HOME DEVELOPMENT MUTUTAL FUND Corporate Headquarters The Atrium of Makati Makati Avenue, Makati City

HDMF CIRCULAR NO. 259 TO : ALL CONCERNED SUBJECT : AMENDED OMNIBUS GUIDELINES IMPLEMENTING THE PAG-IBIG TAKEOUT MECHANISM UNDER THE DEVELOPERS CTS/REM SCHEME

Pursuant to the approval of the HDMF Board of Trustees in its 256th Meeting held last 20 April 2009, the Amended Omnibus Guidelines Implementing the Pag-IBIG Takeout Mechanism under the Developers CTS/REM Scheme are hereby issued:

I. GENERAL PROVISIONS A. OBJECTIVES 1. To enhance the asset quality of the Pag-IBIG mortgage loan portfolio by instituting a credit risk sharing mechanism with housing developers; 2. To define parameters in the allocation and disbursement of funds allocated for housing, specifically for developer-assisted member-loans; 3. To recognize performance of developers in their dealings with HDMF; 4. To provide motivation and incentives to developers to continuously deliver quality mortgages to HDMF; 5. To fast track the governments housing program by providing an express take-out window for accredited developers who meet the standards set by HDMF.

B. COVERAGE These guidelines shall apply to developers who shall deliver housing loan applications to HDMF beginning 20 April 2009. These HL applications are secured by Contracts to Sell (CTS)/Real Estate Mortgage (REM) on the residential property to which the loan proceeds are applied at the point of loan take-out. Developer-assisted housing loan applications filed through the Pag-IBIG retail window shall not be covered by these guidelines

C. MECHANICS 1. HDMF shall accredit developers who shall participate in the program to ensure that its objectives are met. Accredited developers shall be further 1

classified into the following categories in accordance with the criteria set in Item II-A hereof: 1.1 Window 1 (Regular) CTS/REM with Buyback Guaranty 1.2 Window 1 (Elite) CTS/REM with Buyback Guaranty 1.3 Window 2 CTS without Buyback Guaranty 2. The Fund and the accredited developer shall enter into a Funding Commitment Agreement (FCA) providing for among others 2.1 That the Fund shall extend a funding commitment line (FCL) to the developer upon compliance with the terms and conditions set by the Fund; 2.2 That for a developer under Window 1 (Regular) or (Elite), the following shall apply: 2.2.1 That the developer shall receive, evaluate, pre-process and approve the housing loan applications of the Funds memberborrowers in accordance with the applicable Guidelines of the Pag-IBIG Housing Loan Program 2.2.2 That the developer shall buy back CTS/REM accounts that default or are affected by breach of warranties during the first two years of the loan. In the case of a developer under the Window 1 (Elite) scheme, he shall buy back CTS/REM accounts with loan values over Seven Hundred and Fifty Thousand Pesos (P750,000.00) to One Million Pesos (P1,000,000.00) that default or are affected by breach of warranties during the first three years of the loan. 2.2.3 That the developer under Window 1 (Elite) scheme shall be responsible for any liability arising from RA No. 6552, otherwise known as the Maceda Law, for accounts with loan values over Seven Hundred and Fifty Thousand Pesos (P750,000.00) to One Million Pesos (P1,000,000.00). 3. For accounts covered by Contract to Sell (CTS) 3.2 The developer shall execute a Contract-to-Sell with the Pag-IBIG member to cover the purchase of the residential property or lot used as collateral for the Pag-IBIG housing loan of the member. 3.3 The developer shall execute a Deed of Assignment assigning the CTS in favor of the Fund, which shall be annotated in the title of the property. 3.3 Conversion of CTS Accounts 3.3.1 The developer shall convert the security of eligible accounts from CTS to REM not later than the 24th month from date of loan takeout and in accordance with Item VIII hereof. For a developer classified as Window 1 (Elite), conversion of CTS with loan values over P750,000.00 to P1,000,000.00 to REM shall take place not later than the 36th month from date of loan takeout.

3.3.2 All expenses relative thereto shall be for the account of the developer. For this purpose, the Fund shall deduct an amount corresponding to the following percentages of the total loan value from the takeout proceeds of the developer. LOAN VALUE BIR RD LGU Up to P180,000 2.5% 1.5% 1.0% 5.0% Over P180,000 to P500,000 3.5% 1.5% 1.0% 6.0% Over P500,000 to P1 M 4.5% 1.5% 1.0% 7.0% Over P1 M to P2 M 5.0% 1.5% 1.0% 7.5% Over P2 M to P3 M 6.0% 1.5% 1.0% 8.5%

The said rates shall be based on the original loan takeout value regardless of the selling price or zonal valuation of the property. 3.3.3 Retention for BIR or LGU expenses may be waived, refunded or reduced prior to the conversion period. It shall be carried out only upon presentation of the original supporting documents, such as, but not limited to the following: a. Certificates/documents issued by a regulatory government agency expressly granting exemption from paying taxes to the developer [i.e. creditable withholding tax (BIR) and the transfer tax (LGU)] that are relative to the conversion of CTS accounts to REM. Developers granted with tax incentives by the Board of Investments must still present a Certificate of Tax Exemption from the BIR. b. DST Declaration/Return (BIR Form No. 2000) and Payment Form (BIR Form No. 0605). A copy of each document certified by the issuing agency shall be kept by HDMF. 3.3.4 The Fund may, from time to time, review the rates mentioned above and make the necessary adjustments thereon when circumstances warrant, as when new laws, ordinances, rules, regulations or circulars are passed/issued by the concerned government body/agency that may affect existing rates. 3.3.5 The following developers shall be allowed to substitute retention for conversion purposes with other assignable instruments: a. A developer under Window 1 (Regular) b. A developer under Window 1 (Elite) c. A developer who opted to participate under Window 2 despite meeting the classification criteria provided for in Item II A.2 of the abovementioned guidelines, except for the Buyback Performance criterion

Said instruments, the value of which shall be based on the retention rates listed above, shall include but are not limited to the following: a. b. c. d. e. Pag-IBIG Housing Bonds Certificate of Time Deposit and other bank certificates Trust / Escrow Accounts Government securities (treasury bonds, bills, notes, etc.) Other assignable instruments acceptable to the Fund

