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HOME GUARANTY CORPORATION. Historical Background. 1978. 1986. 2000. 1950. E.O. No. 535 Became Corporation & placed under the Ministry of Human Settlements. R.A. No. 8763 Renamed Home Guaranty Corporation. R.A. No. 580 Home Financing Commission. E.O. No. 90 - PowerPoint PPT Presentation
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HOME GUARANTY CORPORATION
Historical Background
1950 1978 1986 2000
R.A. No. 580Home Financing Commission
E.O. No. 535 Became Corporation & placed under the Ministry of Human Settlements
E.O. No. 90Renamed Home Insurance and Guaranty Corporation
R.A. No. 8763 Renamed Home Guaranty Corporation
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Members of the BoardSECRETARY OF FINANCE
Ex-officio ChairmanSecretary Cesar Purisima
HUDCC CHAIRMANEx-officio Vice-chairman
Vice President Jejomar Binay
NEDA DIRECTOR GENERAL Ex-officio Member
Dr. Arsenio Balisacan
HGC PRESIDENTEx-officio Member
Atty. Manuel R. Sanchez
Three (3) other members appointed by thePresident of the Philippines
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MANDATES
To mobilize private funds for home lending
Promote homebuilding and land ownership through self-help and cooperativism
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Guaranty Concept
Subdivision Development Home Acquisition
Developers
Guaranty
HomebuyersFinancingInstitution
DevelopmentalLoans
HomeLoans
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Benefits of the HGC Guaranty
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Risk Cover
100% on outstanding principal obligation
+interest and yields up to 11%
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Benefits of the HGC Guaranty
Exemption from BSP Capital Reserve Requirement
for Credit Risk
Guaranteed Loans are Zero-Risk (BSP Circular 280 s.2001)
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Benefits of the HGC Guaranty
1. Limit on REL (Sec. 1. c. BSP Circular 600 s. 2008)2. Loanable amount may be increased up to 90% of appraised
value of collateral (BSP Circular 343 s. 2002)3. SBL (Sec. 1.E BSP Circular 425 s. 2004)
Exemption from BSPRequirements on Real Estate Loans
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Benefits of the HGC Guaranty
on interests and yields earned on guaranteed loans
Up to 11%
Tax exemption
Simulation of Tax Savings
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Assumptions: Loan Amount P 1,000,000.00 Interest Rate 10%
With HGC' Guaranty No HGC Guaranty Tax Exemption 10.00% - Premium Fee (Bond Coverage) 1.15% -
Interest Income (P1.0m x 10%) P 100,000.00 10.00% P 100,000.00 10.00%Less: Tax Exempt Interest Income 100,000.00 10.00% - - Taxable Interest Income P - 0.00% P 100,000.00 10.00%Less: Deduction/Expenses 5% Gross Receipt Tax P - 0.00%(a) P 5,000.00 0.50% Premium Fee 11,500.00 1.15% - 0.00% Total 11,500.00 1.15% 5,000.00 0.50%
Interest Income Subj. to Income Tax P - -1.15% P 95,000.00 9.50%Less: 30% Income Tax - (c) 28,500.00 2.85%Interest Income Net of Income Tax P - -1.15% P 66,500.00 6.65%Add: Tax Exempt Interest Income 100,000.00 10.00% - -
NET INTEREST INCOME P 88,500.00 8.85% P 66,500.00 6.65%
COMPARISON: With HGC Guaranty vs. No HGC Guaranty Tax Payment for account with No HGC Gty. P 33,500.00 3.35%Tax Payment for account with HGC Gty. P - 0.00%TAX SAVINGS P 33,500.00 3.35%
Improvement(Decline) in Net Income P 22,000.00 33.08%
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Tax Exemption and Maximum LCR
Housing Package Tax Exemption and
Guaranteed Interest
Maximum LCR
(BSP Cir. 343)
Socialized (Up to P400,000) 11% 90%Low Cost Housing (Above P400,000 to P3M)
10% 90%
Medium Cost (Above P3M to P4M) 9.5% 80%Open (Above P4M) 8.5% 70%
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Benefits of the HGC Guaranty
Collection, Foreclosure & TCT Transfer are shifted to HGC
Easing of Administrative Burden (in the event of call on the guaranty)
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Benefits of the HGC Guaranty
Confers classification and other advantages
Sovereign Guaranty
Guaranty Programs
• Retail Guaranty Program – covers individual housing loans secured by:– Real Estate Mortgage– Contracts-to-Sell
• Developmental Guaranty Program – covers developer’s loan for: – Development of Residential Subdivision, Condos, Apartment– Working Capital
• Guaranty for Securitization Program – ensures financial instruments issued for housing-related purposes, such as: – Bonds, Commercial Papers, A/MBS
• Guaranty for Small Loans for Housing – ensures unsecured housing-related loan transactions, such as: – Microfinance Housing Loans– Salary Loans, Multi-purpose loans to be used for housing 14
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1. Purchase of house & lot, townhouse, condominium unit and any other single family dwelling;
2. Purchase of lot and construction of house; 3. Purchase of lot only; 4. Purchase of lot on which the house of the Borrower/Mortgagor presently
stands;5. Major repair, improvement or expansion of an existing house or dwelling
unit; 6. Refinancing of an existing loan, which was principally used for any of
the above-mentioned purposes;7. Financing of Contracts-to-Sell executed by Developers in favor of its
buyers covering purchase of residential units in a developed subdivision or condominium; and
8. Purchase of residential farm lot
Retail Loans Eligible for Guaranty
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Types of Guarantee Coverage(Form of Guaranty Call Payment)
STANDARD COVERAGE• Call Payment is in the form of HGC Debenture Bond if default occurs
within the 1st five (5) years of guarantee coverage• Call Payment is Cash if default occurs after five (5) years of
guarantee coverage
BOND COVERAGE• Call Payment is in the form of HGC Debenture Bond regardless of
the period or timing of the default.
