Implementing Guidelines on the Disposal of Pag-IBIG Fund Real and Other Properties Owned or Acquired (ROPOAs) through Joint Venture

April 22, 2009

HDMF CIRCULAR NO. 246-09

 

Pursuant to Item E Section 4.b of HDMF Circular No. 200, entitled the "Amended Policies and Guidelines on the Disposition of Real and Other Properties Owned or Acquired (ROPOA)", and the approval of the HDMF Board of Trustees in its 255th Board Meeting held last 30 March 2009, the Implementing Guidelines on the Disposal of Pag-IBIG Fund Real and Other Properties Owned or Acquired (ROPOAs) through Joint Venture 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 (ROPOAs).

2. To dispose acquired assets promptly at the highest value possible through a Contractual Joint Venture with an accredited developer.

B. COVERAGE

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

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 Contractual Joint Venture between the Fund and the developer shall entail the rehabilitation and sale of all ROPOAs within a subdivision, as well as any other property within it that will be acquired by the Fund after signing of a Memorandum of Agreement (MOA).

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 JOINT VENTURE PARTNER

To qualify as a Joint Venture (JV) Partner, the developer must meet the following criteria:

1. Developer with previous dealings with the Fund

1.1 Has at least taken out one thousand (1,000) accounts with Pag-IBIG Fund at the time of application, for a developer transacting with the NCR Housing Operations Sector. A developer transacting with a Regional Group must have at least taken out five hundred (500) 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. HEDaTA

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

d. Agreement with Suppliers/Contractors

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

2. New Developer whose Key Officers previously dealt with the Fund

2.1 Any of its key officers have previously dealt with the Fund in good standing as discussed in Item C Sections 1.2 to 1.6 hereof. The key officers being referred herein shall include the board of directors, president/general manager/chief executive officer, corporate secretary and corporate treasurer. acITSD

2.2 The key officer/s have facilitated the takeout of at least one thousand (1,000) accounts, in case of dealings with NCR Housing Operations Cluster, or five hundred (500) accounts, in case of dealings with a Regional Group.

2.3 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:

a. Cash Deposits

b. Bank Guaranty/Stand-by Letter of Credit

c. Bank Credit Line

d. Agreement with Suppliers/Contractors

2.4 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 The developer is able to show technical, financial and marketing capability in undertaking development of real estate projects.

3.2 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

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

D. MECHANICS

1. The program shall be open to all developers who intend to enter in a joint venture and who are 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 ROPOAs. 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 ROPOAs that would be subject of the Joint Venture.

 Book value shall be herein defined as comprising of the principal, three months accrued interest, insurance premiums, foreclosure expenses and capitalized tax payments advanced by the Fund.

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

3. If a single proponent offered to rehabilitate and sell ROPOAs 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 JV partner 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. ISTCHE

4.2 The JV partner 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 JV partner shall rehabilitate and sell the ROPOAs subject of the agreement for a period negotiated with the Fund, but not to exceed three years.

5. 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 JV partner.

6. Pursuant to HDMF Circular No. 200, buyers of properties disposed through this mode shall not be entitled to discount on the selling price.

7. The profit in the sale of acquired assets shall be equivalent to the total contract price net of the book value and pre-agreed expenses, which shall include the following:

7.1 Cost of improvement of each unit

7.2 Cost of completion of land development, if necessary

7.3 Permits and licenses, if necessary

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

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

7.6 Real estate tax incurred after signing of the MOA

7.7 Unpaid utility bills, i.e.,water and power supply

7.8 Cost of security

8. The JV partner's share in the profit, based on total sales made on or before the 25th of every month, as well as the refund on costs incurred in rehabilitating and selling the ROPOAs shall be payable to him by the last working day of the month. The cash bond corresponding to the units sold for the period shall be refunded to the JV partner. AaCEDS

The amount to be released to the JV partner shall be net of the allowable fees and charges collected by him.

9. The title to the ROPOA sold through cash sale shall be released to the JV partner only upon remittance of such payment to the Fund.

10. Sale of ROPOAs through Pag-IBIG Housing Loan by JV partners with existing Funding Commitment Line (FCL) with the Fund shall be deemed as separate and distinct from the former's FCL.

11. If the JV partner is able to sell at least fifty percent (50%) of the ROPOAs either through cash sales or Pag-IBIG takeout, he may submit a new proposal to manage another inventory of Pag-IBIG ROPOAs, subject to the considerations presented herein. At any one time, the aggregate number of units shall be at most five thousand (5,000).

12. 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. Notwithstanding the forfeiture of cash bond, the JV partner 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%).

 

E. ROLE OF PAG-IBIG FUND

1. The Pag-IBIG Fund shall provide the inventory of acquired assets as equity. Each unit shall be valued based on its book value. However, in the case of foreclosed properties, the book value shall also include the capitalized expenses incurred in their foreclosure.

2. The Fund shall grant the JV partner with the authority to market the ROPOAs and undertake eviction proceedings on occupied ROPOAs subject of the MOA.

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

4. The Fund shall pay for the real estate property taxes of acquired assets incurred prior to the signing of the MOA as well as the portion of the Expanded Withholding Tax (EWT) that corresponds to the book value of the ROPOAs and its penalties and surcharges. DIETcC

5. 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.

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

F. ROLE OF THE JOINT VENTURE PARTNER

1. The JV partner shall pay a cash bond in the amount of Five Thousand Pesos (P5,000) for every residential unit or subdivided lot covered by the MOA. In case of raw land ROPOAs, the JV partner shall pay the cash bond in the amount equivalent to one percent (1%) of the appraised value of the said ROPOA. The JV partner may opt to substitute the cash bond with Pag-IBIG Housing Bonds.

2. The JV partner shall rehabilitate/improve the acquired assets subject of the MOA, subject to a work schedule mutually agreed upon by the JV partner and 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 JV partner.

The JV partner must notify the Fund on or before the last working day of the quarter should he be unable to meet the work 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 work schedule reflecting such extension within thirty (30) days from receipt of the written notification by the Fund.

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

The JV partner 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. SECIcT

4. The JV partner 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 JV partner.

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

5.1 one-year advance insurance premiums (SRI and Fire)

5.2 first monthly amortization

5.3 conversion service fee of Five Thousand Pesos (P5,000.00)

5.4 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 sale 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 sale through Pag-IBIG Housing Loan, the JV partner 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 ROPOAs. Non-payment within the prescribed period shall result to the termination of the Joint Venture. EHTIDA

7. At the end of the administration period, the JV partner shall be given the option to purchase the remaining unsold units in his inventory based on the book value plus a twenty percent (20%) markup.

G. TERMINATION OF JOINT VENTURE

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

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 work 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 JV partner.

2. As a result of the termination of the JV, the cash bond corresponding to unsold ROPOAs and those that are not yet due for delivery shall be forfeited in favor of the Fund. However, the JV partner 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%).

3. Notwithstanding the termination, any sale through Pag-IBIG Housing Loan that is still in the pipeline at the time of termination shall accrue to the JV.

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: THCSEA

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 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 JV partners, which shall be developed in accordance with the basic terms and conditions provided herein.

2. The Management shall be authorized to approve proposals for Joint Venture, subject to Board notation.

J. 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. TEAaDC

K. EFFECTIVITY

These guidelines take effect immediately.

Makati City, April 22, 2009.

 

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