3.3.6 In case the retained amount is subsequently withdrawn from the Fund in favor of a third party guarantor, the amount to be released shall be net of a service fee of 0.1%. 4. For accounts covered by Real Estate Mortgage (REM) 4.1 The developer shall be responsible for the annotation of the Loan and Mortgage Agreement (LMA) on the Individual Transfer Certificate of Title covering the house and lot units subject of the loan with the appropriate Register of Deeds (RD) and shall deliver the complete mortgage folders to the Fund. 4.2 Instead of a CTS, the loan may be secured by a First REM and exempted from the buyback provision, provided any of the following conditions are complied with: 4.2.1 The borrower pays the advance amortizations for twenty-four (24) months; OR 4.2.2 The loan-to-collateral ratio does not exceed seventy percent (70%) 5. The developer shall commit to answer for any defects on land development and house construction (except that which is caused by normal wear and tear), and shall do the following, at his own expense, within a period of sixty (60) calendar days from the date of loan takeout: 5.1 Re-work and/or reconstruct houses 5.2 Undertake land development, 5.3 Correct defects and/or meet the specifications set by the Housing and Land Use Regulatory Board (HLURB). This shall be without prejudice to the provisions of Article 1723 of the Civil Code of the Philippines, to which the developer agrees to bind himself solidarily with the engineer, architect or contractor (as the case may be). 6. The developer shall be responsible for the payment of all expenses incidental to the registration of the Deed of Assignment / LMA, which necessarily includes the payment of all tax obligations that may be imposed as a consequence of the executions of the said loan documents in favor of the Fund. 7. HDMF shall accredit developers who may enter into a Collection Servicing Agreement with the Fund and act as its collecting agent during the first two years of the loan repayment period in accordance with Item IX hereof.

Developers accredited under the Window 1 (Elite) Scheme may also act as a collecting agent during the first three (3) years of the loan repayment, subject to the provisions of Item IX hereof.

II. ACCREDITATION A. ACCREDITATION AND CLASSIFICATION CRITERIA 1. The Fund shall accredit developers on the basis of the following criteria: 1.1 The developer/company must be duly authorized to operate as evidenced by a Certificate of Registration from the Securities and Exchange Commission (SEC) or the Bureau of Domestic Trade (BDT). 1.2 The developer/company or its key officers must have an established track record in real estate development. 1.3 The developer must show proof of technical and financial capability to undertake and complete the housing project to which the developer shall apply the proceeds of the loan takeouts covered by the funding commitment line. 1.4 The developer/company and its key officers must pass satisfactory background/credit checks to be conducted by the Fund. 2. Participation under the Window 1 (Regular) scheme shall be granted to developers who meet the following classification criteria: 2.1 The developer must have dealt with HDMF for at least two years and with at least 300 accounts taken out. A new developer shall be allowed to take part under the Window 1 scheme, provided any of its key officers have previously dealt with the Fund for at least two years and have facilitated the take out of at least 300 accounts. The key officers being referred herein shall include the board of directors, president/general manager/chief executive officer, corporate secretary, and corporate treasurer. 2.2 Performing Accounts Ratio The developer must have at least two years of delivering quality mortgages to the Fund and at least ninety percent (90%) Performing Accounts Ratio (PAR) at point of evaluation. The PAR shall be computed in this manner: Performing Accounts (i.e., 0 - 3 months in arrears) that are taken out within the last 24 months prior to date of application, PAR = including fully paid accounts and accounts bought back All accounts taken out within the last 24 months prior to date of application, including fully paid accounts and accounts bought back

Should a developer garner a PAR of 89.5%, said score shall be rounded up to 90%. Conversely, a PAR of 89.4% shall be rounded down to 89%. 2.3 Quality of Units The percentage of units that pass inspection should at least be ninety percent (90%) of the total number of delivered and inspected units as of the quarter prior to date of application for FCL. Quality of Units = No. of units that pass inspection No. of units delivered and inspected as of the quarter prior to date of application 90%

2.4 Quality of Documents The percentage of accounts that are properly documented should at least be ninety five percent (95%) of the total number of delivered accounts as of the quarter prior to date of application for FCL. Quality of Documents = No. of accounts that are properly documented No. of delivered accounts as of the quarter prior to date of application 95%

2.5 Post-takeout validation of Borrowers All borrowers whose accounts were delivered as of the quarter prior to date of application for FCL are validated relative to the following: a. eligibility to avail of the loan, per Membership Status Verification Slip (MSVS) b. attendance with housing loan counseling c. their knowledge of the terms and conditions of their respective loans d. their acceptance of the housing units, whether said units were constructed in accordance with plans as approved by HLURB Post-takeout validation of borrowers shall be performed by the Servicing Department for NCR and the Housing Loans Division for Provincial Branches. It shall be carried out within thirty (30) days from takeout. Refer to Annex A - Borrowers Validation Sheet 2.6 Conversion Performance The number of accounts that are already converted or are substantially converted should be at least ninety percent (90%) of all accounts due for conversion as of the quarter prior to date of application for FCL. Conversion Performance = Where, AC - Accounts Already Converted 6 AC + SC (AC+SC)+(BC-EX) 90%

SC - Accounts with Substantial Compliance BC - Accounts Beyond the Conversion Period EX - Excluded Accounts, comprising of the following: a. Those paid in full by the borrower b. Those bought back c. Those subject of reinstatement A developer whose accounts are already with the Registry of Deeds and is able to present proof of payment to the RD, BIR, and the City/Municipal Assessors Office shall be deemed as having substantially complied with the conversion requirement. 2.7 Buyback Performance The number of accounts that are bought back should be at least ninety percent (90%) of total accounts due for buyback as of the quarter prior to date of application for FCL. Buyback Performance = Where, BB - Accounts Bought Back, through over-the-counter payments or offsetting BRP - Accounts beyond the Remedial Period 2.8 Institutional Loan Performance In the event the developer has an outstanding institutional loan, arrearages thereof shall not exceed three (3) months, i.e. performing loan, as of the quarter prior to date of application for FCL. 2.9 Record with the HLURB A developer must have no record of a Cease and Desist Order at the time of evaluation, as supported by a certification issued by the Housing and Land Use Regulatory Board (HLURB). 3. Participation under the Window 1 (Elite) Scheme shall be open to developers who are able to meet the following criteria: 3.1 3.2 3.3 3.4 With PAR greater than or equal to 95% With Conversion Performance greater than or equal to 95% With Buyback Performance greater than or equal to 95% Other Window 1 (Regular) Scheme classification criteria that are not inconsistent with Subsections 3.1 to 3.3 of Item II-A hereof. BB BB + BRP 90%

4. The Senior Management Committee may impose additional requirements or consider additional criteria, as circumstances may warrant, to achieve the objectives of the program.

