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GUIDELINES FOR DEVELOPMENTAL LOAN GUARANTY PROGRAM
  • ON THE LOAN

    1. Purpose of the Loan

      2. 1.1 Development of residential subdivisions including apartment, townhouse, medium rise buildings;

      1.2 Construction of Residential Condominiums

      1.3 Working capital to the extent of 20% of project cost

        No part of the Developmental Loan shall be used to purchase land and settle existing encumbrance/lien on the property.

    2. Loan Amount

      The amount of the Developmental Loan shall be based on actual project needs as supported by the cash flow projections but not to exceed P500.0 Million for construction loan and up to 20% of the project cost for working capital loans. The loan amount however, should not exceed seventy percent (70%) of prudent production cost.

      *Prudent production cost shall mean, the relevant cost of the Borrower of the proposed physical improvements, using as basis the standards of HLURB for land development and construction.

    3. Interest Rate

      The interest shall be based on prevailing market rates.

    4. Loan Releases

      Loan releases are in accordance with the Project’s requirements, and shall not exceed seventy percent (70%) of the Prudent Production Cost and 70% of the collateral value.

    5. Loan Term

      The term of the loan shall coincide with project completion and repayment schedule of the loan as indicated in cashflow projection.

    6. Collateral

      The collateral of the Guaranteed Developmental Loan shall either be:
      1. A first mortgage on real estate property subject of the Developmental Project to be executed by the Borrower in favor of the FUNDER, duly registered with the appropriate Register of Deeds, and annotated on the certificates of title covering the mortgaged property, copies of which shall be furnished by the FUNDER to the HGC;
      2. Installment receivables from contracts to sell (CTS) provided they are covered by the corresponding deeds of assignment duly annotated on their respective certificates of title upon call on the guaranty and meets the following requirements:

        b.1. At least 10% of the CTS Contract Price has been paid by the buyer;
        b.2. The buyers have complied with the seasoning period as follows:

        Buyer’s equity Seasoning requirement
        10% 2 years
        20% 1 year
        30% Waived

        b.3. The units subject of the CTS accounts are complete at the time of call;
        b.4. The subdivision/condominium where the CTS units are located are complete at the time of call;             
        b.5.  The TCTs/CCTs is free from any lien and/or encumbrance except the real estate mortgage/assignment of receivables constituted in favor of the FUNDER

      3. Additional collateral other than the real estate property subject of the Developmental Project shall be acceptable provided it meets the following requirements:
        1. Property is fully developed, located in a prime area and registered in the name of the borrower;
        2. The property has an existing right of way;
        3. All taxes are updated and the property is free from liens and encumbrances;
        4. The mortgage is annotated on the title.
        5. The additional collateral shall be given a maximum loan value of sixty five percent (65%) of its appraisal.

      Gross area subject of development should not exceed 10 has. and should be developed in phases of not more that 5 has.

      Additional loan for development of succeeding areas shall be made only upon 75% completion of the project and 75% payment of the guaranteed loan.

  • ON THE PROJECT

    1. TECHNICAL

      1. Site/Location

        2. The site must be approved for development into a housing project by the LGU and/or the Housing and Land Use Regulatory Board (HLURB).

        The following criteria must be complied with:

        • must be suitable for housing
        • the project must be accessible thru existing road networks and public transportation
        • availability of electrical/water facilities;
        • distance within ten (10) km. radius from urban infrastructures such as schools, churches, commercial centers, etc.

      2. Project Development

        3. 2.1 Project Design

        The project design, that is, type of land development and type of housing units must:

        • conform with the standards of BP 220 and PD 957, whichever is applicable.
        • address an identified market.

        2.2 Necessary Support Facilities

        • The Project may include provision for necessary support facilities in accordance with the standards of the HLURB.
      3. Permits/Clearances

        4. The following permits/clearances must have been secured before the initial loan release:

        1. Environmental Clearance Certificate by DENR
        2. DAR Conversion or Exemption
        3. LGU Development Permit

      4. Balanced Housing

        5. The project must comply with the twenty percent (20%) balanced housing requirement under Sec. 18 of R. A. 7279 otherwise known as the Urban Development Housing Act.

    2. MARKETING

      1. Package
        Sales package of the housing units to be generated by the Project should be affordable by the target market in the vicinity.

