DBP, GFIs to raise P25-B for housing sector

President Arroyo has ordered the Development Bank of the Philippines (DBP) to spearhead the formation of a first-ever secondary market mortgage syndicate that will raise P25 billion for the development of what Mrs. Arroyo called the formal housing sector.

Ordered to join the syndicate are the Land Bank of the Philippines, the Department of Agrarian Reform (DAR), Department of Finance (DOF), the Bangko Sentral ng Pilipinas (BSP), the Home Development Fund (HDMF or the Pag-ibig Fund), and other government agencies involved in socialized or mass housing.

Of the total amount, P15 billion will be allocated for development financing and the other P10 billion for mortgage-backed securities.

"President Arroyo wants to create immediately the vehicle to purchase more mortgages and other mortgages that will be developed through the development loans," Secretary Michael T. Defensor of the Housing and Urban Development Coordinating Council (HUDCC) said.

The HUDCC will provide the development loans through a program office, and the DBP will lead the consortium or the purchasers of existing mortgage held by the different financial institutions.

"It is basically securitization. Loan payables for say a 20-year period locks the loan issuer, for example a bank. What the plan seems to be is the government will liquefy these through a secondary market. The job is to put up an infrastructure where you convert all the receivables into say certificates that can be traded in the market, which is secondary," Joel C. Valdez, Philippine Export-Import Credit Agency (PhilExim) president and chief executive officer explained. PhilExim, a line agency of the finance devepartment, has been designated by the President to look into the plan.

Mrs. Arroyo is also asking the finance department to study proposals to lower the interest rates on lending for housing programs of government.

Meanwhile, the DBP has agreed to provide Pag-ibig Fund with a P1-billion loan. It has also agreed to restructure, renegotiate and resource funds for an existing debt worth P5 billion.

The Pag-ibig Fund has an existing loan of P5 billion with the DBP which is scheduled to mature in September 2003. The housing-related fund is seeking an extension and a possible restructuring of the loan.