MODIFIED CASH PAYMENT• Call payment is in cash based on a scheduled monthly amortization.• Payment shall commence on the first month that the loan becomes
delinquent until the loan maturity.
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Classification : Government Securities
Term : 3 to 5 years
Face Value : OB + accrued interest (Max of nine months)
Coupon rate : The lowest of Market Rate, Mortgage/CTS Rate, or 8.5% p.a.
Tax exemption : Up to the coupon rate of the bond
Interest Servicing: Semi-annual
Bond Redemption: Principal payable at maturity
Tradability : Traded in the market
Features of the HGC Debenture Bond
Annual Guaranty Fee(Retail Housing Loan)
Types of Housing Package
*Premium Rate – Standard
(% to outstanding principal
obligation)
*Premium Rate – Bond
(% to outstanding principal
obligation)
*Premium Rate –Modified Cash
(% to outstanding principal
obligation)
Socialized housing 1.40 1.20 1.25
Low cost housing 1.45 1.15 1.25
Medium cost housing
1.50 1.10 1.25
Open housing 1.70 1.50 1.25
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Types of Housing Package *Premium Rate –Bond (% to outstanding principal
obligation
Socialized housing 1.25
Low-cost housing 1.50
Medium cost housing 1.75
Open housing 2.00
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Annual Guaranty Fee(Developmental Housing Loan)
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GUARANTY FOR SMALL LOANS FOR HOUSING
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Guaranty for Small Loans for Housing
Guaranty
FinancingInstitution
Borrowers for home improvement and repairs
Lends to individual borrowers
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Benefits of the HGC Guaranty
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Risk Cover Covers outstanding principal balance Guaranteed interest of up to 11%.
Zero-Risk Classification
HGC-guaranteed loans have zero risk weight. Banks are exempt from providing risk capital on HGC-guaranteed loans
Tax incentive Interest income on housing loans up to
the extent of 11% is exempt from all forms of taxation.
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Benefits of the HGC Guaranty
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Simulation of Tax Savings (For Small Loans for Housing)
ASSUMPTIONS: Housing Loan Portfolio 10,000,000 Interest Rate per annum (%of portfolio) 10% Tax free interest with HGC Guaranty 10% Premium Fee (%of portfolio) 2% No HGC Guaranty With HGC GuarantyInterest Income 1,000,000 1,000,000 Less : GRT (5%) 50,000 - Taxable Income 950,000 1,000,000 Less : Income Tax (30%) 285,000 - Premium Fee - 200,000 Net Income 665,000 800,000
Savings/ Improvement in Income P135,000 per P10 million worth of loans
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Sovereign Guaranty HGC guarantees carry the sovereign
guaranty
Funding Benefit
FI can leverage for lower cost of borrowings
Long-term funds may be made available by some funders
Assignability of Guaranty The guaranty may be assigned to
assignee of guaranteed loans
Benefits of the HGC Guaranty
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TERMS AND CONDITIONS OF GUARANTY
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Eligibility of FIs:• Track record of at least three (3) years in implementing sustainable
microfinance programs; • Capital Adequacy Ratio (CAR) of not lower than 12% for BSP-
supervised FIs;• Latest CAMELS rating of at least “3” for BSP-supervised FIs;• With collection efficiency of at least 95%;• Capacity and technical capability to offer small loans for housing;
and• No arrearages in borrowings from wholesale lenders.
Loan Value Eligible for Guaranty: •Maximum of P400,000.00[1] per borrower
[1] Loan amount may be adjusted/increased upon the approval of the HUDCC and the BSP
Terms and Conditions of the Guaranty
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Purpose/s of the Loan:
•House and/or lot acquisition for housing;•House construction; and•Home improvement/repairs.