B. DOCUMENTARY REQUIREMENTS Documentary requirements for accreditation shall be as follows:

1. 2. 3. 4.

Duly accomplished application form Articles of Incorporation and By Laws Corporate profile including capitalization and ownership structure Audited financial statements for the last three years duly acknowledged by the BIR* 5. List of Board of Directors and officers, with resumes 6. Certification from the HLURB that the developer has not been issued with a Cease and Desist Order. 7. Other documents as may be required *For newly registered developers, submit Affidavit of the Treasurer, duly authenticated by the SEC.

C. EVALUATION OF ACCREDITATION

APPLICATIONS

FOR

NEW/RECLASSIFICATION

OF

1. Applications for accreditation shall be evaluated and approved by the Accreditation Committee, composed of the following: Vice President of the concerned operations group as Chairperson Department/Branch Managers as members

2. Developers who did not qualify for Window 1 (Regular) or (Elite) shall be automatically classified under the Window 2 Scheme. However, developers who qualified under Window 1 (Regular) or (Elite) shall have the option to deliver under Window 1 or Window 2 Scheme. 3. Developers shall be notified of the result of evaluation within five (5) working days from date of evaluation. 4. A developers performance shall be evaluated quarterly to determine whether said developer is eligible to continue, or be upgraded under the Window 1 scheme. 5. A developer participating under the Window 1 (Regular) or (Elite) scheme, who failed to meet the corresponding classification criteria thereon, shall be allowed to deliver accounts under the existing scheme for the immediately succeeding quarter; Provided, however, that said developer satisfies the criteria within the said quarter. Otherwise, his deliveries for the next quarters shall be processed under the Window 2 or Window 1 (Regular) scheme, where applicable. 6. Developers under Window 2 who wish to take part in the Window 1 scheme may apply for reclassification for the succeeding quarters. Considering the nature of Window 2, the Buyback Performance criterion will not be considered in the evaluation and reclassification of Window 2 developers.

III. FUNDING COMMITMENT LINE A. ALLOCATION OF PROGRAMMED FUNDS The Fund shall ensure the takeout of eligible housing loan applications delivered by granting a funding commitment line according to the following parameters:

1. Group Allocation Funding allocation for the current year shall be based on the membership level of the concerned Pag-IBIG Operations Group as of the end of the immediately preceding year. 2. Single Developers Limit - the Fund shall impose a single developers limit of not more than P500 Million per annum. B. TERMS AND CONDITIONS OF THE LINE 1. Amount / Term 1.1 The amount of the FCL shall be based on the developers projected schedule of delivery of housing loan applications, from the date of application for FCL up to the end of the calendar year, which shall be the term of the commitment line. For this purpose, the developer shall submit the corresponding monthly schedule of projected delivery of housing loan applications, with the first delivery scheduled not later than sixty (60) calendar days from the date of the signing of the FCA. 1.2 The developer shall inform the Fund in writing at least thirty (30) calendar days prior to delivery date if he shall not deliver housing loan applications for a scheduled drawdown. As such, the developer automatically gets a thirty (30) day extension to utilize the FCL. In case the developer failed to comply with the required notice, the commitment line corresponding to the scheduled delivery shall be forfeited. 2. Commitment Fee 2.1 The developer shall pay a front-end quarterly commitment fee equivalent to one-half percent (1/2%) of the projected delivery for the quarter. 2.1.1 For a developer under Window 2, the commitment fee shall be non-refundable. 2.1.2 For a developer under Window 1, he shall have the option to seek a refund of the commitment fee paid or apply the same to the succeeding quarter, provided the commitment line for the quarter has been utilized completely. The following shall be considered as utilization of the commitment line: a. Actual releases representing take-out values b. Loan values of accounts delivered to the Fund Non-utilization or partial utilization of the commitment line shall entail the forfeiture of the unused line and the proportionate commitment fee for the quarter. 2.2 In case of re-application for a commitment line that was forfeited, the developer shall pay the commitment fee of one-half percent (1/2%) of the commitment line re-applied for.

3. Processing Time and Release of Funds for Accounts under Window 1 (Regular) or (Elite) The Fund shall release the takeout proceeds due the developer within seven (7) working days from the date of submission of the following documents: 3.1 For CTS Accounts a. CTS duly executed between the member-borrower and the developer, with the written conformity of the buyer to the assignment of the CTS to the Fund; b. Certificate of Acceptance declaring that the buyer unconditionally accepts the housing unit; c. Occupancy Permit; d. Individual Transfer Certificate of Title (TCT) covering the subject house and lot package with the Deed of Assignment (DOA) duly annotated thereon; e. Tax Declaration; f. Updated Real Estate Tax Receipts (for the quarter); and, g. Deed of Absolute Sale h. Notarized PN; i. Sworn Affidavit that the lot has been fully developed and that the house construction has been completed, in lieu of the Collateral Appraisal Report (CAR)

3.2 For REM Accounts a. LMA executed by the member-borrower duly annotated on the TCT; b. Notarized PN; c. Certificate of Lot/House Acceptance d. Occupancy Permit; e. Individual Transfer Certificate of Title (TCT) covering the subject house and lot package in the name of the borrower with proper mortgage annotation in favor of the Fund; f. Tax Declaration and Tax Receipt/s in the name of the borrower; and g. Updated Real Estate Tax Receipt (for the quarter) 4. Processing Time for Accounts under Window 2 4.1 Housing loan applications under Window 2 that are delivered after the signing of the FCA, which meet the necessary requirements and are