      2. Borrowers’ Financing
        Borrowers must have a ready source of buyers’ financing documented by way of a Memorandum of Undertaking or Agreement (MOU or MOA) from funding institutions (GFIs or private FUNDERs), private commercial FUNDERs or companies with their own housing loan program.

    3. FINANCIAL

      1. Financial Viability

      1.1.   Profitability

      The projections should reflect the project’s ability to adequately service and repay all obligations and to generate a return on equity of at least 10% after provisions for income tax.

      1.2.   Debt-Service Coverage Ratio

      Cashflow projections should register positive ending cash balances and a debt-service of at least 1.25:1.

  • ON THE DEVELOPER

    1. Equity on the Project

      2. Equity of the Borrower should at least be thirty percent (30%) of prudent production cost.

    2. Track Record

      3. Borrowers must have a proven record of success in undertaking real estate projects. An assessment shall be made of the success or failure of past and current projects which shall include among other things, feedback from homebuyers, suppliers and contractors.

      For new borrowers who will be engaging in housing development, an assessment shall be made on the management’s capability and tie-up with other professional groups i.e. project, construction, and marketing management groups, to assist them in project implementation.

    3. Credit Worthiness

      4. The Borrower must have a good credit standing among FUNDERs, financial institutions, its trade suppliers and other government housing agencies.

    4. Single Borrower's Limit

      5. HGC’s exposure for developmental projects for the account of any one institution or entity shall not, at any time, exceed three (3) times the networth of such institution or entity.

  • THE HGC GUARANTY COVERAGE

    1. Borrowers whose loan shall be enrolled for guaranty coverage shall be required to submit a certification from HUDCC that they have no pending issues with the shelter agencies.

    2. The financial institution shall conduct an evaluation of each project, i.e, financial analysis, credit investigation and title verification in accordance with HGC’s set of evaluation policies and procedures;

    3. The appraisal function, validation of project cost, as well as determination of maximum loanable amount shall be done by the FUNDER. The FUNDER shall warrant that the appraisal meets the minimum requirements of HGC’s appraisal guidelines and standards. HGC, however, reserves the right to conduct a post-audit;

    4. HGC shall guarantee the outstanding principal balance of the loan plus interest based on the type of housing package that will be offered by the guaranteed project, as shown below:

      5. Type of Housing Package Guaranteed Interest
      Socialized (P450,000 & below) 11.0 %
      Low Cost (Above P450,000 – P3.0M) 10.0 %
      Medium Cost (Above P3.0M – P4.0M) 9.5 %
      Open Housing (Above P4.0M) 8.5 %

      The respective ceilings may be revised based on the prevailing economic conditions.

    5. The type of guaranty coverage shall be Bond Guaranty Coverage but HGC has the option to pay in cash, subject to availability of funds.

    6. The guarantee premium and other fees per account enrollment shall be as follows.

      7. Sales Packages Guaranty Premium Bond Coverage Audit Fee Application Fee*
      Less than P 450,000 1.25% .25% P 5,000
      Above P 450,000 up to P 3.0M 1.50% .25% P 5,000
      Above P 3.0M up to P 4.0M 1.75% .25% P 10,000
      Above P4.0M 2.00% .25% P 10,000

      * One time payment upon enrollment of account.

      Premium rates are subject to adjustments based on an assessment of risk position in accordance with sound actuarial principles.

    7. Tax exemption on the interest income of the guaranteed loan shall be as follows

      8. Sales Package per Unit Generated by the Project
      P 450,000 & below 11.0 %
      Above P 450,000 to P3.0 M 10.0 %
      Above P 3.0M to P4.0 M 9.5 %
      Above P 4.0M 8.5 %

    8. The extension of guaranty for Developmental Projects for the account of any institution or entity shall not, at any time, exceed three (3) times the net worth of such institution or entity;

    9. The credit supervision and monitoring of the Project shall be done by the FUNDER subject to submission of quarterly status report to HGC;

    10. The FUNDER shall execute the following warranties:

      1. The documents evidencing the Developmental Loan and the mortgage/collateral securing the repayment thereof are valid, binding and enforceable against the Borrower;

      2. The FUNDER has undertaken all requisite credit investigation, appraisal and credit analysis in approving the Developmental Loan in accordance with HGC’s Developmental Guaranty Line Guidelines;

