Delinquent borrowers

Many were surprised at the treatment that the National Home Mortgage Finance Corporation (NHMFC) recently got from some of our senators recently. And the question is being asked whether or not the NHMFC is being scolded for actually doing what is right.

NHMFC officials were recently summoned by the Senate Blue Ribbon committee in connection with the sale of some P32 billion worth of highly delinquent housing loan accounts that piled up over the past several decades.

The business sector views is the move  is a wise decision. By selling the highly delinquent accounts to a joint venture entity, the government recovered some P5.13 billion. If the NHMFC did not take this option, the entire portfolio of P42 billion in loans that the delinquent borrowers of the government’s Unified Housing Loan Program had not bothered to pay would have all been lost forever.

According to one business leader, P5 billion in the pocket is better than P42 billion on paper which cannot be collected anyway. So, it looks like the NHMFC move was indeed a sound business decision.

The view is that the NHMFC probably got some scolding because of the backlash that the move triggered from some of the 52,000 delinquent borrowers who may have thought they can forever get away without paying. Now that a private entity has bought the liabilities from the government, somebody is finally running after them.

From where we stand, going after these delinquent borrowers is an auspicious start of a massive clean-up of the housing sector. This should also help change the mentality exemplified by these 52,000 borrowers who apparently had no plans to settle their obligation – that there is no need to repay the loan simply because the money was borrowed from government.

For a while, many thought that the Senate inquiry into the NHMFC sale of that big basket of delinquent accounts was politically colored. Vice President Noli de Castro happens to be the head of the housing sector and there were fears that this non-issue was being used to dent his prospective presidential bid that some people are afraid of.

The NHMFC plan to sell the delinquent accounts in order to recover some portions of it was signed even before the Vice President was named housing czar. He, however, set it into motion.

Maybe, De Castro did not foresee that there would be a backlash from the 52,000 delinquent borrowers. Or maybe, he knew that such backlash could happen but simply had the political will to implement it.

Doesn’t a clean up of the housing sector deserve support rather than scolding? Just asking.

 MWSS deal in question

Any moment now, the Metropolitan Waterworks and Sewerage System (MWSS) will announce the signing of a joint venture that will construct the Laiban Dam in Tanay, Rizal.

The project aims to raise about 1,900 million liters per day (MLD) or 22 cubic meters per second of water for residents of Metro Manila and nearby provinces. It has been listed as a priority project of the Arroyo administration.

However, some sectors are asking why the urgency and secrecy in the approval of the $1-billion Laiban Dam project in Tanay, Rizal that is projected to be seven times bigger than the ZTE-NBN deal. These people are saying that everything from its creation, to the terms of the contract, to the signing and execution of the project  is highly questionable.

They say that the multi-billion peso project has not gone through public bidding as required for government priority projects. Under the law, all government priority projects should undertaken via the build-operate-transfer (BOT) scheme should undergo public bidding.

But the Laiban dam project will be undertaken not through the BOT scheme but via a joint venture agreement with a private firm which submitted an unsolicited proposal to undertake the project. The question is, shouldn’t this be subjected to a Swiss challenge as mandated by law?

According to the MWSS, the project needs to be signed immediately because of the urgency of the need to augment the water supply of Metro Manila. But the project has a seven-year time frame and will not be operational until 2016.

MWSS has committed under a take or pay provision, to buy over 710 million cubic meters of water for 25 years at a total cost of over P391 billion with national government guarantee.

There are those who have expressed apprehension that that the project will raise the cost of water because of its take-or-pay scheme. Meaning, even if water is not delivered, Filipinos will still have to pay for the full amount agreed upon.

The MWSS has projected that the Laiban project will yield 1,900 MLD daily but this is based on estimates made even before World War 2. But the terms of the contract would be for 1,900 MLD so that even if the dam produces half of that amount of water, the proponent would still get paid for the 1,900 MLD.

There is nothing wrong with finding solutions to the country’s water supply problems but the same must be carried out with transparency.

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