RP sub-prime crisis to hit us?

September 13, 2008 § 1 Comment

If there’s a Fannie and Freddie Mac, both housing firms which recently bailed themselves out of a sub-prime mess, in the Philippines, we have the National Home Mortgage Finance Corporation (NHMFC). Many people feared that it would suffer the same fate as that of its US counterpart. Yet, the sub-prime crisis in the States blew and past and still we did’nt hear any bad news coming from the NHMFC, simply because it operates on a different financial environment altogether. And it already knows what to do since it suffered a sub-prime crisis in 1990 and survived.

However, the NHMFC is not out of the woods, not just yet. It still has more than P 30 billion worth of delinquent accounts, which need restructuring.  They already turned P2.5 billion worth of these delinquent mortgage accounts to Residential Mortgage-backed securities which it intends to sell this November. It represents 220,000 bad housing mortgages. These securities are meant to juice up the depleting funds of the NHMFC which is suffering from low collection since the economic situation went south the first and second quarters of this year. With inflation at a high of 12.7% and consumer confidence levels in all-time low, the question is–how many will bite?

If the sale goes bust, obviously the NHFMC will have to turn again to its cousins, the GSIS, SSS and Pag-Ibig Funds for help. With all these funding agencies suffering too with their own mini-financial crises, NHMFC will probably just have to bite the bullet in this one.

Should NHMFC fails to liquify its non-performing assets and P 30 billion worth of delinquent accounts, it will not have enough financial muscle to support banks and real estate companies. Banks will not be able to free their books and expand their housing loan portfolios. If this happens, it would frustrate prospective home buyers and ground most real estate projects to a halt. 

Worst, the hemorrhaging at the NHMFC will continue and will force it to the ground. How to save the NHMFC is anybody’s guess at this point. 

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