Pag-IBIG advised on developers’ failure to convert housing loans

MANILA, Philippines — The Commission on Audit (COA) has called the attention of the Home Mutual Development Fund (HMDF) or Pag-IBIG Fund over the failure of property developers to convert the contracts to sell (CTS) of 22,123 housing loan borrowers to real estate mortgages (REM). 

In a 2017 report released recently, state auditors said such failure to convert P14.407 billion worth of housing loans poses risks to both lender and borrower. 

The COA report said non-conversion of CTS to REM exposes the borrower’s property ownership to risk; may result in delay and difficulty in redemption, foreclosure and disposal of properties; and non-recovery of Pag-IBIG Fund’s investment in housing. 

State auditors noted that under the rules, the property developer of housing projects shall convert the security for eligible accounts from within 24 to 36 months. 

The rules also state that the developer shall begin converting eligible CTS accounts to REM not later than the 18th, 24, 30th, and 36th month depending on the type of account. 

“Analysis of the CTS accounts available for conversion disclosed that a total of 22,123 accounts with loan value of P14.407 billion were not yet converted to REM, but which have already exceeded the allowable seasoning period for the developer to convert the CTS accounts to REM,” the COA report read. 

State auditors said the housing units affected include those from the National Capital Region (NCR) home lending operation, La Union, San Fernando in Pampanga, and Cebu. 

“Due to the deficiencies noted, titles of the mortgaged properties have not yet been transferred in the name of the buyer-borrowers, hence, annotations of the REM could not be done by the Register of Deeds (RD),” the audit team explained.