Escudero questions auction of P13-billion delinquent housing loans

MANILA, Philippines - Opposition Sen. Chiz Escudero said a joint venture firm formed by the National Home Mortgage Finance Corp. (NHMFC) and the Deutsch Bank Real Estate Global Opportunities (Global) may have committed violations in auctioning delinquent loans.

In the process, Escudero noted that this may have put some 53,000 families at risk of losing their homes.

“The government, in cooperation with the private sector, should implement a continuing program that will make available at affordable cost decent housing to less fortunate Filipinos. This constitutional policy and mandate seemed to have been reversed in the case of Balikatan,” he said during a Senate hearing.

Escudero filed Senate resolution 1094 last May 26 asking the Senate Blue Ribbon Committee and the Committee on Urban Planning, Housing and Resettlement to probe the auction of non-performing housing loans amounting to P13.45 billion which resulted in higher interest rates and exorbitant downpayment loan restructuring scheme.

He said the controversy started when NHMFC and Global formed Balikatan Housing Finance, Inc. to absorb the delinquent loans auctioned in 2004 without the knowledge of the borrowers.

“That is the first issue which is not permitted under the law. Section 6, Article1301 of the Civil Code says that subrogation of a third party requires the consent of the original parties. The (special purpose vehicle) SPV was done without the knowledge and consent of the debtors,” he said.

Escudero noted that instead of granting a reprieve to those delinquent in their housing payments, Balikatan imposed higher interest rates and exorbitant down payments in its housing loan restructuring scheme, from six percent to 14 percent per annum.

“How did Balikatan do this? They cannot alter nor increase the interest rate just by their own accord.” Escudero said.

Rule 12 of the SPV law provides that “no transfer of loans to an SPV or individual shall take effect without prior notice to and consent of the borrowers. Any restructuring or renegotiating of the loan shall be agreed upon, under the rules of court, by the borrower and the financial institution concerned”.

“While it may be argued that NHMFC entered into such arrangement with Global in full accord with the law, it is quite unthinkable that it had a detrimental effect on the borrowers and homeowners whose rights and interests should have been constitutionally ensured and protected,” Escudero said.

He said that as Balikatan continues with its move to foreclose the properties and eventually evict these homeowners, the Senate should intervene to prevent an injustice and a clear violation of a constitutional policy.

“We must provide relief to our disadvantaged public. This inquiry’s primary concern is to raise public accountability, especially when there is an imminent reversion to homelessness despite the safeguards being given by our laws and the Constitution,” Escudero said.