Hu FR

RECEIVED
Republic of the Philippines se 15 AUG 2016
HOUSE OF REPRESENTATIVES OP —
Quezon City TIVE: 3B
BY: x
SEVENTEENTH (17") CONGRESS

First Regular Session REZISTRATION LAST

9 {LS AND INDE X SERVIOE
HOUSE BILL NO. 2904 | suis as

Introduced by REP. JOSE CHRISTOPHER Y. BELMONTE,

EXPLANATORY NOTE

The bill entitled, “An Act to Strengthen the National Home Mortgage Finance
Corporation for Mass Housing Endeavors, Amending for the Purpose Presidential Decree
Numbered 1267,” was originally filed in the 16th Congress by Rep. Ibarra Gutierrez III.

This bill intends to enhance the National Home Mortgage Finance Corporation by
amending Presidential Decree (P. D.) No. 1267. This bill seeks to ensure that the National
Home Mortgage Finance Corporation is able to keep up with new developments in various
housing-related financial and investment instruments in order to better respond to the State's
responsibility of producing mass housing for its people.

With this goal in mind, this bill proposes to expand the mandate of the corporation to
include the development of a secondary market for housing-related financial instruments.
This will protect housing-related receivables or assets from mortgages, and issue housing-
related asset-backed securities. These securities are recommended to be exempted from the
registration requirements under the Securities Regulation Act to hasten their issuance in order
to boost funds for housing development.

This bill also seeks to widen the functions of the corporation to include development
or promotion of investments in new housing-related financial instruments and investment
vehicles, including real estate investment trusts and reversed mortgages, to increase the funds
that can be made available for housing development.

Finally, this will grant the corporation the power to accept equity participation from
other government financial institutions through conversion of existing obligations to equity or
subscription to unissued shares of stock, and from private investors and multilateral agencies.

For these reasons, the approval of the proposed bill is sincerely requested.

Aion



Republic of the Philippines
HOUSE OF REPRESENTATIVES

Quezon City

SEVENTEENTH (17"") CONGRESS
First Regular Session

2204

HOUSE BILL NO.,

Introduced by Representative Jose Christopher Y. Belmonte

AN ACT
TO STRENGTHEN THE NATIONAL HOME MORTGAGE FINANCE
CORPORATION FOR MASS HOUSING ENDEAVORS, AMENDING FOR THE
PURPOSE PRESIDENTIAL DECREE NO, 1267 AND OTHER LAWS AFFECTING
THE NHMFC

Be it enacted by the Senate and House of Representatives of the Philippines in the
Congress assembled:

Seetion 1. For purposes of this Act and in order to strengthen the National Home
Mortgage Corporation, Presidential Decree (P.D.) Numbered 1267 is hereby amended as
follows:

(a) The preamble of P.D. 1267 is amended to read as follows:

“WHEREAS, there is an urgent need to effectively increase the level
of funds committed to the housing effort by establishing a secondary
market for home mortgages and other housing-related receivables,
conveyances and financial instruments, as well as by, developing,
promoting and operationalizing new housing-related _ financial
programs, products, instruments and investment vehicles and the
capital markets therefor, which will amplify, and enable home
financing institutions to optimize the leverage of, funds earmarked for
housing and home development:

“WHEREAS, it is a policy of the state to pursue the development of a
secondary market for asset-backed securities, particularly but not
limited to residential mortgage-related financial instruments, to
generate investment in and accelerate the growth of the housing
finance sector, especially for socialized and low-income housing;


“WHEREAS, the development of a secondary market for home
mortgages, other housing-related receivables, conveyances and
financial instruments, as well as the development, promotion and
operationalization of new housing-related financial programs

instruments, products and investment vehicles, require the support and

assistance of the Government and the private sector.”

(b) Sections 3, 4, 5, are hereby amended to read as follows:

1.) “Section 3. Capitalization. ~ The Corporation shall have an
authorized capital stock of Fifty Billion Pesos (PhPS0,000,000,000)
divided into Fifty Million (50,000,000) shares of common stocks with
a par value of One Thousand Pesos (PhP1,000) per share, to be
subscribed and paid by the Government of the Republic of the
Philippines.

“For this purpose, the amount of Five Billion Pesos
(PhPS,000,000,000) shall be automatically included and appropriated
annually in the General Appropriations Act, until the Corporation is
fully capitalized in the amount abovementioned.

“On recommendation of the Board of Directors, and subject to the
recommendation of the Governance Commission for GOCCs (GCG)
and approval by the President of the Republic of the Philippines, the
Corporation may accept equity participation from other government
financial institutions through conversion of existing obligations to
equity or subscription to un-issued shares of stock or both. Equity
participation may likewise be accepted from private investors or other
multilateral agencies if it would serve the public interest or enhance the
attainment of the Corporation's mandate.”

2.) “Section 4. Purposes of the Corporation. The primary purpose of
the Corporation is to develop, promote and provide for a secondary
market for home mortgages, housing-related receivables and other
financial instruments and conveyances granted or originated by public
or private home financing institutions or entities, as well as, to
undertake, develop, operationalize, facilitate, promote and support new
or non-traditional/pioneering housing-related financial projects,
programs, products, instruments, investment vehicles, and sources of
funds for housing, and cultivate capital markets for the purpose, to
effectively increase and optimize the funds available for housing and
home development.

