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NHMFC raises P604M, eyes more housing loan purchases

Posted on August 09, 2012 09:07:16 PM [ BusinessWorld Online ]

THE NATIONAL Home Mortgage Finance Corp. (NHMFC) raised P604 million from the sale of residential mortgage-backed securities dubbed as “Bahay Bonds 2,” rejecting orders as investors inundated the bond sale.

“We raised P604 million from the Bahay Bonds 2 [on Wednesday],” NHMFC President Felixberto U. Bustos, Jr. said in a text message yesterday.

“We had to reject some orders for the bonds because we could not increase our issue size. We had only P604 million worth of home loans to back the bonds,” he added.

NHMFC, tasked to develop and provide a secondary market for home mortgages, began to offer the bonds on July 26. It was supposed to close the offer on Aug. 7 but had to extend it by a day after Malacañang suspended work in government offices and private firms due to floods spawned by monsoon rains.

Tenders for the Class A senior notes, which were offered to retail investors, reached over P350 million, exceeding NHMFC’s P300-million offer.

The five-year notes carried a 4.8% interest rate.

Meanwhile, orders for the Class B senior notes, which were offered to institutional investors, exceeded NHMFC’s P120-million offer.

“The offering of the Class B notes was closed last week by Land Bank [of the Philippines] because we already reached our target amount.

We had to turn down some orders from institutional investors,” Mr. Bustos said.

The notes, which had a 10-year tenor, carried a 6% interest rate.

Lastly, the Class C subordinated notes worth P180 million were purchased by NHMFC.

Proceeds of the “Bahay Bonds 2” debt sale, Mr. Bustos said, will be used by NHMFC to “purchase more housing loans to provide the lending firms with liquidity to provide more loans to their clients.”

“For instance, a bank provided a 25-year loan to a developer. A 25-year loan will take a long time before a bank can recover or earn from that loan. So as a secondary mortgage institution, NHMFC will purchase the 25-year mortgage loan from the bank, giving the bank liquidity to provide more loans to other clients,” he explained.

“Then, NHMFC will hire an underwriter that will securitize the loan and turn it into bonds, which will be sold to the investing public,” he added.

“The proceeds from the bond sale will be used by NHMFC to purchase more mortgage loans from the lending institutions. That is the cycle.”
Landbank served as the debt sale’s sole arranger and underwriter.

The bank and Philippine Commercial Capital, Inc. also served as selling agents.

Local credit rating agency Philippine Ratings Services Corp. last Tuesday affirmed the “Aa” rating of both Class A and B senior notes and the “Baa” rating it assigned to the Class C subordinated notes. -- Ann Rozainne R. Gregorio            
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