxes of acquired assets incurred prior to the signing of the MOA.

7. The Fund shall provide long-term home financing to qualified member-buyers under the regular Pag-IBIG end-user financing program for the acquisition of house and lot or condominium units via the Contract-to-Sell (CTS) Scheme (Window 2), with a mandatory two-year seasoning period before transfer of title in the name of the borrower. In connection thereto, the CTS shall be executed by and between the Fund and the borrower. ADaSEH

8. The Fund shall convert eligible CTS accounts to REM not later than the 24th month from date of loan takeout.

F. Role of the Developer

1. The developer shall pay a cash bond in the amount of Five Thousand Pesos (P5,000.00) for every residential unit or subdivided lot covered by the MOA. In case of raw land, the Developer shall pay the cash bond in the amount equivalent to one percent (1%) of the appraised value of the said ROPOA. The developer may opt to substitute the cash bond with Pag-IBIG Housing Bonds.

2. The developer shall rehabilitate/improve the acquired assets subject of the MOA, in accordance with a rehabilitation schedule approved by the Fund. Hence, the developer shall submit to the Fund land development or unit improvement plans as the case may be. Said plans would be consequently validated by the Fund prior to the setting of the selling price, which shall be jointly established by the Fund and the developer.

 The developer must notify the Fund on or before the last working day of the quarter should he be unable to meet the rehabilitation schedule. Thereafter, he shall be given an extension of three months to rehabilitate/improve the acquired assets and shall be required to submit a revised rehabilitation schedule reflecting such extension within thirty (30) days from receipt of the written notification by the Fund.

3. The developer shall market and sell the refurbished units in accordance with a delivery schedule mutually agreed upon by the developer and the Fund. Disposal of the ROPOA shall commence not later than one year (1) from signing of the MOA.

 The developer must notify the Fund on or before the last working day of the quarter should he be unable to meet the delivery schedule. Thereafter, he shall be given an extension of three months to dispose of the acquired assets and shall be required to submit a revised delivery schedule reflecting such extension within thirty (30) days from receipt of the written notification by the Fund.

4. The developer shall undertake eviction proceedings on occupied units. Should any ROPOA become occupied after the signing of the MOA, the eviction cost for said ROPOA shall be for the account of the developer.

5. The developer shall be authorized to collect the following from the borrower:

5.1 One-year advance insurance premiums (SRI and Fire), in case of Pag-IBIG Housing Loan

5.2 Conversion service fee of Five Thousand Pesos (P5,000.00) TDCAHE

5.3 Processing fee of Eight Thousand Pesos (P8,000.00), which shall be distributed as follows:

a. In case of cash sales, the processing fee shall be for the developer

b. In case of installment sales or through Pag-IBIG Housing Loan, Five Thousand Pesos (P5,000.00) shall be for the developer while the remaining Three Thousand Pesos (P3,000.00) shall be for the Fund

6. In case of cash sales, the developer shall endorse the buyer to the Cash Division/Cash and Administrative Services Division of the Fund when the latter pays for the acquired asset.

7. In case of sale through Pag-IBIG Housing Loan, the developer may opt to have the accounts processed under Window 1. However, he shall be obliged to purchase from the Fund the CTS accounts that become in default within the two-year seasoning period.

 For this purpose, the purchase price shall be defined as the total outstanding loan obligation of the member-borrower at point of default (comprised of the outstanding principal balance and unpaid interests), which should be paid within sixty (60) calendar days from receipt of Notice of Default. Payment may be made through cash, offsetting from takeout proceeds in other development projects or waiver of share in the profits from sale of the ROPOA. Non-payment within the prescribed period shall result to the termination of the Memorandum of Agreement.

8. At the end of the administration period, the developer shall be given the option to purchase the remaining unsold units in his inventory based on the book value plus at least twenty percent (20%) markup. In such a case, said cash bond shall be refunded to him.

G. Termination of the Agreement

1. The following shall be grounds for termination of the agreement:

1.1 Charging and collection of fees in excess of what has been prescribed in Item F Section 5 hereof.

1.2 Non-payment of purchase price of Window 1 accounts that become in default within the two-year seasoning period.

1.3 Non-compliance with the rehabilitation schedule.

1.4 Non-compliance with the delivery schedule.

1.5 Misrepresentation by any person or agent employed by or allowed to transact or do business in behalf of the developer.

2. As a result of the termination of the agreement, the cash bond corresponding to the ROPOA that are not yet sold shall be forfeited in favor of the Fund. However, the said cash bond shall be refunded to him should the developer opt to purchase the remaining units in his inventory based on the book value plus a percentage markup of at least twenty percent (20%). DAESTI

3. Notwithstanding the termination, any sale through Pag-IBIG Housing Loan that is still in the pipeline at the time of termination shall still be subject to the provisions of these guidelines.

H. End-User Financing

1. The borrower shall pay for the expenses to be incurred in the conversion of CTS to Real Estate Mortgage (REM) without interest together with the monthly payment within the first eighteen (18) months of the seasoning period. It is broken down as follows:

Conversion	Conversion
Expenses	rates
BIR	2.0%
RD	1.5%
LGU	1.0%
	––––
Total	4.5%
	====

 The borrower may pay the total conversion cost upfront.

2. All other provisions of the prevailing Pag-IBIG Fund end-user financing program except for CTS retention and the Loan to Value ratio, which shall be set at one hundred percent (100%) regardless of loan amount, are hereby incorporated by reference.

I. Selection Committee

1. The Management shall be authorized to act as the Selection Committee and set the parameters of the competitive selection of Developers, which shall be developed in accordance with the basic terms and conditions provided herein.

2. The Management shall be authorized to approve proposals for the Agreement, subject to Board notation.

J. Repealing Clause

HDMF Circular No. 246 as well as all memoranda, rules, regulations and other issuances inconsistent herewith are hereby repealed, amended or modified accordingly.

K. 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 Pag-IBIG Fund under its charter and existing laws.

L. Effectivity

These guidelines take effect immediately. AcSCaI

Makati City, February 22, 2010.

 

(SGD.) JAIME A. FABIAÑAChief Executive Officer