SHDA Business Meeting
I would like to thank our partners from the premier organization of subdivision and housing developers in the country for inviting us to this business meeting. As always, we welcome any invitation from SHDA to discuss our programs. I know you would like to hear more from us regarding the newest developments in our housing loan program. And similarly, we would also like to hear your views and concerns.
Early in 2006 we issued circular 213, or the revised guidelines of the Pag-IBIG housing loan program, the highlight of which was the revised interest rate structure with reduced interest rates. Later that same year, we received orders from our chairman, vice president Noli de Castro, to look into the viability of further lowering the interest rates and extending the loan repayment period to 30 years.
This is meant to lower the housing loan amortizations, particularly in our low cost housing packages, to make the loans more affordable to low income earners. This is the segment of the market which is currently not being served by private banks, and the vice president is firm that government intervention in the formal sector be focused in this segment, without compromising the financial position of the fund, of course.
The result of this is circular 219, or the guidelines to the “Pag-IBIG Pabahay, Abot Kamay” program, which was approved by our board of trustees last November. Let me present now some of the more important changes introduced in the new guidelines.
Under the new guidelines, we have lowered the required contribution rates vis-à-vis the loan entitlement. For instance, under the old circular, the loan entitlement for a Php200 monthly contribution ranges from over Php125,000 to Php250,000. Under circular 219, a member may now borrow up to Php500,000. For the maximum loan of Php2 million, the required monthly contribution is now only Php950, down from Php1,600.
We have also adjusted the loan to collateral ratio to 95% for loans over Php750,000 to Php1 million under a buyback guaranty, and 85% for those without buyback guaranty and for retail accounts, up from the previous 90% and 80%, respectively. We also increased to 75% the loan to collateral ratio of our highest loan package for loans without buyback guaranty. This is to bring it up to par with private banks.
Of course, the highlights of the new guidelines are the new interest rates. I’m sure most of you still remember when Pag-IBIG could only lend housing loans of up to Php500,000 with interest rate of 17%. We are certainly a long way from that now.
We now have only for loan packages, with their corresponding rates, instead of six under the circular 213. Loans up to Php300,000 now have an interest rate of 6% per annum, down from 9%.
For loans over Php300,000 to Php500,000, the interest rate has been reduced to 7% per annum from the old rate of 10%.
For the Php500,000 to Php1 million package, the interest rate is now 10.5%, and for the p1 million to Php2 million package, 11.5%.
We no longer have separate rates for payments made after the due date. Instead, a penalty of 1/20 of 1% for every day of delay shall be charged for payment made after the due date.
These interest rate reductions translate to, of course, lower monthly amortizations. For a loan of Php300,000 with a 30year term, for instance, the monthly amortization is only Php1798.65, compared to p2,413.87 under the old rates. The required net disposable income for this loan package is only Php4,496.63.
For loans up to Php300,000, Pag-IBIG may reprice the outstanding balance of the loans once every five years, provided that it shall not exceed the original rate.
For loans over Php300,000 on the other hand, Pag-IBIG shall now reprice the outstanding balance once every five years based on prevailing market rates, with but only up to 9%, 12.5% and 13.5% for the three highest loan packages, respectively.
We have also revised the loan terms. The maximum loan term is now 30 years for all loan packages. The loan term shall not exceed the difference between the present age and age 70, instead of 65, of the principal borrower.
These are some of the most important points of the new guidelines.
We ended 2006 with Php16.09 billion in end user housing loans released to 33,038 borrowers. This year, we expect to attract even more borrowers with our guidelines. In fact i am happy to report that we are now seeing a warm response from our members to these guidelines.
For one thing the number of requests for membership status verifications slips, or MSVS, which is one of the requirements for a housing loan application, has increased five times. We are also now seeing four times more members who are attending our loan counseling seminars.
Many developers are also gearing up for more buyers in the Php500,000 market. In fact we have one in Cagayan de Oro with a 105hectare-socialized housing project.
Aside from the major change in our enduser housing loan guidelines, i would also like to announce some new changes we have introduced or are proposing.
First, we have set an 8.5 % floor rate for our institutional loans. This is in response to the downward trend in treasury rates, which we use as the basis for interest rates in our institutional loan programs.
For our housing receivables program, we have already liberalized our policies. We have raised the financing amount to a maximum of Php5 million per receivable account, with a maximum term of 10 years.
We also have our latest institutional loan program, the house construction financing line, which aims to further increase the inventory of new housing units.
This is for developers who have existing developed subdivisions and who wish to avail of an institutional loan to built housing units in these subdivisions. Since you can no longer avail of a developmental loan in this case, we are offering this new program that gives a one year revolving line of up to Php20 million. The good thing about this is that we can replenish a developer’s financing line within the year based on the delivery of loan takeouts.
Aside from these, we are about to submit for the board’s proposal another new program called Pag-IBIG Township. This is bigger than the Pag-IBIG City program, with minimum project size of 100 hectares and 4,000 Housing units.
Of course, as you know, we have just had another successful issue of our housing bonds, which further assures continuous funding for our housing loan program. And i would like to thank SHDA for investing in the kabayan housing bonds to the tune of Php30 million.
For this year we are allocating Php25 billion for our shelter financing programs. And i hope our friends from SHDA will do their share in utilizing this allocation.
Ladies and gentlemen, 2006 proved to be a very good year for the fund. We hope to do even better, especially in fulfilling our primary mandate of delivering affordable shelter to our members. With the strong support and help of our partners from the private developers sector, especially the members of SHDA, this is what we hope to accomplish.
Thank you very much.