Substandard government housing for the poor

Alan Codizar’s family noticed the smell after two months of staying in their house in Catalunan Grande, a village about 5 kilometers from Davao City’s downtown area.

“We thought it was the dog,” recalled Codizar’s wife Lourdes. “So, we moved the doghouse somewhere else, but still the smell lingered.”

Later, they opened the sewage at the back of the house and noticed that the pipes were leaking. The one-room house, with a floor area of 90 square feet, is one of the low-cost units of South Villa Heights 2, which was awarded to the Codizars in 1994 under the Unified Home Lending Program (UHLP). They took over from its previous occupant only two years ago because the community then had no access road and is far from their workplace.

When they first arrived, the house looked like an empty matchbox. They put up jalousies on the windows, installed doors, tiled the floor and later, laid the sewage pipes.

“There were cracks even at the ceiling,” Lourdes said. “We can’t even nail something to the wall without feeling that the house would cramble.”

A couple of blocks away lives Vidal Payao, 60, who has stayed in the place since the lae 1990s. He has refused to pay his housing loan amortization.

Suit vs developer

Payao and 60 other homeowners sued the subdivision developer, Robern Development Corp., in 1994 for the substandard units. “They used dilapidated plywood,” Payao said. “The sewage pipe was leaking and the drainage was so bad. They did not follow the prescribed plan. There was no light and water. Until the developer has fixed our units, we refuse to pay.”

Robern disputed the claims, but an inspection by the Housing Land Use and Regulatory Board (HLURB) of the South Villa Heights 2 houses showed cracks on the walls, leaking sewage pipes and other deficiencies.

Loan payments

The homeowners won the case in 2000. Lawyer Donna Ladao,housing and land-use arbiter ordered the developer to repair the units, build an access road and drainage system and supply water.

But the HLURB Legal Services Group did not agree with their refusal to pay their loans. Citing Section 23 of Presidential Decree No. 957, Ladao said that home buyers could only suspend amortization payments to the owner or subdivision developer, but not to the lending or financing institutions where they had borrowed money for the units.

Their contracts with the developer is totally separate from those with their financier, said lawyer Miguel Palma Gil, HLURB arbiter for Mindanao.

Foreclosure orders

In late 2007, Payao was surprised to receive foreclosure orders from Balikatan Housing Finance Inc., a company created to absorb the “high delinquent” loans of the National Home Mortgage and Finance Corp. (NHMFC) such as those of South Villa borrowers.

Accounts are classified as “highly delinquent” if these have not been paid in the last 15 years, Lawyer Gerald Paez, head of the Balikatan corporate communications development.

The bad loans had sent NHMFC reeling in the 1990s, a condition that the country’s financial experts regarded as the Philippines’ precursor of the US subrime mess that recently sent banks around the world to the brink of collapse.

The NHMFC only averted its own fall by auctioning off the loans in 2004. The sale involved 52,000 “highly delinquent” loans, with an outstanding principal balance of P12 billion and total obligations of P30 billion. Among these accounts were 6,000 housing units in Davao City, involving 16 low-cost subdivisions.

Enter Balikatan

Deutsche bank purchased the non-performing loans and, together with the NHMFC, put up the Balikatan on a 49:51 ownership sharing and its holding company, Bahay Financing Services Inc., to carry out its restructuring program.

City officials however, questioned the government agency’s selloff, saying it was a remission of the government’s duty to provide affordable housing to its citizens.

Councilor Danilo Dayanghirang said Celso delos Angeles founder of the controversial Legacy Group that is said to be behind the collapse of several rural banks, used to sit as board chair of the NHMFC when the government agency initiated the selloff.

Mayor Rodrigo Duterte also appealed to President Macapagal-Arroyo to order the suspension of the foreclosure orders so that the homeowners could be given more affordable payment terms.

The NHMFC was created in 1977 to develop and provide a secondary market for home mortgages, but it was also mandated to complement the government’s low-cost housing program.

Secondary mortgage

Experts believe the secondary mortgage market will “unlock” opportunities in banks to lend more to the housing sector at affordable rates by allowing the NHMFC – with borrowings from the Social Security System, the Government Service Insurance System and Pag-IBIG to buy the mortgages and securitize these to potential investors.

But in 1986, then President Corazon Aquino issued Executive Order 90, placing upon the NHMFC the management and development of the Unified Home Lending Program (UHLP) to finance housing for the poor.

Borrowing P42 billion from the SSS, GSIS and the Home Development Mortgage Fund (HDMF), more popularly known as Pag-IBIG, the NHMFC provided mortgage financing to some 220,000 homeowners from 1987 to 1996.

But the agency did very poorly in screening applicants and in collecting their dues. In the mid-1990s, it was chokin in debts. –Germelina Lacorte, Davao City