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within the delivery schedule, shall be processed within thirty (30) working days, and shall be issued the corresponding Notice of Approval (NOA) or Notice of Deficiency (NOD). 4.2 Housing loan applications returned to the developer for rectification of documents or correction of findings shall likewise be processed over a period of five (5) working days, reckoned from the date the rectified loan applications are re-delivered to the Fund. 4.3 Takeout proceeds shall be released within seven (7) working days from date of submission of the following documents a. CTS duly executed between the member-borrower and the developer, with the written conformity of the buyer to the assignment of the CTS to the Fund; b. Certificate of Acceptance declaring that the buyer unconditionally accepts the housing unit c. Occupancy Permit; d. Individual Transfer Certificate of Title (TCT) covering the subject house and lot package with the Deed of Assignment (DOA) duly annotated thereon; e. Tax Declaration; f. Updated Real Estate Tax Receipts (for the quarter); and, g. Deed of Absolute Sale h. Notarized PN; 5. Inspection for Accounts under Window 1 (Regular) or (Elite) 5.1 At any time within thirty (30) calendar days from loan takeout, the Fund shall conduct a post-takeout inspection of accounts delivered by developers providing buyback guaranty. The developer shall ensure that for the duration of the 30-calendar day period, a technical representative of the developer shall always be present to assist the Fund in the inspection. 5.2 The Fund may also inspect the subject property/ies prior to takeout provided that the processing time will still be within the seven-day prescribed period.

C. ADDITIONAL FCL A developer who has fully utilized the FCL applied for the year may be allowed to avail of a new FCL, subject to the following: a. Availability of funds b. Developers PAR

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D. INSURANCE 1. To protect the Fund from the risk of the borrowers death, as well as from fire during the pendency of the loan, CTS/REM accounts that have been assigned to the Fund shall be covered by Sales/Mortgage Redemption Insurance (SRI/MRI) and Fire Insurance, the proceeds of which shall be endorsed to the Fund. 2. SRI/MRI coverage shall take effect on the date the Fund accepts loan applications from developer for Window 1 or on the date of Notice of Approval (NOA)/Letter of Guaranty (LOG) for Window 2 up to end of loan term. 3. Insurance premiums covering the period from acceptance of loan applications from developer for Window 1 or the date of Notice of Approval (NOA)/Letter of Guaranty (LOG) for Window 2 up to the takeout date and the first year of loan repayment shall be deducted from the takeout proceeds.

IV. UNCOMPLETED UNITS / DEVELOPMENT Without prejudice to other legal actions that the Fund may take, and regardless of the number of residential units taken out by the Fund that the developer fails to complete, the said developer shall be notified of such offense in writing and shall be meted with the following sanctions: First Offense Suspension of the FCL until such time that the developer has fully complied with the warranties on house construction. The developer shall be given sixty (60) calendar days to complete the units/development. Pre-inspection of the housing units shall be required prior to loan takeout. Processing of accounts will still be made under the Window 1 after completion of the inspection and issuance of a Collateral Appraisal Report (CAR). The Fund may restore all privileges accorded to developers under Window 1 if all pre-inspected deliveries for the quarter were found to be satisfactorily completed. Restoration of said privileges shall commence on the beginning of the following quarter. Second Offense Suspension of the FCL until such time that the developer has fully complied with the warranties on house construction. The developer shall be given sixty (60) calendar days to complete the units/development. Pre-inspection of the housing units shall be required prior to loan takeout, and processing of the applications shall be made under Window 2. Third Offense Blacklist the developer, including its officers from any future availment or participation under Pag-IBIG lending programs

Such offenses shall be recorded and the developer must be properly notified in writing of such offense.

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V. WARRANTIES The developer shall provide the following warranties: A. LOAN EVALUATION The developer under Window 1 scheme warrants that the member-borrowers and their respective housing loan applications have been properly evaluated and approved in accordance with the applicable guidelines of the Pag-IBIG Housing Loan Program prior to their endorsement to the HDMF.

B. DOCUMENTATION The developer warrants that all documents, inclusive of the individual titles and the corresponding Deeds of Assignment, submitted to the Fund relative to the program, are valid, binding and enforceable in all other respects that they purport to be.

C. TITLE/OWNERSHIP OF PROPERTY The developer warrants that he is the lawful owner of the property or in the case of joint venture, that the owner has authorized him to develop the property and sell the individually titled saleable units in the subdivision or condominium project, subject of the FCA. Likewise, the developer warrants that the property is free from all liens, encumbrances and adverse claims, that the title/ownership papers have no vitiating defects, which could have been found or discovered with the exercise of proper diligence and technical skills.

D. PROJECT DEVELOPMENT The developer warrants that the project shall be developed and completed in accordance with the developmental plans approved by the government agencies and other regulatory bodies concerned.

E. HOUSE CONSTRUCTION The developer warrants that the residential units have been constructed in accordance with the plans and specifications approved by the concerned regulatory agencies, as well as with the local ordinances, and that there are no hidden defects whatsoever in the construction of the said units.

F. MISREPRESENTATION The developer warrants that any person or agent employed by the developer, or allowed to transact or do business in its behalf, has not committed any act of misrepresentation.

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G. COMPLIANCE WITH LAWS, RULES AND REGULATIONS The developer warrants that he complied with all pertinent laws, rules and regulations.

H. CONVERSION OF CTS ACCOUNTS TO REM The developer shall convert the security for eligible accounts from CTS to REM within one hundred eighty (180) calendar days from receipt of notice from HDMF.

I. DELIVERY OF ACCOUNTS AND OCCUPANCY OF UNITS Accounts delivered by the developer to the Fund shall be free from lien and encumbrances. The developer shall turn over the properties to the memberborrowers upon release of the takeout proceeds, and the member-borrowers can occupy these properties immediately.

