NHMFC eyes guarantee model for reverse mortgage program

MANILA, Philippines — The National Home Mortgage Finance Corp. (NHMFC) plans to implement a guarantee model for its reverse home mortgage program in a bid to lure more senior citizen borrowers.

“We will have to have something that has a guarantee, because like I said, if we shoulder the rates, eventually it reflects on the balance sheet,” NHMFC president Felixberto Bustos said.

He said the agency was in a negative financial position when he joined the NHMFC late 2011.

“They’ve done some aggressive spending in the past. We only became positive last year. It took us four years to get back to self sufficiency,” Bustos said.

Bustos said incorporating a guarantee model into the reverse home mortgage program would help pay for shortfalls the fund may encounter in the case of borrowers being unable to pay loans.

The NHMFC took part in the Knowledge Sharing Program (KSP) of the Korea Ministry of Finance and the Korea Development Institute (KDI), which aimed to help the former improve its reverse home mortgage program.

The agency’s reverse home mortgage program, dubbed as MaBuhay, was implemented in November 2016 in a bid to help senior citizens/retirees with limited income to use their properties as a source of additional income.

Among the policy recommendations of the Korean government through the KSP is to shift the current loan execution structure of the MaBuhay program to the “guarantee structure”, such as that used by the Korea Housing Finance Corp. (KHFC), that lends guarantees with the government’s budget.

“Rather than a process that organizes budgets every year and borrows MaBuhay directly, the process of running Mabuhay with funds from the bank would be recommended,” said Jae Hyun, research fellow of the Korean Fiscal Performance Management Institute.

“It is expected that the efficiency and effectiveness of government financial investment as NHFMC guarantees MaBuhay and run MaBuhay loans as financial resources of banks and other financial institutions,” he added.

This sentiment was echoed by Seung Dong, professor at the Sangmyung University, as he emphasized that the current Philippine model for the reverse mortgage program is based on the conventional mortgage loans model.

“In this model, lenders may face the prospect of running out of funds,” Dong said. “And spreading risks between borrowers and lenders can be a critical issue because both do not have a tool for managing risks for reverse mortgage products,” he added.

Moreover, Hyun said NHMFC also needs to work on the promotion strategy of Mabuhay program.

Since the Mabuhay program’s launch in late 2016, Bustos said the NHMFC has only three approved borrowers for the program at present.

Dong stressed the importance of improving the country’s reverse mortgage program as the Philippines will be considered as an “aged society” by 2040, where in more than 14 percent of the population are senior citizens, based on projections by the United Nations.