Eligible Borrowers:
• Existing depositor/client/member;
• Borrowers who are determined by the FI to be eligible for small loan for housing, provided that: (a) they do not have an existing small loan for housing; and (b) loan payments should not exceed 60% of their income as determined by the FI’s cash flow analysis;
• With verifiable source of income; and
• With good track record of loan repayment for the last three (3) loan cycles of any loan type from the FI.
Terms and Conditions of the Guaranty (cont.)
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Payment:
• Frequent amortization (daily, weekly, monthly); and
• Loan payments should not exceed 60% of client’s net disposable income as determined by the FI’s cash flow analysis.
Loan Term:
• Up to 15 years for loans above P150,000 and/or for lot acquisition and house construction; and
• Up to 5 years for loans not exceeding P150,000 availed for home improvement and repairs.
Terms and Conditions of the Guaranty (cont.)
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Event of Default:
• Consecutive non-payment of loan amortization by the borrower depending on the payment schedule as follows:
Premium Structure:
• The guaranty premium is two percent (2%) per annum of the outstanding loan balance.
Terms and Conditions of the Guaranty (cont.)
Mode of Payment Default Weekly 4 weeks non-payment Monthly 2 months non-payment
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Maximum Allowable Guaranty Call:
• The FIs may call on the HGC guaranty to the extent of 1.2% of the total enrolled account.
Premium Refund:
• In case there is no call on the guaranty at the end of the guaranty period, the FI shall be entitled to a premium refund of up to 1% of the guaranteed loans.
Other conditions:
• Within one (1) month from release of the loan, the FI shall submit to HGC a proof of the borrower’s utilization of the proceeds as specified in the loan application;
Terms and Conditions of the Guaranty (cont.)
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GUARANTY OPERATIONS
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Guaranty Line Application
1 Applies for guaranty lineSubmits:• Application letter• Company Profile• Profile of Stockholders & Key Officers• Audited F/S (for the last 3 years)• Credit Policies & Guidelines• Prospective Enrollments• CAMELS Rating (Banks)/PESO Rating (Coop)• Application Fee (P10,000)
HGC
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Evaluates application
Elevates to HGC Board for approval3
Sends notice of approval/disapproval
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Executes Contract of Guaranty5Guaranty
Contract
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FinancialInstitution
Enrollment Procedure
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FinancialInstitution
COG
Enroll accounts for guaranty coverage, submits:Enrollment Letter containing warranties that: 1.Bank has undertaken credit evaluation of
account 2. Loan documents are valid 3. TCT is clean, free from lien 4. All loans are within LTV limits
Batch List 1. At least P 1.0 M or 10 accounts 2. Information about the borrower, the loan,
and collateral
Premium Payment
Processes Certificate of
Guaranty
Issues Certificate of Guaranty(signed by HGC President)
Post Audit of Guaranteed Loans
HGC validates sufficiency and orderliness of loan documentation with the FI
HGC inspects housing unit of the borrower
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FinancialInstitution
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Call Procedure
BORROWER
Borrower defaults(6 mos. Non-payment ofmonthly amortization)
Option FORECLOSURE
Option Notice of call30 calendar days
from date of default
Pays Call30 calendar days from conveyance of original
loan documents
Loan documents
Evaluates Call30 calendar daysfrom receipt of notice of callIF
VALID
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2
FinancialInstitution
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Call Documents
Documents to be submitted upon call on the guaranty within 30 calendar days from default date:
- Notice of claim- Demand letter of bank to borrower-Statement of account and ledger-Copies of TCT, Tax Declaration, vicinity map, lot plan and house plan - Bank appraisal report- Audit evaluation sheet
Documents to be submitted after receipt of Notice of Claim Approval within 30 to 180 calendar days from receipt of notice of approval :
- Registered Deed of Assignment and Conveyance- TCTs, tax declaration, tax receipts- PNs, Loan Mortgage Agreement, REM- Fire Insurance Policy duly assigned to HGC-Bank Certification that all taxes and Homeowners Association dues are updated
Performance Indicators
Outstanding Guaranty as of Dec. 2012 P 82.40B
Guaranty Capacity as of Dec. 2012 P 145.39B
Net Income from Operations as of Dec. 2012 P 457.59M
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Top 10 Client- Banks
BPI FAMILY SAVINGS BANKRCBC SAVINGSPS BANKMETRO BANKEASTWESTPLANTERS BANKUNIONBANKSTERLING BANKMALAYANPHILIPPINE NATIONAL BANK
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Top 10 Client - Developers
AYALA LANDCITYLAND GROUPCENTURY PROPERTIES PRO-FRIENDSFILINVESTSUNTRUST PROPERTIESPUEBLO DE OROROBINSONS LANDNGG PROPERTIESCITYSTATE PROPERTIES
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Visit us at:
Home Guaranty Corporation335 Sen. Gil Puyat Avenue, Makati City
Tel. No. +63 2 8964116www.hgc.gov.ph
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