MANILA, OCTOBER 10, 2003  (STAR) By Des Ferriols  - The government is preparing to sell some P14-billion worth of non-performing housing loans of the National Home Mortgage Finance Corp. (NHMFC) this year, marking the first major sale under the new Special Purpose Vehicle Act (SPVA).

Monetary Board sources told reporters yesterday that the NHMFC was finalizing the portfolio of non-performing loans (NPLs) that would be sold through a competitive bidding, pending the approval of the government financial institutions that financed the original housing programs.

After the failure of the banking system to take advantage of the SPVA, sources said the government is eager to complete the sale of its inactive housing loans in hopes of allowing housing agencies to cash in on their NPLs and use the proceeds for more housing projects.

According to the source, the portfolio contained NPLs that have been identified for sale to any interested SPV under the Unified Housing Loan Program (UHLP) for members of the Government Service Insurance System (GSIS) and the Social Security System (SSS).

These housing loans, the source explained, were all inactive and could be easily reactivated by the SPV once they have been transferred after the sale of the entire portfolio.

"Based on worldwide experience, home mortgage loans are actually the most attractive because they are the easiest to turn around once they have been privatized," the source said. "These borrowers are usually always very willing to reactivate and repay their loans."

According to the source, the P14-billion portfolio represented the outstanding principal balance of the UHLP loans and they would be sold at a discount to whoever makes the most attractive offer to the NHMFC.

NHMFC’s total portfolio is estimated to be at P42 billion and its total NPL at 30 percent.

NHMFC could apply the sale of the NPL portfolio for incentives under the SPVA program which would allow the corporation to book its losses arising from the discounted sale over a period of seven years.

On the other hand, the company that buys the loans would also qualify for certain tax breaks.

When completed and implemented, the source said the sale of the NHMFC loans would mark the first actual sale of NPLs under the new law which was originally intended to allow private companies to take over government-funded housing loans.

Several foreign groups have already expressed keen interest in this type of housing loans because they are the easiest to revive and reactivate.

Under the law, SPVs could acquire the portfolio from the seller at a discount since they are non-performing loans anyway. Then, the buyer takes over the collection of the loans and profit from the receivables.

NHMFC has already hired Ernst & Young/Punongbayan & Associates as financial adviser for the sale and the source said the actual bidding for the NPLs is expected sometime this year.

"The hope is to be able to sell this within the year but if not, certainly before the May elections," the source said. "We expect to make the official announcement sometime in the next few months."

The source said the transaction is only a waiting to complete the approval process, pending the agreement of the GSIS, the SSS and the Bangko Sentral ng Pilipinas (BSP) which would approve the application for incentives.

Reported by: Sol Jose Vanzi

All rights reserved