      3. The OCT/TCT/CCT of the mortgaged properties is free from all liens, charges, claims, and other encumbrances other than the one constituted in favor of the FUNDER;

      4. The Loan to Collateral Ratio on the Developmental Project does not exceed seventy percent (70%)

      5. The Developmental Loan shall not exceed P500.0 M and three times the Networth of the Borrower as declared in the audited and BIR-filed financial statements;

      6. The FUNDER has notified the Borrower that the Developmental Loan is covered by the HGC guaranty;

      7. The FUNDER shall undertake credit supervision of the Project;

      8. Loan releases are in accordance with the Project’s requirements, and shall not exceed seventy percent (70%) of the Prudent Production Cost and the collateral value;

      9. The schedule of development, disposition and marketing of the Project are in accordance with the business plan approved by the FUNDER;

      10. The Developmental Loan and sales proceeds shall be used exclusively for the development and payment of related costs and expenses of the Project;

      11. Releases of the OCT/TCT/CCT are in accordance to the redemption formula prescribed by HGC;

      12. All permits and licenses and clearances from appropriate government agencies necessary for the development and marketing of the Project have been obtained by the Borrower;

      13. The Project has complied with the Balanced Housing requirement provided under Section 18 of Republic Act No. 7279 otherwise known as the Urban Development Housing Act of 1992 which mandates subdivision developers to develop socialized housing component equivalent to twenty percent (20%) of the total land area or project cost of the main subdivision project or to invest in socialized housing bonds; and

      14. The Project and the Borrower have passed the rating prescribed by HGC for acceptance of loan for guaranty coverage.

    11. Project/s of any company belonging to the group of companies under the financial institution and all other DOSRI accounts (per CB definition of DOSRI) shall be referred to HGC for evaluation;

    12. The FUNDER shall have the option to renew the insurance coverage for the second and subsequent years upon HGC’s conduct of an audit on the overall status of the Project subject of development, timely payment of the annual guaranty premium and issuance of the warranties prescribed by HGC.

    13. A call on the HGC guaranty shall be made upon default which is defined as follows:

      14. Mode of Payment Min. No. of Installment In Arrears
      Monthly 6
      Quarterly 2
      Semi-annual / Annual 1

    14. Inability of the borrower to secure buyer’s financing shall likewise be a ground for denial of call. Although a commitment for buyer’s financing is a requirement prior to extension of guaranty, the funders have the option to cancel the commitment if the developer fails to comply with the requirements.

    15. The FUNDER shall be given thirty (30) calendar days from date of Default to transmit to HGC the Guaranty Call;

    16. The HGC shall make payment of the Guaranty Call within thirty (30) calendar days from its receipt of the following documents:

      17. 16.1. For Developmental and Working Capital Loans:

        1. Deeds of Assignment and Conveyance of the FUNDER’s rights and interest over the mortgaged properties which must be free from liens and encumbrances except the guaranteed mortgage.
        2. Original copies of all contracts such as REM, loan agreement and PN
        3. Owner’s copies of the OCT, TCT, CCT with the Deed of Assignment and Conveyance annotated thereon;
        4. Fire Insurance policy duly endorsed in favor of HGC; and
        5. Tax declarations and official receipts evidencing realty tax payments on the mortgaged properties.

      16.2. For Loans secured by CTS accounts:

        1. Deed of Assignment and Conveyance of property covered by the defaulted CTS;
        2. Deed of Cancellation of the CTS.Owner’s copies of the OCT, TCT, CCT with the Deed of Assignment and Conveyance annotated thereon;
        3. Fire Insurance policy duly endorsed in favor of HGC;
        4. Tax declarations and official receipts evidencing realty tax payments on the properties subject of the defaulted CTS;
        5. Certification that the property is  vacated;
        6. Certification that there are no pending claims under the  Maceda Law; and
        7. Certification that the unit under the CTS is up to date in the payment of association/condominium dues.
        8. For updated CTS buyers, a Notice duly received by the buyers that the receivables, mortgage properties, and all the rights in the mortgage, have been assigned and conveyed to HGC.

      16.2.1  Conditions for the Assignment of CTS receivables and the underlying property subject of CTS

        1. Fully completed unit
        2. The subdivision/condominium where the CTS units are located are complete at the time of call;
        3. Clean and unencumbered Title on the property

      16.2.2  Conditions for the assignment of  defaulted CTS:

        1. CTS should have been rescinded;
        2. Housing unit of defaulted CTS should have been vacated;
        3. Assignment of TCT covering the cancelled CTS in favor of HGC.
        4. The buyer has no pending claims under the Maceda Law.
        5. The CTS is up to date in the payment of association/condominium dues.

