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



Pursuant to the approval of the HDMF Board of Trustees during the 256th Board Meeting held last 20 April 2009, the following Amended Guidelines on House Construction Financing Line are hereby issued: A. OBJECTIVES 1. To encourage developers to construct housing units on their fully developed lots, thus, creating ready inventories of affordable house and lot packages for sale. 2. To provide developers with a liquidity mechanism that will increase their capacity for construction of housing units and reduce project financing cost. 3. To provide bridge financing for the construction or completion of housing units with approved housing loan applications under the Pag-IBIG end-user financing program.

B. ELIGIBILITY REQUIREMENT 1. The proponent must have established a track record of at least three (3) years in housing development. If the proponent has previous dealings with the Fund, the proponent must have an established track record of delivering quality mortgages. 2. The proponent must have a good credit standing among banks, suppliers, financial institutions and other government housing agencies. 3. At any time, the Funds exposure for wholesale loans on projects of the proponent does not exceed the single borrowers limit prescribed by the Fund.

C. LOAN FEATURES 1. Loan Purpose The proceeds of the loan shall be used exclusively for the construction of the housing units on the property for which the Fund shall release funds; provided that the proceeds of the loan shall entail the house and lot packages in the project site to add up to at least seventy percent (70%) of the total units.

2. Loan Amount / Effectivity of the Line The line shall be based on actual project need per HDMF evaluation of house construction cost, but not exceeding Twenty Million Pesos (P20,000,000.00). The line shall be revolving and shall be made available within one (1) year from date of execution of the Memorandum of Agreement (MOA) between HDMF and the developer, renewable for another year thereafter. At any time, HDMFs exposure, inclusive of the outstanding obligations in other institutional loan programs, shall not exceed the single borrowers limit prescribed by the Fund. 3. Interest Rate The loan shall bear an interest rate defined as the prevailing market rate (on Friday preceding the date of release of proceeds) of 2-year Treasury Notes, plus three percent (3%). In no case, however, shall the said interest rate fall below the rate of 8.5%. The PDST-F yield rate may be used as an alternative basis to Treasury Notes in determining interest rates. 4. Loan Release The loan shall be released in tranches, the initial drawdown of which shall be equivalent to fifty percent (50%) of the approved loan. Succeeding releases shall be made only after ninety percent (90%) of the previous drawdown has been infused in the project, wherein at least seventy percent (70%) are already in place while twenty percent (20%) are in inventory of construction materials. The outstanding loan obligation at any given time shall not exceed 70% of collateral value. 5. Loan Term The loan shall have a maturity period of twelve (12) months. 6. Collateral The loan may be secured by any of the following collaterals: a. On-site collateral subject to 70% loan-to-value ratio; and/or b. Off-site collateral, either adjacent or contiguous to the project site, and is classified as residential and fully developed in terms of land development. However, loan-to-value ratio for off-site collateral shall be limited to 50% of the appraised value. Regardless of whether it is on-site or off-site, the collateral must be fully developed in terms of land development. The developer shall execute in favor of and deliver to HDMF the Deed of Assignment of Take-out Proceeds, Real Estate Mortgage, Promissory Notes and TCTs covering the house and lot packages for which HDMF shall release funds.

7. Loan Payment The loan shall be paid as follows: a. Interest interest on loan shall be paid quarterly, with the first payment due at the end of the first quarter from date of the initial loan release. b. Principal principal is due on the 12th month from date of initial loan release. c. Application of take-out proceeds at least 70% of the mortgage take-out proceeds due the developer from HDMF shall be applied to the outstanding principal at any time after the initial release of the house construction loan. Should the take-out proceeds fully cover the developers outstanding loan balance and accrued interest charges, HDMF shall remit any remaining amount thereon to the developer. In the event that the house and lot packages for which the Fund shall release funds shall be financed by institutions other than HDMF, or in case of cash sales, the corresponding TCTs shall be released to the developer only upon payment of the redemption value. In the event that no take-out is effected during the loan term, the principal and any accrued interest due thereon shall be due and demandable upon loan maturity. 8. Penalties The developer who fails to pay his loan obligations when due shall be charged a penalty of 1/20th of 1% of any unpaid amount for every day of delay. 9. Default Provision In the event the developer fails to pay his loan obligations upon maturity, the outstanding loan, including accrued interest, shall be considered due and demandable without notice or demand. The Fund shall likewise register the REM on the TCTs securing the loan and institute foreclosure proceedings. All expenses pertaining to the registration of the REM shall be for the account of the developer.

D. PROJECT ACCREDITATION CRITERIA 1. Site / Location The project must be characterized by the availability of basic socio-economic institutions such as government centers, churches, hospitals/health centers, schools, public markets and commercial establishments within a five-kilometer radius, and must be accessible to public transport. 2. Project Development The project design must conform to the standards of BP 220 or PD 957, whichever is applicable.

The site subject of house construction must be fully developed. The proceeds of the loan shall entail house and lot packages in the project site to add up to at least seventy percent (70%) of the total units. 3. Permits and Licenses The following permits and licenses must have been secured at the time of loan application: a. DAR Conversion Clearance or Exemption; b. Environmental Clearance Certificate (ECC) from the DENR; and c. Development Permit. Meanwhile, the License to Sell shall be submitted prior to initial loan release. 4. Marketing a. House & Lot Packages The selling price of the house & lot packages should not exceed P2 Million Pesos. b. Market - the prospective buyers must preferably be Pag-IBIG members. To ensure market viability, 30% of the total number of units must have confirmed buyers. 5. Project Timetable The construction of the housing units must commence within thirty (30) days from date of release of the loan and must be completed within twelve (12) months.

E. OTHER PROVISIONS 1. Loan Processing Fee The developer shall pay a processing fee of 1/4 of 1% of the approved loan amount or P50,000.00, whichever is lower, inclusive of a non-refundable filing fee of P10,000.00. 2. Service Fee The developer shall pay a service fee of 0.1% of the amount for drawdown. 3. Penalties Failure to pay the obligation upon maturity or when it becomes due and demandable, shall subject the developer to a penalty of 1/20th of 1% per day of delay on any unpaid amount. 4. End-User Financing Preferably, at least fifty percent (50%) of the house and lot packages generated from the project shall be financed by HDMF under its end-user financing program.

5. Commitment Fee The developer shall submit a schedule of drawdown, the first of which shall not be later than sixty (60) days after the signing of the MOA. The developer shall pay a commitment fee equivalent to 1/4 of 1% of amount of line approved. If availments are made as scheduled, said fee may be refunded. Otherwise, it shall be forfeited. 6. Approving Authorities The Senior Management Committee shall have the authority to approve applications for availment of the House Construction Financing Line. 7. Amendments These guidelines may be amended, revised or modified by the Senior Management Committee in furtherance of the objectives of the program, provided that the amendments, revisions or modifications herein adopted are consistent with the mandate of the Fund under its charter and existing laws. This Circular takes effect immediately.

JAIME A. FABIAA Officer-in-Charge Makati City _________________ 2009