VI. INCENTIVES FOR DEVELOPERS UNDER WINDOW 1 A. INCENTIVES Window 1 developers shall be granted the following incentives: 1. Execution of Unilateral Deed of Assignment The developer takes the risk that even if the Deed of Assignment is already annotated on the title, the Fund still reserves the right to reject takeout of accounts found to be defective. 2. Deputation of Loan Counseling Qualified developers shall be deputized to conduct the loan counseling in behalf of HDMF, using canned presentations provided by the latter. 3. Post-audit of the Membership Status Verification Slip (MSVS) For qualified developers, the MSVS shall be subject to post-audit evaluation within thirty (30) days from takeout, provided, that the developer shall correct any findings on accounts of borrowers who were subsequently found ineligible within thirty (30) days from receipt of Notice of Buyback. The developer shall be given fifteen (15) days from demand to buy back said accounts. In case of failure to buy back the account, HDMF shall automatically offset the total amount due against subsequent takeout proceeds or from any amount due the developer, if any, within five (5) days from the date the 15-day grace period expires. 4. Window 1 (Elite) accounts shall be allowed to deliver loans over Seven Hundred and Fifty Thousand Pesos (P750,000.00) up to One Million Pesos (P1,000,000.00) with the following additional features: a. One hundred percent (100%) loan-to-collateral ratio b. Exemption from Net Disposable Income evaluation

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B. OTHER CONDITIONS 1. Should a developer who benefits from the incentives provided for in these guidelines violate any of the provisions of the Funding Commitment Agreement (FCA), said benefits shall be suspended until such time that the terms and conditions of the said agreement has been fully complied with. Restoration of said incentive shall commence on the beginning of the quarter following the date of the developers compliance. 2. Member-borrowers, who shall be purchasing properties from developers allowed to have a post-audit of MSVS, shall certify that he/she: a. is a member of the Fund in good standing, i.e. has at least 24 monthly contributions and is updated; b. has no STL or has one but it is updated; c. has no existing housing loan, either as principal or co-borrower; d. had no Pag-IBIG housing loan that was foreclosed, cancelled, bought back, or subjected to dacion en pago; and, e. has attended loan counseling Developers shall likewise certify that the member-borrower has attended loan counseling. The above certifications shall be subject to the validation of HDMF and shall not prejudice the latter from demanding the buy back of affected accounts or instituting appropriate action as provided in the FCA should negative findings arise. Issuance of MSVS shall be carried out within seven (7) days from submission of complete requirements 3. All operating units must designate a point person to process the MSVS from other branches in case online verification is unavailable. For regional requests for MSVS verification by NCR branches, said requests shall be coursed through the Servicing Department Loans Origination Group

VII. CONVERSION OF CTS ACCOUNTS TO REM A. ACCOUNTS ELIGIBLE FOR CONVERSION 1. The following accounts shall be eligible for conversion to REM: 1.1 All Contract-to-Sell (CTS) accounts updated during the two-year seasoning period, and with at least eighteen (18) monthly installments. 1.2 All CTS accounts delivered under the Window 1 (Elite) Scheme, with loan values over Seven Hundred and Fifty Thousand Pesos (P750,000.00) to One Million Pesos (P1,000,000.00), that are updated during the three-year seasoning period and with at least thirty (30) monthly installments. 1.3 CTS accounts with recorded delinquencies but are updated at the time of evaluation and are eligible for conversion. 2. Non-payment of the equity and other obligations due the developer from the member-borrower shall not be grounds for non-conversion of CTS accounts

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notwithstanding any agreement entered into between the developer and the member-borrower.

B. PERIOD FOR CONVERSION 1. The developer shall begin converting eligible CTS accounts to Real Estate Mortgage (REM) on the 18th month from date of loan takeout. In the case of Window 1 (Elite) accounts with loan values over P750,000.00 to P1,000,000.00, conversion shall commence on the 30th month from date of loan takeout. The conversion of the CTS to REM shall be based on prior written notice from the HDMF indicating the list of CTS accounts that are eligible for conversion to REM. If found negligent in the issuance of notices for conversion that would cause the Fund to become liable under the refund provision of the Maceda Law, the costs or losses that may be incurred shall be for the account of the PagIBIG Fund officer and/or employee directly responsible for the delay of issuance. 2. Developers providing buyback guaranty may opt to convert accounts earlier than the 18th or 30th month from date of loan takeout, as the case may be. Notwithstanding the early conversion of CTS accounts to REM, the buyback guaranty shall remain in full force until the end of the two-year or threeyear seasoning period, whichever is applicable. 3. The conversion of the CTS to REM shall be done within a period of one hundred and eighty (180) calendar days, reckoned from receipt of the Notice of Conversion, but in no case shall it go beyond the 24th month of the seasoning period. In the case of Window 1 (Elite) accounts with loan values over P750,000.00 to P1,000,000.00, conversion must not go beyond the 36th month of the seasoning period. 4. A developer whose accounts are already with the Registry of Deeds and is able to present proof of payment to the RD, BIR, and the City/Municipal Assessors Office shall be deemed as having substantially complied with the conversion requirement as prescribed in Item II-A.2.6 hereof. Proof of payment must be presented to the Fund within five (5) days from date of payment. A certified copy of the said documents shall be kept by the Fund.

C. RELEASE OF LOAN DOCUMENTS AND RETENTION 1. Upon presentation of the updated real estate tax receipts, the developer shall execute a Deed of Undertaking pertaining to the conversion of CTS accounts. The Fund shall then release the following documents: 1.1 Signed but not notarized Deed of Absolute Sale (DOAS) 1.2 Tax Declaration 1.3 Loan and Mortgage Agreement (LMA) 2. The Fund shall process the refund of the retained amount upon the developers presentation of the notarized DOAS. The said amount shall

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be released to the developers authorized representative only upon presentation of a duly notarized authorization letter. 3. The original Transfer Certificate of Title (TCT) / Condominium Certificate of Title (CCT) shall be released to the developer only upon presentation of the Certificate Authorizing Registration (CAR) issued by the Bureau of Internal Revenue (BIR). The developer shall execute a Trust Receipt pertaining to the title to be converted. 4. In case the developer opted to use other instruments instead of retention for conversion purposes, the Fund shall only release the assigned instruments to the developer after the latter returns the new TCT / CCT to the Fund, which should be issued in the name of the buyer and the LMA duly registered and annotated in the back thereof. The assigned instruments shall be released to the developer or his representative, upon presentation of a duly notarized authorization letter, within seven (7) working days from compliance with the required documentation. 5. The Cancellation of Deed of Assignment shall only be released to the borrower, along with the Cancellation of Mortgage and the TCT/CCT, upon full payment of his/her housing loan.

