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Socialized housing dragged by birth rate

BY AMADO P. MACASAET [ Malaya.com.ph ] August 26, 2011

Pag-Ibig is running as fast as it can but it cannot even stay where it is in implementing the housing program for the poor.

Darlene Marie B. Berberabe, president and chief executive officer of the Home Development Fund (Pag-Ibig), said in an exclusive interview with Malaya Business Insight that the housing backlog for the poor is estimated at more than 3.5 million units. However, the Fund lent home construction loans of an average of 45,000 per year during the past five years.

This year, she hopes to see 100,000 socialized homes constructed with money from the Fund.

Given the fact that about two million babies are born every year, the backlog is actually increasing by more than 200,000 units. That means Pag-Ibig is actually going backwards although it is running as fast as it can.

It is the unchecked population growth that makes the implementation of socialized housing a Herculean job, according to Ms. Berberabe, a lawyer from the University of the Philippines who has behind her extensive practice in labor law.

The bigger problem is the high unemployment rate. Only those who have jobs are qualified to become members of the Pag-Ibig.

Berberabe pointed out that the money contributed by private-sector employees and matched at the same amount by their employers is paid annual dividends of 4.5 per cent.

The dividends come from the earnings of the Fund from investments in sovereign liabilities like treasury bills and bonds. The bigger source is interest income on loans.

Berberabe said 80 percent of the Fund’s net income is paid to members in the form of dividends.

She said the dividends could be much bigger if the default rate or non-performing loans is not unusually high at 25 percent, which is slightly more than P55 billion.

Ms. Berberabe said 114,598 housing loans are in arrears or not paying.

She said she is in constant negotiations with property developers for the disposal of the homes which are not amortized and have been foreclosed.

She said she has to be practical. She explained that she is willing to accept 50 percent of the value of the non-performing loans. "That is better than keeping in the books supposedly liquid assets but cannot be collected and may have to be eventually written off to allow Pag-Ibig to have a clean balance sheet."

It is the same high default rate – in this case, 50 per cent – that forced the Government Service Insurance System to abandon individual housing loans or through property developers.

Robert Vergara, president and general manager of the system, said he decided instead to lend an initial P5 billion to Pag-Ibig on condition that the money produce a yield of at least 5 percent.

Ms. Berberabe said she will not disappoint the GSIS.

Pag-Ibig is cash-rich. Of total assets amounting to P294.666 billion, nearly all of it – P202.7 billion – is members’ contributions. Sadly, however, acquired assets stand at P7.341 billion, indicating the high default rate or non-performing loans which are extremely difficult to collect.

The Fund reported a net income of almost P11 billion as of July this year. The Fund appears to be extremely careful handling the trust funds. This is shown by the fact that as of the same period, expenses totaled only P3.858 billion on gross income of P14.8 billion.

The contributions of members of the fund are guaranteed by the state. Which, according to Ms. Berberabe, means that in the event that the Fund is dissipated by foul means ("it would not happen in my watch"), the "losses" will be replenished by the government as guarantor.

Value of outstanding loans stood at P145 billion as of July.

Ms. Berberabe said socialized housing of P400,000 per borrower is charged an interest rate of 6 percent a year. Pag-Ibig is authorized to lend as much as P3 million but Ms. Berberabe said borrowers under this category represent only about 5 percent of total loans released.
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