The National Home Mortgage Finance Corporation was created in 1977 by virtue of Presidential Decree 1267, with the mandate of increasing the availability of affordable housing loans to finance the Filipino homebuyer’s on their acquisition of housing units through the development and operation of a secondary market for home mortgages. Consistent with this mandate NHMFC bought mortgages originated by private financial institutions and eventually sold them back to the public through the issuance of mortgage backed financial instruments.
However, the financial crisis which hit the country in 1984 up to the early part of 1986 caused the collapse of a relatively successful home-financing program of the government. Since a sizeable portion of NHMFC funds came from the financial market, with addition to funds coming from contributions of PAG-IBIG members, the 30% to 40% interest rates of the financial market made it impossible for NHMFC (whose lending rate was pegged at 9%) to operate viably.
With the assumption into office of the Aquino Administration in 1986, there was already a felt need to reorganize the government housing agencies and define their new mandates. Executive Order No. 90 on December 17, 1986, gave fresh mandates to the five housing agencies, NHMFC included. As the major government home mortgage institution, NHMFC was tasked to operate a viable home mortgage market, utilizing long-term funds principally provided by the Social Security System (SSS), the Government Services Insurance System (GSIS), and the Home Development Mutual Fund (HDMF), to purchase mortgages originated by both private and public institutions that are within government-approved guidelines. It was also charged with the development of a system that will attract private institutional funds into long-term housing mortgages.
In view of the above, NHMFC clientele was expanded to include among others, borrower/members of SSS and GSIS (in addition to PAG-IBIG members), and even non-members of these institutions, as well as developers of low-cost housing projects. Other qualified originators were added: private developers, government agencies, community associations, local government units and non-government organizations, together with private financial institutions.
Until 1995, NHMFC was operating under the Executive Order No.90 mandate, but ceased to do so with the signing of a Memorandum of Agreement on Housing Finance with the Department of Finance, Department of Budget and Management, and the Funders (SSS, GSIS & HDMF) which transferred the processing and payment of mortgages to HDMF in 1996.
Despite the suspension of the UHLP, the Corporation continuously administered the Community Mortgage Program (CMP) that was amended under R.A. 7279 – UDHA of 1992. Further, the Abot-Kaya Pabahay Fund Program, which was created under R.A. 6486 in 1990 remained under administration of NHFMC. In December 1994, R.A 7835 (or the CISFA 1995) was enacted into law and further amended R.A. 6846 that provided for the continuing funding support for the CMP and the Abot-Kaya Pabahay Fund Program. The economic slowdown of 1998 took its toll in the asset recovery program of NHMFC. The Corporation continuously failed to register positive financial marks. Early on the Estrada Administration, a memorandum dated May 20, 1999 from the President addressed to HUDCC, DOF, DBM and SEC was issued, constituting them into a Task Force to prepare the appropriate disposition plan for NHMFC.
Then President Estrada issued Executive Order 195 dated December 31, 1999 directing all government-owned and controlled corporations under the HUDCC and the Presidential Commission on Mass Housing (PCHM) to prepare their respective Rationalizing and Streamlining Plans. The E.O also mandated to re-direct NHMFC operations to the development and provision of a secondary mortgage market to finance mortgage take-out and fast track the disposition of existing mortgages. The E. O. provided the President policy direction with respect to NHMFC.
In the 1st quarter of 2002, as part of an overall rehab program, NHMFC hired Punongbayan & Araullo/Ernst & Young (P&A/E&Y) as its Financial Advisor. In the last quarter of the same year, the Corporation undertook a Restructuring Agreement with the Funders (SSS & HDMF) and started the processing for the Sale of the Non Performing Loans (NPLs) of the UHLP portfolio.
After pre-qualifying potential bidders in 2003, NHMFC announced the competitive auction sale of the NPLs after pre-qualifying potential bidders. This sale is part of a strategy that will reposition the Corporation to meet the future affordable housing needs of the Filipino people. This realignment process actually started during the second quarter of 2002 with the direct involvement of Management of NHMFC, SSS, HDMF, HUDCC & the DOF.
NHMFC realignment included the formal restructuring of its P46 B outstanding debt balance that includes SSS and HDMF and obtaining approval from all the required government bodies to implement its plan to dispose of the portfolio of delinquent loans. This complex approval process required a consensus among all the parties and took more than one year to achieve.
