Pag-IBIG, SHDA ready CTS loan rules

The Home Development Mutual Fund (Pag-IBIG Fund), in close consultation with the Subdivision and Housing Developers Association (SHDA), is finalizing and set to issue the implementing guidelines for this year's housing loan program for Pag-IBIG members using subdivision developers as loan conduits or originators under the newly-adopted Contract-to-Sell (CTS) system.

Called the CTS 2000 scheme, the alternative take-out mechanism is for Pag-IBIG housing loans to be granted and subsequently delivered by developers to Pag-IBIG Fund starting this month, according to Mariano D. Martinez Jr., SHDA national president.

Aside from providing a new home financing option for Pag-IBIG members other than the availment of housing loans through the regular Pag-IBIG's Retail Window, the CTS 2000 scheme cuts the processing for the release of the developers' loan take out proceeds to 15 working days.

The new scheme also provides assurance to Pag-IBIG on the repayment of the borrower's loan through the developer's assumption of warranty during the first two years of the loan, when the occurrence of delinquency is at its highest, Martinez said.

Under the system, a Pag-IBIG member interested in buying a housing unit, files a housing loan application with a Pag-IBIG-accredited developer, who in turn grants the loan, secured by a Contract-to-Sell (CTS). The developer then delivers the loan documents to Pag-IBIG for the take-out payment, Martinez explained.

Pag-IBIG shall then convert the CTS to a Real Estate Mortgage (REM) for accounts which are updated for the first two years, to combine the advantages of the CTS and REM schemes, as homelending instruments.

Martinez, however, clarified that CTS accounts, which become in default during the first two years of loan repayment period, shall be cancelled and the developer, which granted the loan, shall be required to buy it back from Pag-IBIG.

CTS accounts, whose documents are converted to REM now qualify for securitization as the asset quality for securitization as the asset quality of the accounts shall have been established after the two-year seasoning period, Martinez explained.