NEWS: Bank urged to be vigilant in verification of titles

The Consumer Union of the Philippines (CUP) has expressed dismay over the reported P 389 million peso loan fiasco involving titles which victimized the Development Bank of the Philippines (DBP) and urged banks to reform their title verification and loan releasing processes.

In an earlier reports, a savings bank using allegedly spurious documents and highly questionable titles, obtained in a P 389 million pesos in loans from the DBP sourced from the Industrial Guarantee and Loan Fund (IGLF) jointly funded by the USAID, World Bank and Asian Development Bank. The suspicious nature of these documents was apparently discovered only much later after the loan had already been released and the Bangko Sentral conducted an examination of the bank's loan portfolio.

The CUP chairman Ambassador Raul Goco, a former solicitor-general, said this deplorable incident and many other similar cases over the years highlight the dangerous inadequacies of banks in filtering out dubious titles submitted as collateral for loans.

In view of these incidents and banking system's abnormally high inventory of non-performing loans (NPL) at some P 150 million peso, and other Real and Other Properties Acquired (ROPAs) currently amounting to more than P 250 billion pesos Goco said banks should immediately reform their lending procedures, as loans collateralized by dubious titles are never meant to be repaid in the first place.

The banks' disclaimers in the sale of their ROPOAs, which is practically disavow title authenticity, Goco said, amount to an admission of their failure to comply with the Supreme Court's rule requiring banks to have a much higher degree of diligence in verifying titles, beyond the standard "due diligence" practiced by ordinary dealers in the real property.

"From the many cases we have reviewed, it is only after the borrower has already absconded or failed to pay the loan that the banks discover the fake or fraudulent titles they have accepted as collateral", Goco said.

CUP President Quirino Marquinez, a practicing lawyer, said that for as long as banks continue with their present cursory title verification process conducted by their in-house appraisers or credit investigators, they will remain the principal target of fake titles syndicates.

Marquinez said these will preclude collusion between fake title syndicates and bank insiders, even as the use if independent, government-recognized title verifiers will ensure objective, non-self-serving, influence-free and transparent findings about the title, upon which any party - not just the lender, borrower or buyer - may rely.

The CUP urged banks to immediately subject titles covering their NPLs to a thorough verification process by third party independent verifiers so that should fake titles be discovered, appropriate action may be taken while they still can against the parties responsible, and immediately subject all ROPAs to the same process so that appropriate adjustments may be made in the bank's financial statement to reflect the factual values of said ROPAs for the general public to know.

Source: Manila Bulletin (February 24, 2008)

STEPS IN MAKING CASHFLOWS THROUGH REAL ESTATE RENTALS

Are you happy with the pay you receive?

Earning extra-income is one of our foremost priority in making both ends meets. There are times that we as workers have to settle for a measly sum heavily deducted our overtime pay with tax when we are toiling for hours in a dead end job that doesn't pay and compensate you much. It is a good thing if you have extra cash on hand then why not make money work for you through passive income. Better yet to "Work Smarter, Not work harder".

There are certainly many potential streams of passive income where you can sit tight and let it grow. Example of these are investments through stock, mutual funds, time deposits, money market and bank deposit but these streams cannot compensate much in terms of Return of Investment. However these are also ideal and advisable for those who are building up their assets (wealth in general), diversifying through as additional cash flow and live a fruitful retirement during our old age.

Real Estate is still the king wherein it has become advantageous for most people nowadays as the construction of residential and commercial building are sprouting in the skyline of Metro Manila. Thanks to the influx of foreign investment brought about by the strong peso, Business Process Outsource (contact centers) and remittance of our Overseas Filipino Workers (OFW) who have been the lifeline in the Philippines. Demand for properties especially in Makati for BPO is high including residences for foreign expatriates who want to retire as well.

As a real estate professional, I too have mixed feeling of the tall skyscrapers blocking the view of the blue sky of the Metro Manila plus the progress we are experiencing. Hopefully, we are not affected with the U.S. subprime crunch wherein there are too many foreclosures in America. A piece of advise, much better to buy a property now in the U.S. It also becomes a happy notion for me that I can sell a residential condominium and give a satisfied client with a smile on his face on moving-in and living in his own condo unit or house.

Real estate rentals have become a lucrative business for most people. An example of this is Lito, he inherited a property from his parents a 365 square meter bungalow home located in corner street in Cubao, Quezon City built in 1960s. The property is accessible to Aurora Boulevard which is few minutes away and is inside a busy street of Public Utility Jeepneys. Although it is old, he did rehabilitate it a little just to make it presentable to possible clients. In two months time, it attracted a couple working nearby a call center in Libis at a agreed price of PhP 7,000.00 per month on the rent for this three bedroom bungalow property. The place is a bit busy but for the couple it is conveniently close to their workplace so they decided to get it.

