Standard Chartered issues P2.2-billion mortgage-backed housing debt paper

MANILA, Philippines - The first-ever residential mortgage backed securitization (RMBS) bond paper worth P2.2 billion was issued by the Standard Chartered Bank Philippines (SCBP) along with the government-run National Home Mortgage and Finance Corp. (NHMFC).

Named BahayBonds, the issue lays down the foundation for a vibrant secondary mortgage market in the country, long mandated to attract private institutional funds into long-term housing mortgages. It supports NHMFC’s vision of being the largest source of home mortgage funds in the country, primarily for the low-cost and socialized housing sectors.

“The investor response to the maiden issuance has been very positive. Based on the latest figures, the demand is more than two times of the issuance size. Both public and private sector financial institutions have participated in the subscription,” the bank claims.

The issuance closes end March, along with the pricing of the issue.

BahayBonds, which are tax exempt, consist of two classes of notes. The senior notes, rated AA by Philratings, are being offered to institutional investors. The sub notes, rated BBB+ by Philratings, will be retained by NHMFC. The senior notes have the first priority over the collections from the loans while sub notes have the lowest ranking priority. The duration of the notes is five years.

The transaction, arranged and underwritten by Standard Chartered Bank (Standard Chartered), will further develop the local capital markets and create a vibrant secondary mortgage market for the Philippines.

The transaction is based on a pool of 12,000-odd residential mortgage loans. These are the best quality loans in NHMFC’s portfolio, and selected through a stringent set of eligibility criteria to ensure that they are performing and have strong payment history.

PricewaterhouseCoopers, Home Guaranty Corp., Romulo Mabanta Law Office, and Standard Chartered Bank audited the loans to ensure that all documentations and records meet the securitization criteria.

Almost all the loans were originated from 1985 to 1996. They have low current LTVs, which means the obligors have built up a lot of equity in the properties over time. The historical loss rate of the pool is very low. The monthly mortgage payment on the loans is also very affordable.