D. REMEDIES AVAILABLE TO THE FUND 1. For CTS accounts whose conversion to REM is overdue, without prejudice to the Funds right to file appropriate action in court against the developer and/or any of its officers, the Fund may impose singly or collectively the following sanctions, if warranted: 1.1 The developer shall be required to buy back the account. 1.2 HDMF shall retrieve the documents from the developer and shall take over and/or outsource the conversion process. The Fund shall suspend subsequent releases of Transfer Certificates of Title (TCTs) and Retention Fees to the developer until such time that all conversion expenses advanced by HDMF have been fully settled. Succeeding conversions of the said developers accounts shall likewise be undertaken by the Fund and/or its authorized agents. Hence, the corresponding retention covering the conversion expenses of said accounts shall not be released to the developer. 1.3 All conversion expenses advanced by HDMF, if any, plus a service fee equivalent to two percent (2%) of the loan value or Seven Thousand Five Hundred Pesos (P7,500.00) per account, whichever is lower, shall be collected from the developer. In the event the developer fails to pay the service fee, the same shall be charged against his future takeout proceeds. 1.4 The developers succeeding deliveries of housing loan applications shall be documented under the REM scheme. However, the REM account shall still be covered by buyback guaranty.

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1.5 If within thirty (30) calendar days from receipt of billing, the developer is still unable to pay the Fund for the conversion expenses and service fee, the developer shall be blacklisted from the Funds roster of accredited developers, without prejudice to other legal actions that the Fund may take. 2. If an account defaults while conversion is still in process, regardless of whether the seasoning period has expired, the developer shall be required to buyback the account. 3. The Loans Management Group shall provide the Loans Origination Group with a monthly aging of accounts that are undergoing conversion until such time that the said accounts have been fully converted. Similarly, the Loans and Contribution Management and Recovery Division-Regional Branch shall provide the Housing Loans Division-Regional Branch with the monthly aging of accounts.

VIII. BUYBACK OF ACCOUNTS A. GROUNDS FOR BUYBACK The following circumstances shall be grounds for the buyback of accounts: 1. Default of Contract-to-Sell (CTS)/Real Estate Mortgage (REM) accounts For CTS accounts, default shall mean failure of the member-borrower to pay when due any three (3) consecutive monthly installments stipulated in the Contract-to-Sell, which is inclusive of the two (2) months grace period provided for in Section 4 of R.A. 6552. For REM accounts, default shall mean failure of the borrower to pay any three (3) consecutive monthly amortizations. Developers providing buyback guaranty shall be furnished with a monthly status report of covered accounts, indicating the name of the borrower, number of payments made, status (e.g. updated, in arrears, in default) and other relevant remarks / information. This shall be furnished to the developer not later than the 15th of every month. In any of the foregoing instances, whether the account is a CTS or REM, for purposes of buyback, default shall set in whether or not any requirement for notice or any other condition/s has/have been satisfied. 2. Breach of the Developers Warranties, as stated in Item V hereof. This shall apply to developers under Windows 1 and 2.

B. NOTICE OF BUYBACK 1. The Notice of Buyback must be sent to the developer not later than 15 calendar days from the date of default or discovery of the breach of warranties. 2. In other cases of breach of warranty/ies where the developer is given certain period within which to correct or cure the breach, the Notice of

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Buyback must be sent to the developer not later than fifteen (15) calendar days from the lapse of the prescribed period to cure or correct the breach.

C. MODES OF BUYBACK 1. Outright Buyback 1.1 In case of default of CTS accounts, the developer shall buy back the accounts, either in cash or in check, within sixty (60) calendar days from receipt of the Notice of Buyback. 1.2 In case of breach of warranties, as determined by HDMF, the developer shall buy back the defective CTS account within fifteen (15) calendar days upon receipt of Notice of Buyback. 2. Offsetting 2.1 In case of default of CTS/REM account, the developer may submit a written request within sixty (60) calendar days from receipt of the Notice of Buyback for the offsetting of the amount due against the subsequent takeout proceeds or any amount due the developer in the event that he is unable to buyback the account within the prescribed period or is incapable of applying for any legal remedy. 2.2 In case of breach of warranty/ies, the developer may submit the written request for offsetting of the amount due against the subsequent take out proceeds or any amount due the developer within fifteen (15) calendar days from receipt of Notice of Buyback in the event that he is unable to buyback the account within the prescribed period. 2.3 In case of failure of the developer to buyback the account or failure to avail of any acceptable remedies within the specified 90-day grace period, HDMF shall automatically offset the total amount due against subsequent takeout proceeds or from any amount due the developer, if any, within five (5) calendar days from the date the 90-day grace period expires. 2.4 In case of failure of the developer to buyback the account for breach of warranty/ies, HDMF shall automatically offset the total amount due against subsequent takeout proceeds or from any amount due the developer, if any, within five (5) calendar days from the date the 15day grace period expires.

D. REMEDIES AVAILABLE TO THE DEVELOPER Within ninety (90) calendar days from receipt of Notice of Buyback, the developer may be allowed to resort to any of the following acceptable remedies: a) Require the member-borrower to update the account; b) Replace the member-borrower through assumption of CTS obligation or through a new CTS.

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E. BUYBACK VALUE 1. The buyback value shall be defined as the total outstanding loan obligation of the member-borrower at point of default (comprised of the outstanding principal balance, and unpaid interest), which should be paid within sixty (60) calendar days from receipt of Notice of Buyback. For accounts affected by breach of warranties, the buyback value shall be the total outstanding obligation at point of receipt of Notice of Buyback. Pag-IBIG membership contributions and insurance premiums shall not be included in the buyback value. Should the developer be unable to buyback the account within the sixty (60)-day prescribed period, the buyback value shall be subject to a penalty of one-twentieth of one percent (1/20 of 1%) of the amount due per day of delay, reckoned from the date of default up to the actual date of settlement. The above values shall also be applicable in instances where the developer fails to avail of any of the legal remedies available or HDMF exercises its option on offsetting against subsequent takeout proceeds, as well as in cases of call on the guaranty. 2. For breach of any of the warranties, the developer shall be required to buyback the subject accounts within fifteen (15) calendar days from demand. Failure to pay such amount due within the said period shall subject the buyback value to a penalty of 1/20 of 1% per day of delay, reckoned from receipt of Notice of Buyback up to actual date of settlement. 3. All amounts retained for conversion shall be applied against the buyback value at point of payment/offsetting. 4. In case of staggered/partial payments, penalties shall continue to accrue against any unpaid amount beyond the sixty-day period until such time that the said amount has been fully settled. 5. Delays in the issuance of notice shall not be deemed as a waiver of the recourses/remedies available to the Fund. Notwithstanding the said delay, the developer should still buy back the account within sixty (60) calendar days from receipt of Notice of Buyback. Failure to do so shall subject the buyback value to penalties, which shall be computed from date of receipt of notice up to actual date of settlement. If found negligent in the issuance of notices, the deficiency in the computation of penalties from the point of default up to the date that the developer receives the notice shall be for the account of the Pag-IBIG Fund employee and/or officer directly responsible for the delay of issuance.