Cash came flowing from the start and at the same Lito received the one month deposit and two months advance for the house. Let say, the house is earning PhP 7,000.00 per month multiplied by 12 months it will be earning at net of PhP 84,000.00 annually. Other expenses like taxes, repairs and other unforseen circumtances like unpaid dues etc are not yet included in the computation. Just be ready for anything.

Another example is Ren, he is involved lease-hold and sublease properties wherein he is using another man properties and subleasing it to other people. Here is how it works. Ren finds a property close to a university in the U-Belt. It is a few minutes away from UST and FEU and close to Espana. Let say he finds a property, an old two storey wooden house. Somehow it was rehab by the real owner and is renting it at PhP 6,000 per month. Ren sees an opportunity on this and focused its hind sight on this income earning potential. He grabbed it and asked the owners if he can sublease the property

Better to insure your property with non-life insurance like fire and others if ever you want to recuperate your investment from disasters.

Read the new laws on rental control. I believe the Senate have passed recently a law updating the old rental control law which expired last 2005. Right now, the laws governing the rent control was extended till December 31, 2008.

Residential condominiums are also excellent investment as real estate rentals. You can buy one at a low price during its pre-development stage and when it is ready for occupancy. You can but in the "FOR RENT" sign on the homeowners bulleting board. Right now, the best location to invest are those close to the university and schools wherein parent of students coming from the province need to find a place to live close to school and which is convenient at the same time than living in a dormitory. A colleague of mine owns a condo close to De La Salle University in Taft Ave, Manila. He leases at PhP 18,000 per month and is earning at least PhP 216,000.00 net. It is a cash cow indeed. You'll just have to worry paying the monthly dues for the maintenance. Other utilities will be shouldered by the lessee.

In Rental properties, you see to it that you make an monthly inspection or sometime quarterly inspection on the property. Check for leaks, termites and other problem that your tenants might call your attention to. Always establish rapport with them and even better if you talk to them from time to time.

So if you intend to be a landlord, you therefore will have sufficient passive income for your wealth or asset to grow in terms of money without much exerting physical effort in working for a company.

NEWS: BSP okays low-cost housing loan scheme

BSP okays low-cost housing loan scheme
By Des Ferriols
Monday, February 18, 2008

The Bangko Sentral ng Pilipinas (BSP) has approved a housing loan scheme that would allow low-income borrowers access to micro-financing to build low-cost houses.

The scheme, which also provided incentives for banks and micro-finance institutions, would allow for small loans that borrowers could be paid in frequent but small amounts.

BSP Deputy Governor Nestor Espenilla Jr. told reporters over the weekend that the micro-loan model has been tried and tested among low-income borrowers already used to schemes such as the traditional paluwagan and hulugan models.

“To start with, housing loans already have a very high repayment rate,” Espenilla said. “It’s in the culture of the Filipino to want to own a home and not to lose it.”

According to Espenilla, the scheme approved by the BSP would allow low-income borrowers to access financing from formal financing institutions that they otherwise would not be able to access.

The Housing Microfinance product, Espenilla said, would address the shelter needs of the economically active poor that were currently not being served by financial institutions.

Espenilla explained that the Housing Microfinance product involved the application of microfinance principles and best practices to the provision of housing finance for home improvements, house construction as well as house/lot acquisition.

Espenilla said the home improvement loans have a maximum of P150,000, similar to microfinance loans, while house construction and acquisition may be up to P300,000.

As an incentive to participating financial institutions, Espenilla said the product would be classified as a type of microfinance loan which would enjoy the incentives granted to regular microfinance loans such as no collateral requirements or the acceptance of collateral substitutes, as well as simpler documentary requirements.

“This addresses the usual barriers that the poor face in accessing housing finance,” he said.

Espenilla said the BSP’s Monetary Board has also agreed to allow housing microfinance loans to be considered as alternative compliance to the mandatory credit allocation to agrarian reform and agriculture activities as required by PD 717.

To implement the program, Espenilla said the BSP would enter into a Memorandum of Agreement with the Housing and Urban Development Coordinating Council (HUDCC). He said they would agree on the accreditation criteria and standards that would be applied to the banks offering this product.

According to Espenilla, the specific risk management features have been embedded in the product design. Some of these features include using a cash flow analysis to determine the client’s ability to pay, requiring a good track record as a microfinance client as well as collecting savings.

In addition, due to some features that were slightly different from regular microfinance loans, Espenilla said additional risk mitigants were required for banks that would offer this product.

“One distinct feature is the possible use of secure tenure instruments as collateral substitutes,” he said. ”In the absence of a land title, these legal instruments effectively provide proof of legal use, possession or ownership of a property.”

Although large commercial banks are not expected to be able to engage in housing micro-financing, Espenilla said the BSP expected significant take-up among rural and cooperative banks as well as micro-finance institutions that already exist.

“These institutions already have the capability and expertise in giving out small loans and undertaking the close supervision that it would require,” he said.

“The idea is for low-income but economically active borrowers to be able to secure the loan that they could pay back in small amounts with higher-than-usual frequency,” he said.

Source: Philippine Star - February 18, 2008