Why I am concerned with Pag-IBIG foreclosures
OFF TANGENT - Aven Piramide (The Freeman) - December 28, 2014 - 12:00am

Someone, who wanted me to keep his name from being printed, called to complain about my last article.  He said that while he figured out the general framework of my write up, I was, in his words, "cryptic." I failed to discuss the full range of my idea to his complete understanding. And I am sure that my friend was just being his usual self, modest. According to him, he also been noticing the number of public auction sales publicized by Pag-IBIG Fund. In fact, there were announced in one local newspaper alone 9 foreclosure petitions the day before he called me. But, rather than being alarmed by the numerous auctions, he thought that foreclosures were part of normal business activities such that they should not be of such concern as to become a topic of my column.

Well, I wrote on that subject in the hope that our legislators take a good look at the situation. An incredible amount of money is probably involved here. And if this money comes from the contributions of Pag-IBIG members, like me, there is certainly tremendous degree of public interest involved.

Why so?  The huge numbers of foreclosure moves taken by Pag-IBIG indicate an equally big volume of defaulting borrowers. As I wrote on the subject, there were 14 such public auction sales announced in one day. To repeat, that was just one day's publication. So how many foreclosures does the institution make in a month? In a year? And if the amount involved in that one publication shot beyond ten million pesos, we must be talking about billions of pesos.

Let us go back to the basics. It is a general practice of the business of financial institutions to loan funds to borrowers who provide adequate security. As I understand it in the case of Pag-IBIG fund, the security that it requires of its borrowers is a mortgage on the very property that a would-be homeowner seeks to own. For example, let us suppose that the cost of a socialized housing unit that a would-be purchaser has come to like, is P400,000.00.  In all likelihood, he is required to put up an equity of ten percent, (P40,000) in order to buy it. Pag-IBIG then pays the developer the whole price. The sum paid by Pag-IBIG, together with the interest and other charges is considered a loan that the homeowner-buyer pays in monthly installments for a period of time, usually 25 years. In order to assure the payment of the loan, the title to the property is registered in the name of the homeowner-buyer but a real estate mortgage is annotated in favor of Pag-IBIG.  When the buyer-borrower defaults in his payments, the lender forecloses on the mortgaged property.

In my last article, I cited the case of a 38 square meter property located in Minglanilla which Pag-IBIG advertised for sale at more than one million pesos. Yet, how much was its original cost when the eventually defaulting buyer bought it? I have to assume that the house built on that 38 square meter lot must, presumably, be old. For all we know, it now needs some serious repair work to be done for it to be livable.

At the outskirts of the city, there are still parcels of land valued at say P3,000 per square meter or thereabout. If I buy a 100 square meter lot, I will spend about P350,000 including taxes and fees. So, that if I have available the  P 1,200,000 that kind of money that may be intended for the Minglanilla lot, my options are clear.

What I am trying to say is that the possibility of Pag-IBIG selling the mortgaged properties to other parties is almost nil. If there are no takers of the foreclosed properties, then it is stuck with non-performing assets where the sums of money it used to pay could not be recovered. If this should be the situation, government leaders need to look into two things. Investigative authorities must find out if there are individuals who facilitate these transactions even if conscious that they are manifestly disadvantageous to the government. Investigators might discover malicious confabulation between private developers and fund managers. At the same time, our lawmakers must hurry in enacting remedial legislation. Before the Pag-IBIG funds are used in these perceptibly no-recoverable investments, statutes must be put in place to guard our funds.


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