F. DOCUMENTS TO BE ISSUED UPON BUYBACK Upon receipt of the payment for the buyback of the account (either in the form of cash/check payments over the counter or offsetting), HDMF shall issue a Deed of Release/Cancellation of Assignment covering the CTS accounts subject of the Deed of Assignment executed by the developer in favor of HDMF.

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G. SANCTIONS FOR NON-BUYBACK Without prejudice to other legal actions that the Fund may take, the Fund shall suspend the developers entire FCL for failure to buyback the CTS accounts or apply for any of the acceptable remedies within the prescribed 90-day period. The Fund may also blacklist the developer, including its officers from any future availment or participation under any of the HDMF lending programs

H. REINSTATEMENT OF CTS ACCOUNTS Accounts subject of Notice of Buyback and/or those that are already bought back by the developer may be reinstated by the borrower beyond the ninety (90) day remedial period from receipt of Notice of Buyback, provided that the following conditions have been complied with: 1. The borrower has personally submitted a formal written request to update the account. Upon interview and satisfactory evaluation of the borrower, the Fund shall endorse the borrowers letter-request to the developer for conformity. 2. The developer/HDMF has not yet cancelled the CTS and its corresponding Deed of Assignment. 3. The member-borrower actually resides in the subject property, as validated by the Fund. 4. The payment for updating will come from the borrower. The total amount for updating shall refer to total arrearages up to actual date of updating. 5. The borrower shall update his/her membership contributions. 6. Conversion shall be done before the end of the new seasoning period and in accordance with Item VII of these guidelines. 7. In view of the reinstatement of the account, the developer shall execute a written document explicitly acknowledging his liability for any obligation arising from RA No. 6552, with the conformity of the borrower. 8. Approval of the reinstatement of CTS accounts shall be subject to existing level of authorities per loan amount. 9. Reinstatement of the CTS account beyond the buyback period shall only be allowed once during the term of the original loan. 10. Upon full updating and reinstatement of the account, the Fund shall return to the developer the buyback value previously paid by the latter, net of the penalties, if any.

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IX.

COLLECTION SERVICING AGREEMENT A. MECHANICS 1. Only developers that have dealt with the Fund for at least two (2) years and with PAR rating of at least 80% at point of evaluation shall be allowed to act as HDMFs Collecting Agent for the duration of the seasoning period. 2. Developers with existing Collection Servicing Agreement as of effectivity of these guidelines who failed to meet the aforesaid criteria shall be allowed to continue to act as Collecting Agent and receive the same Collection Servicing Fee for the immediately succeeding quarter; Provided, however, that said developer satisfies the criteria within the said quarter. Otherwise, the CSA shall be terminated for the remaining months of the seasoning period. All PDCs, used and unused PFRs shall be retrieved by the Fund upon issuance of notice of termination of CSA. 3. The Fund and the developer shall enter into a Collection Servicing Agreement (CSA) providing for among others: 3.1 That HDMF shall process the takeout of housing loan accounts delivered by participating developers. 3.2 That the developer shall provide collection assistance to HDMF for the duration of the two-year or three-year seasoning period, whichever is applicable, unless said collection assistance is extended subject to the provisions of Item IX-H. PFRs to be issued by the developer to the buyer must be dated on date the payment was made. 3.3 That the Fund shall pay a Collection Servicing Fee (CSF) to the developer for the latters services as the Funds collecting agent. 4. The Fund shall provide the developer with a list of accounts and the Collection Schedule indicating thereon the monthly installments due and the corresponding due dates, to serve as basis for collections. The Collection Schedule shall be an integral part of the CSA, the conforme portion of which shall be signed by the developer as proof of his conformity and the duplicate thereof submitted to the Fund. On a monthly basis, the developer shall provide the Fund with a list of borrowers who have fully paid their accounts or signified an intention to pay through other modes (e.g. auto-debit arrangement, salary deduction, etc.) for their exclusion from the Collection Schedule. The request for exclusion must be submitted to the Fund not later than the 5th day of the month following the occurrence of full payment or signified payment through other modes. Within five (5) days thereafter, the Fund shall provide the developer with a revised Collection Schedule. 5. The developer shall collect the monthly installments of the memberborrowers during the two-year seasoning period, based on the Collection Schedule and remit the same to HDMF, subject to Item IX-D hereof. 6. The Fund shall issue HDMF Receipt (PFR) booklets to developers, for which the latter shall be held responsible for the issuance of the corresponding PFRs to member-borrowers from whom they collect monthly

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installments. The PFRs to be issued by the developer shall be stamped with the name of the developer for easy identification and monitoring. The Fund shall monitor the usage of the PFRs based on the Abstract of Collection/Deposit Report (ACDR) and Pag-IBIG Fund Receipt Inventory Report (PFRIR) to be submitted by the developer. 7. HDMF shall furnish the developer with a monthly status report of accounts covered by the CSA.

B. GUARANTY FOR COLLECTION REMITTANCE 1. The developer shall secure a surety bond from the Bonding/Insurance companies accredited with HDMF as guaranty for the remittance of collection proceeds. 2. The said bond shall be assigned in favor of the Fund to cover the amount that may be collected for a period of one (1) month but are not remitted by the developer. The amount of the collection guaranty shall be based initially on the Collection Schedule provided by the Fund. The Fund shall increase the amount of the bond or require the developer to furnish a replacement security, if circumstances so warrant. 3. The said bond shall continue to be in full force and effect until the termination of the CSA. 4. HDMF shall call on the collection bond within ten (10) days from date of non-remittance.