In June 20, 2004, Executive Order 272 authorized the creation of the Social Housing Finance Corporation, a subsidiary of NHMFC. In June 21, 2005, SHFC was entrusted with the Community Mortgage Program (CMP) and its amortization, as well as the developmental component of the Abot-Kaya Pabahay Fund (AKPF) Program of NHMFC. They have also assumed the implementation of the AKPF and CMP upon the mandate to be leading government agency to undertake social housing programs for the low-income earners. For more than 17 years, AKPF and CMP has become the most affordable-long term micro finance facility that meets land tenure and housing security requirements of the “poorest of the poor”. It is recognized as the most successful housing program for the homeless and the underprivileged sector of our society.
In September 2006, the outcome of the CMP and AKPF programs of SHFC and the sale of its Non-performing Loans (NPLs) to Balikatan Housing Finance encouraged the corporation the process of rationalization of its manpower structure. The Plan for Reorganization was approved by DBM and CSC in November of 2006 and was implemented and completed in June of 2007. The new structure helped downsized its functions to collection and CMP programs instead of focusing on the establishment of a Secondary Mortgage Institution.
In August 2007, Ernst & Young Transaction Advisory Services Inc. became the Financial Advisor that assisted in the maiden securitization of the corporation and laid the building blocks for the transformation of NHMFC into an SMI. EY TASI conducted due diligence on the low delinquent accounts of NHMFC and assisted the corporation in matters of finance, accounting, regulatory and legal implications of the securitization transaction.
In August 2008, NHMFC brought on board the securitization expertise of Standard Chartered bank as underwriter and Lead arranger for the maiden securitization issue, along with the Trustee and Special Purpose Trust, namely, DBP and PNB respectively.
In March 23, 2009, the NHMFC launched the maiden securitization issue of the 2.06 Billion Bahay Bonds. This is the first residential mortgage backed securities (RBMS) issued in the Philippines by a government agency. The Bahay Bonds Maiden Issue took place at the height of the global economic crisis that was brought about by sub-primed mortgages. This was rated AA by the Philippine Rating Services Corporation (PhilRatings). Bahay Bonds become oversubscribed twice because of this the corporation was recognized by Asset Asian Awards 2009 and was awarded the Triple A Award category 2009 Securitization of the Year.
In November 19, 2009, the Board approved the proposed Guidelines on the Housing Loan Receivable Purchase Program (HLRPP) that granted authority for the NHMFC President to approve all purchases under the HLRPP. The new guideline allowed the purchase of housing loan receivables from the originating institutions and will be turned into an asset pool for eventual issuance of securities or bonds for sale in the capital market. With this program, the NHMFC will continue to perform its mandate as a Secondary Mortgage Institution (SMI) to operate a viable housing finance system thru the securitization of the residential home mortgages.
In August 2012, NHMFC issued the second of its Bahay Bonds series (BB2). It is the first ever retail mortgage-backed securities (RMBS) issued in the country and was given a conditional rating of PRS Aa by the PhilRatings. The following year, NHMFC was awarded by the Philippine Dealing System Holdings Corporation & Subsidiaries (PDS Group) with the Innovative Listed Corporate Bond Issue of the Year for the pioneer issuance of BB2 Special Purpose Trust.
In March 2013, the NHMFC was awarded ISO 9001:2008 for the Rizal Division after audit stages conducted by Tüv Süd PSB Philippines. In 2014, NHMFC has expanded ISO certification for the Borrower Counseling System of the Rizal, NCR and Luzon Division, Extra-judicial foreclosure process (Buyer-Initiated) of the Litigation Division and Release of Title process of the Securities and Mortgage Custodianship Division. In 2016, the NHMFC was awarded ISO 9001:2008 Certification for its Securitization of Housing Loan Portfolios and Borrower’s Services for all its offices nationwide.
NHMFC is continuously seeking ways to continue to cater to the housing needs of the low-income and underserved sectors of the society. In 2016, two new sub-programs were launched with the aim of expanding the target market of HLRPP. The Socialized Housing Loan Takeout of Receivables (SHeLTeR) program, rolled out in the second quarter of 2016, aims to purchase socialized housing loan receivables from socialized housing developers as well as microfinance institutions, cooperatives, LGUs, national government agencies and civic organizations. The SHeLTeR Program offers more affordable terms as it targets the socialized housing market. During the last quarter of 2016, the first ever reverse mortgage program in the Philippines was launched through NHMFC’s MAginhawang BUhay dahil sa baHAY (MABUHAY). The program is part of NHMFC’s effort to address the needs of the senior members of our community. MaBuHay allows Senior Citizens to convert a portion of their home equity into cash in order to address their various needs.