House to look into housing agency losses

MANILA, Philippines – The House committee on housing will look into the reported losses incurred by the Home Guaranty Corp. (HGC), one of several housing agencies under new housing czar Vice President Jejomar Binay.

Committee chairman Oriental Mindoro Rep. Rodolfo Valencia and committee member Manila Rep. Amado Bagatsing told reporters yesterday that they would soon call HGC officials led by president Gonzalo Bongolan to a hearing.

“We want to know why the company is losing billions,” Valencia said.

Bagatsing said the irregularities in HGC could be bigger than those recently discovered in Pag-Ibig Fund, which has reportedly been victimized by supposedly fake borrowers whose loan applications were filed by a developer.

“We have to stop these losses because ultimately it is the taxpayers, through the government, who will absorb them,” he said.

The housing committee decided to launch an investigation after the Commission on Audit (COA) reported that in 2008 alone, HGC incurred losses amounting to P1.1 billion.

Auditors discovered that the housing guaranty firm has been steadily losing money since 2002, when it posted losses totaling P204 million.

In the succeeding years, it lost P2.283 billion from the “disposal of overvalued assets” and P2.035 billion from the sale of foreclosed properties.

It recently sold a lot in Port Area in Manila at P13,000 per square meter when the going price was at least P25,000 per square meter.

Bagatsing said he would confront HGC officials with the COA report and other documents showing irregularities.

According to the COA, HGC’s payables increased by P22 billion and its financing charges by P10 billion “because it was settling its guarantee obligations through bond flotation, resulting in overlapping of liabilities.”

“HGC’s growing losses and deficits had continuously impaired the corporation’s financial condition, casting doubt on its financial capability to carry out its mandate and operate as a going concern,” the COA said.

It said despite its losses, HGC gave an early separation incentive package to its employees equivalent to two months’ salary for every year of service.

The housing firm paid a total of P224.1 million to early retirees, the audit commission added.

It reported that part of the firm’s losses were incurred when it sold at low prices several lots and luxury villas it had acquired.

Because of HGC’s steady losses, the COA recommended that Bongolan and other officers should “implement stricter fiscal discipline to reduce capital and operating expenses and prioritize scarce financial resources to more compelling expenditures and obligations.”

It said the corporation should focus on its principal task of providing credit guaranty in support of the government’s program to promote home ownership.

The COA also asked HGC to coordinate with other government-owned and controlled corporations for the settlement of unpaid guaranty obligations as well as to expedite the sale of foreclosed assets at prices advantageous to the government.

It recommended that the loan-to-collateral ratio of not more than 70 percent be strictly complied with to ensure recovery of guaranty exposure in case of default.

Another housing agency under Binay’s supervision, the Pag-Ibig Fund, has been in the news lately for allegedly allowing a developer to take out nearly P7 billion in loan proceeds of borrowers, many of whom were found to be fake.

‘Organizational reforms’

In Bacolod City, Binay, who also chairs the Housing and Urban Development Coordinating Council (HUDCC), reiterated his vow to clean up and reform the housing sector.

“Organizational reforms in key shelter agencies are underway,” Binay told delegates of the national convention of Subdivision and Housing Developers Association.

He said it was the “evidently dysfunctional dispatch of loanable funds” that allowed a developer to corner much of the funds for its housing projects.

He said that while other developers were waiting for four to six months to have their loans released, the “favored” developer was getting his in just three to seven days.

“The basic defect in the concentration of loanable funds to a single developer is the inconsistent application of a Single Borrowers’ Limit (SBL) Policy,” Binay said.

“My predecessors had adopted an SBL for institutional loans of P3 billion for a single developer-borrower. On the other hand, the end-buyer’s loan did not have an SBL limit, with the justification that the borrower under this window is not the developer but the buyers themselves,” Binay added.

“This is incorrect since the buy-back guarantee requirement under this window is a contingent liability of the developer and therefore should be part of a borrower’s limit or restraint,” he explained.

“This allowed that same developer in Pampanga to avail himself of a P5-billion end-buyers loan. That same developer, after getting P5-billion end-buyers loan, got an additional approval of P6 billion for a project in Zambales,” Binay said.

“Had this P6-billion project been implemented, more havoc would have been wrought. The grant of more end-buyer loans was imprudently tolerated in the absence of a prudent SBL policy,” he said.

“This inequitable practice, this policy inconsistency must stop,” he said.

“First, we will come up with an SBL policy that will include in the ceiling computation for an SBL all the loans of developers in all lending windows of Pag-Ibig whether it is institutional or end-buyers financing,” he said.

“Second, we will deploy the loanable funds co-equitably per region on the basis of demand for housing loans and performance of developers,” he said.

“Third, we will not favor any developer except to affirm those who are able to build integrity into the houses that they deliver, as much input integrity in the buyers that they present,” he added.

Binay said that while “the need for housing is not diminishing in urgency and volume,” the housing sector should be sturdy enough to meet the demand and weather challenges.

“I know that the reason developers are hesitant and apprehensive in building more houses is the perennial lack of funds,” he said.

He said he is “interceding, if not intervening, to accelerate action in the other groups and sectors of housing.”

“I have adjusted the target of housing loans from 75,000 housing units to 150,000 units and P30 billion in new loanable funds that will be made available to buyers and developers,” he said, referring to his initiatives for Pag-Ibig.

“This is ambitious, I know, but I must also know that if we must make Pag-Ibig responsive to the growing interests of stakeholders like you, if we must make you true partners in development, we must put in courageous interventions in unprecedented proportion,” Binay said.

“We must deliver more houses to fill the gap between housing stock and housing needs, which is about 350,000 each year,” he said.

“In Pag-Ibig, the investments portfolio in non-related housing business will significantly be shifted to investments in housing development,” he said. –-Jess Diaz (The Philippine Star) with Danny Dangcalan