C. REMITTANCE OF COLLECTIONS AND SUBMISSION OF COLLECTION REPORTS The developer shall remit the collections for the collection period specified below and the corresponding ACDR and PFRIR to the Treasury Department-Collecting Agents Accounts Division for NCR and Cash and Administrative Services Division for regional branches in accordance with the following schedule: Type of Collections Cash Collection Period Monday to Sunday Monday to Tuesday Check Wednesday to Sunday Remittance Date On or before 5:00 pm of the first working day of the following week On or before 5:00 pm of the first working day of the following week On or before 5:00 pm of Thursday of the following week, or the immediately following working day if Thursday is a non-working day

Collection reports shall be submitted to the Fund in electronic files, either through submission of diskettes or through electronic mail.

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In case there is no HDMF office in the area, the developer may deposit the weekly collections on the prescribed day to the Funds designated bank account.

D. COLLECTION SERVICING FEE The collection servicing fee (CSF) equivalent to two and a half percent (2.5%), for accounts under Window 1, and one percent (1%) for accounts under Window 2, for the following collections: Regular monthly collections Monthly amortizations not to exceed three (3) months The CSF shall be paid to the developer not later than the twentieth day of the following month. However, CSF rates shall be subject to periodic review taking into consideration the financial condition of the Fund.

E. PENALTY 1. The developer shall be charged with a penalty of P500 per day if any of the following offenses were not addressed within five days from the date the collection remittance/reports are due: 1.1 Failure to remit the weekly collections as prescribed in Item IX Section C of this Circular. 1.2 Underpayments or discrepancies between actual collections remitted to the Fund and amount reflected in the collection reports. 1.3 Delayed submission of collection reports stipulated in Item IX Section C. 2. Beyond the aforesaid five-day period, the developer shall be charged with a penalty of P500 or 1/20 of 1% of collection due per day of delay, whichever is higher. Said penalty shall be imposed without need of notice or demand. 3. The Fund shall automatically deduct the penalties incurred from the CSF for the affected collection remittance or developers other receivables from the Fund.

F. SANCTIONS FOR NON-REMITTANCE OF COLLECTIONS 1. In addition to the penalty charges stipulated in Item VII-E hereof and without prejudice to the Funds right to file appropriate action in court against the developer and/or any of its officers, the Fund shall impose the following sanctions: First Offense If the developer fails to remit the collection proceeds within ten (10) days from the date it falls due, the Fund shall suspend the CSA. All PDCs, used and unused PFRs shall be retrieved by the Fund at point of developers receipt of notice of

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suspension. Thereafter, the Fund shall call on the guaranty for the remittance of collection proceeds. The suspension shall be lifted only upon remittance of collections and payment of penalty, or upon settlement of call. Once a call has been made on the guaranty covering the developers collection remittance, the developer shall assign a new guaranty in favor of the Fund for the remittance of one-month gross collection proceeds upon lifting of suspension as guaranty. Second Offense The CSA shall be cancelled / terminated automatically. All PDCs, used and unused PFRs shall be retrieved by the Fund at point of developers receipt of notice of cancellation. The Fund shall call on the guaranty for the remittance of collection proceeds. Such offenses shall be recorded and the developer shall be properly notified of such offense in writing. 2. The Fund may also impose singly or collectively the following sanctions, if warranted: 2.1 Suspend the acceptance of housing loan applications 2.2 Cancel the developers FCA and barring said developer, including its key officers, from any future availment or participation under PagIBIG lending programs

G. NOTICE TO MEMBER-BORROWERS 1. HDMF shall notify member-borrowers affected by the suspension or cancellation/termination of CSA, as discussed in Item IX-F hereof, within three (3) working days from its occurrence that instead of paying their subsequent installments/amortizations through the developer, they should remit such payments on or before their respective due dates to any of the following: 1.1 HDMF Billing and Collection Department 1.2 Provincial Branch responsible for the takeout of the account 1.3 Accredited Collecting Banks/Agents 2. Upon the developers compliance with the conditions for the lifting of suspension, the Fund shall inform the borrowers that they may continue remitting their amortization payments through the developer within three (3) working days from date of issuance of notice to the developer relative to the lifting of CSA suspension. 3. At least two months prior to the expiration of the two-year seasoning period, the branch concerned shall send notices to the member-borrower stating that installments/amortizations from the 25th month onwards shall be remitted on or before his/her accounts due date to any of the channels enumerated in Item IX-G Section1.

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H. EXTENSION OF COLLECTION SERVICING AGREEMENT FOR ACCOUNTS BEYOND THE SEASONING PERIOD 1. The developer may apply to extend the CSA for accounts originally covered during the seasoning period, which on the basis thereof, the Fund shall determine whether the developer shall be allowed to continue as its Collecting Agent for the aforementioned accounts based on the following criteria: a. Completeness and timeliness in the remittance of collections and submission of collection reports in accordance with Item IX-C hereof. Completeness shall mean that all collection documents and reports are submitted by the developer, as well as full remittance of all amounts due for the period. Timeliness, on the other hand, shall mean remittance to the Fund without delay. b. PAR rating of at least 80% covering all accounts covered by the existing Collection Servicing Agreement, including those that are beyond the seasoning period to be eligible for an extension of the CSA. 2. Upon extension of the CSA for the said accounts, the developer shall be entitled to a collection servicing fee based on the following PAR rating: PAR 80% - 85% 85% - 90% 91% - 95% > 95% Collection Servicing Fee 1.0% 1.5% 2.0% 2.5%

Monitoring of the developers PAR shall be done monthly, which shall serve as basis in determining the CSF for the month. Payment of the CSFs to the developer shall be made not later than the twentieth day of the following month. The above CSF rates shall be subject to periodic review taking into consideration the financial condition of the Fund. 3. The extension shall be governed by the CSA previously executed between the Fund and the developer under the same terms and conditions except for the Collection Servicing Fee rate which shall be based on the PAR rating of the developer as herein provided. 4. The extension shall follow the same mechanics set forth under Item IX-A hereof.

X. REPEALING CLAUSE HDMF Circular No. 237, as well as all memoranda, rules, regulations, and other issuances inconsistent herewith are hereby repealed, amended or modified accordingly.

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XI. AMENDMENTS The Senior Management Committee may amend, modify or revise certain provisions of these guidelines, provided that the amendments, modifications, revisions thereof are in furtherance of the objectives of this program and are consistent with the mandate of HDMF under its charter and existing laws. These guidelines shall take effect on 20 April 2009.

JAIME A. FABIAA Officer-in-Charge Makati City _______________, 2009

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