Existing Premium Structure for HGC Guaranty
- Retail Guaranty
HGC charges a premium fee for the guaranty. The guaranty premium varies depending on the type of guaranty coverage and loan value classification. The premium is payable in advance for every year of renewal of coverage at the following rates:
Type of Housing Package |
Premium Rate (% to Outstanding Principal) |
|
Standard |
Bond |
|
| Socialized Housing (P300,000 and below) |
1.40 |
1.20 |
| Low-Cost Housing (above P300,000 to P3.0 Million) |
1.45 |
1.15 |
| Medium Cost Housing (above P3.0 Million to P4.0 Million) |
1.50 |
1.10 |
| Open Housing (above P4.0 Million to P10.0 Million) |
1.70 |
1.50 |
The Modified Cash Flow Guaranty Premium is initially set at a.25%. This rate, however, may be reduced, depending on the credit risk of the guaranteed program/scheme.
The premium for a cash guaranty has not been set because this type of coverage was discontinued after the enactment of the new charter. HGC may again provide cash guarantees with appropriate premium to cover the risk that goes with such coverage.
In terms of loan classification, the premium for open housing is higher compared to other packages because the premium from this category is supposed to subsidize the lower packages.
Admittedly, this structure does not address the risk characteristics of each housing classification. Had the risks been considered, the premium should have been higher on the lower packages where loan-to-value (LTV) ratios and default rates are relatively higher from a historical standpoint.
- Developmental Guaranty
The premium fees for developmental guarantees are higher than those for retail because the loan values are greater and the risk components of developmental projects are higher. Among these are: the completion risk, marketing risk, price escalation of materials and labor, and increase in interest rates.
The developmental premium structure is shown below:
Type of Housing Package |
Premium Rate (% of OPO*) |
Enrollment Fee |
Audit Fee |
|
Cash |
Bond |
|||
| Socialized Housing (P300,000 and below) |
2.00 |
1.25 |
5,000.00 |
1/4 % |
| Low-Cost Housing (above P300,000 to P3.0 Million) |
2.25 |
1.50 |
5,000.00 |
1/4 % |
| Medium Cost Housing (above P3.0 Million to P4.0 Million) |
2.50 |
1.75 |
10,000.00 |
1/4 % |
| Open Housing (above P4.0 Million to P10.0 Million) |
2.75 |
2.00 |
10,000.00 |
1/4 % |
The above-stated premium structure was implemented under the old guidelines wherein there was no explicit cap on the loan amount, provided that it does not exceed 3x the networth of the borrower. The loan-to-value ratio and the project requirements as determined by the cash flow projections also had to be met. A call can be made upon payment default even if the project is not completed.
Under the new guidelines, a cap of P75 million is imposed. Also, a call can only be made if the project is completed. With these changes, the premium may be reduced since some of the risks have already been mitigated.
- Securitization
The guaranty program on securitization of housing assets is designed to enable the issuance of securities backed by continuous payment flows from the underlying mortgages or receivables from CTS and other acceptable assets that are pooled. With this guaranty mechanism, the servicing and redemption of the securities are assured.
Under a cash flow guaranty, in the event of default on a mortgage or CTS, HGC pays the corresponding amortizations at HGC's guaranteed interest rate. This type of coverage is deemed cheaper than the traditional coverage because the capital outlay or requirement for HGC is lower.
- Other Fees
| For Retail Guaranty | ||
|
P 10,000.00 | |
|
1/10 of 1% of approved Retail Line |
| For Developmental Guaranty | Socialized |
Low Cost |
Medium Cost |
Open Housing |
|
|
P 5,000.00 |
P 5,000.00 |
P 10,000.00 |
P 10,000.00 |
|
|
P 5,000.00 |
P 5,000.00 |
P 10,000.00 |
P 10,000.00 |
|
|
1/4% |
1/4% |
1/4% |
1/4% |
| For Securitization and Other Guarantees | ||
|
P 10,000.00 |
|
|
P 100.000.00 |