      16.2.3.  The value of the property should be 143% of the total guaranteed obligation.


    17. The HGC shall not accept call on the guaranty for projects with incomplete development.

    18. HGC, through its duly authorized representatives and during reasonable hours, may inspect the titles, PNs, LA and other documents pertaining to any or all the insured mortgages to satisfy itself of compliance with its requirements;

    19. The FUNDER shall be given six (6) months from approval of the Developmental Guaranty Line to build-up the accounts for enrollment. If the approved line remains unutilized after the prescribed period of six (6) months, HGC shall either cancel the guaranty line or charge the commitment fee thereafter. The commitment fee to be charged shall be 1/10 of 1% of the amount of the unutilized portion of the approved line. The commitment fee shall be converted or credited as premium payment in direct proportion to the amount of guaranty availment. The formula for crediting the amount of premium for every enrollment shall be based on the following formula:

      Premium Credit (P) =  Amount of enrollment X commitment fee
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      Developmental Guaranty Line

      If after six (6) months period provided above, the total amount of the Developmental Guaranty Line or the remaining portion thereof remains unutilized, HGC shall have the following options:

      1. Continue its commitment to guaranty future availments on the Developmental Guaranty Line; or
      2. Cancel the unavailed balance of the Developmental Guaranty Line and forfeit the commitment fee.

      Under the former option, the balance on the commitment fee shall be credited to future guaranty premiums but for a maximum period of one (1) year. After the lapse of one year period, any remaining unavailed balance of the Developmental Guaranty Line shall be deemed cancelled and the corresponding balance of the commitment fee shall be forfeited.

    20. Grounds for termination of guaranty Coverage on Enrolled Accounts – The commission of any of the following acts shall terminate of the guaranty coverage provided that the FUNDER shall given written notice of the fact and cause of termination.

      20.1   Non-payment of Guaranty Premiums and penalty fees required herein.

      20.2   Violation of the FUNDER of any of its warranties and representation.

      20.3   Transfer or assignment of the Contract of Guaranty to another person or entity without prior written consent of the HGC;

      20.4   Disposition by the FUNDER or by an approved transferee or assignee of an interest in the mortgage through a declaration of trust or some other documents without prior written consent of the HGC.             

      20.5  Non-compliance by the FUNDER or by an approved transferee or assignment with any of the terms and conditions provided herein;

      20.6   Any misrepresentation committed by the FUNDER on any matter or account arising from or in connection with the subject guaranty;

      20.7  Substantial change in the juridical personality of the FUNDER or substantial change in its ownership and/or composition of the majority of its Board of Directors and such change is determines by the HGC Board to be inconsistent with existing HGC policies & guidelines; or

      20.8  The FUNDER has ceased to operate due to:

      1. preliminary or permanent closure;
      2. cancellation of franchise, permit, license or registration;
      3. placement under receivership, sequestration, liquidation or judicial trusteeship
      4. stay order or suspension of payments;
      5. prevention from performing its regular functions by a court, administrative agency or government body clothed with appropriate power;
      6. filling of a petition for insolvency, suspension of payment, cancellation of franchise, permit or registration.
    21. Cancellation of Unavailed Guaranty Line - The HGC may cancel the unavailed Developmental Guaranty Line, subject to thirty (30) calendar day prior written notice   given to the FUNDER, under the following grounds:

      21.1  Post Audit of the Developmental guaranty Line strongly shows violations by the FUNDER of any of its warranties;

      21.2  The credit evaluation guidelines and procedures of the FUNDER are no longer acceptable to the HGC;

      21.3  The Developmental Guaranty Line has been unavailed for six (6) months from date of execution of the Contract of guaranty; or

      21.4  The FUNDER is unable to perform the accounts management and credit supervision functions required by the HGC.

    22. In case of termination or cancellation of the guaranty coverage due to any of the foregoing, all premiums paid shall be forfeited in favor of HGC

    23. HGC may amend any of the aforesaid terms and conditions upon mutual consent of the parties’ duly authorized representatives, provided they are consistent with the provisions of R.A. 8763 or the HGC Charter.