P&A to advise government on sale of P40-B mortgage

The Housing and Urban Development Coordinating Council's (HUDCC) initiative for the liquidation of some P40 billion in residential housing loans held by the National Home Mortgage Finance Corporation (NHMFC) to unlock fresh funds for the government's housing program gets underway with the signing last Wednesday of the letter of engagement appointing Punongbayan & Araullo (P&A Ernst & Young), as exclusive financial advisor for the planned mortgage liquidation.

Leading the signing ceremonies were Housing Secretary Michael T. Defensor, concurrent HUDCC chairman; Antonio B. Herbosa, principal, P&A Ernst & Young; NMHFC president Angelico T. Salud; Benjamin R. Punongbayan, managing partner, P&A Ernst & Young; and HUDCC secretary general Armando de Castro.

Under the letter of engagement, P&A Ernst & Young will conduct for NHMFC a due diligence review of the mortgage portfolio; estimate the value of the mortgage holdings for disposition to potential investors; provide advice on the financial structuring and disposition strategy for the transaction; and implement an international and/or domestic sale auction process, among others.

"This is a milestone even in the country's efforts to source funds for housing from the capital market through sale of mortgage holdings of government agencies that will also hasten the development of a secondary market for mortgages," Defensor said.

"We are also taking advantage of the current opportunity arising from the keen interest being shown by foreign funding institutions and investment houses in mortgage investments in the country, as a mode of sourcing funds for home acquisition by low-cost housing beneficiaries," he added.

Upon prior approval from SSS, GSIS and Pag-IBIG Fund, which earlier funded its mortgage holdings, NHMFC intends to dispose said mortgages using one or more of the following approaches: a competitive bidding process that uses an auction format; a negotiated private sale; and/or securitizing the assets through the issuance of Asset-Backed Securities.

P&A Ernst & Young is among some 30 local and foreign trust and investment institutions which earlier signified their interest to provide NHMFC their financial advisorship services, during the prequalification, bids and awards process presided by a committee heaed by Finance Undersecretary Nieves Osorio; and De Castro as co-chairpersons.