“For purposes of the Securitization Act of 2004, the NHMFC shall be
the government's secondary mortgage institution primarily responsible
for providing liquidity mechanism to primary mortgage lenders/holders
and developing a secondary market for mortgage and housing-related
ABS.”


waorvauswnn

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

34
35

37
38
39
40
41
42
43
44
45
46
47
48
49
50

3.) “Section 5. Powers and Functions. ~ The Corporation shall have the
following powers and functions:

“a. To purchase (in wholesale or otherwise), acquire, sell, discount,
refinance, or otherwise deal in home/residential mortgages and
participations therein, housing-related contract receivables and
conveyances (including contracts to sell), asset-backed securities and
other housing-related financial instruments, and develop, promote and
provide for a secondary market therefor, as well as, to perform all the
functions/powers of a secondary mortgage institution under existing
laws to channel funds from the capital markets to the mortgage and
housing finance sector, under such terms and conditions as may be
prescribed by the Board of Directors of the Corporation;

“b. To invest in, undertake, develop, operationalize, facilitate, promote
and support new, non-traditional/pioneering housing-related financial
projects, programs, products, instruments, investment vehicles and
sources of funds for housing, including but not limited to Real Estate
Investment Trusts (REIT), Reversed Mortgages, Islamic housing
finance and Sukuk bonds, under such terms and conditions as may be
prescribed by the Board of Directors of the Corporation;

%c. Subject to existing laws, rules and regulations on conflict of
interest, to act as and perform the functions of a financial advisor,
program manager, arranger and other roles to facilitate the housing-
related asset-backed securitization projects or issuances of other public
or private entities;

“d.To borrow funds from domestic or foreign, private or public,
financial institutions as may from time to time be required for its
operations, and to issue bonds, promissory notes, debentures, and other
debt instruments in local or foreign currency;

“e. To establish and maintain a subsidiary or subsidiaries in relation to
any of the purposes of the Corporation;

“f. To own, lease, purchase or otherwise acquire, sell or otherwise
dispose of, property, real or personal, as may be necessary and
appropriate for the conduct of its business;

“g. To invest the funds or monies of the Corporation not invested in
mortgage loans and other housing-related receivables, conveyances,
financial instruments and investment vehicles, in securities issued by
the National Government, Bangko Sentral ng Pilipinas and other
government entities including government-owned and controlled
corporations, as well as, by domestic private corporations, and foreign
entities, and deal with the monies and properties of the Corporation in
such manner as may be considered wise or expedient for the
advancement of its interest;


“h. To conduct and transact lawful activities and enter into and perform
any contract or lawful arrangement with any person or entity, public or
private, as may be necessary, desirable, proper, conducive or
incidental in carrying out the business of the Corporation, or to the
exercise of any of its powers and functions or in the attainment or
furtherance of any of its objectives and purposes:

“j, When the interest of the Corporation so requires, it may
compromise or release in whole or in part any settled claim of or
liability to the Corporation;

“j. To adopt, alter and use a corporate seal; to sue and be sued; and
generally, to exercise all powers of a corporation under the
Corporation Code which are not inconsistent herewith; and

“k, To promulgate such rules and regulations, and to do or cause to be
done any one or more of the acts and purposes set forth herein, within
or outside the Philippines, as may be necessary, desirable, proper,
conducive, or incidental to carry out any one or more of its
responsibilities, powers and functions or for the attainment of the
Corporation’s objectives, or which shall, at any time, appear conducive
to or expedient for the protection or benefit of the Corporation.”

(6) Section 6 of P.D. No. 1267 is hereby deleted in toto.

(d) Sections 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, and 17 are hereby renumbered

as Sections 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, and 16, respectively.

(c) Renumbered Section 7 is hereby amended to read, as follows:

“Section 7. Investment of Funds. Funds of the Corporation not
invested in home mortgages and other housing-related receivables,
conveyances, financial instruments and investment vehicles, shall be
kept in cash on hand, or on deposit, or invested in securities issued by
the National Government, Bangko Sentral ng Pilipinas and other
government entities including government-owned and controlled
corporations, as well as by foreign entities.”

(f) Renumbered Section 8 is hereby amended to read, as follows:

“Section 8. Board of Directors. - The powers and functions of the
corporation shall be exercised by a board of directors, hereafter
referred to as the “Board”, which shall be composed of the following:

“a. The Chairperson of the Housing and Urban Development
Coordinating Council (HUDCC) who shall be the Chairperson of the
Board.


“b. The President of the Corporation, who shall be the Vice-
Chairperson, shall be appointed to the Board by the President of the
Philippines and elected annually by the members of the Board from
among its ranks in accordance with existing laws. He shall serve for a
term of one (1) year, subject to re-appointment pursuant to existing
laws.

“c, The Secretary of the Department of Finance (DOF). Provided, That
whenever the Secretary of the DOF is unable to attend the meeting of
the Board, the secretary shall designate an undersecretary or assistant
secretary or such other officer as may be allowed under applicable
laws, rules, regulations, or issuances of the Governance Commission
for Government-Owned and Controlled Corporations (GCG), to act as
his permanent alternate.

“d. The Governor of the Bangko Sentral ng Pilipinas (BSP). Provided,
‘That whenever the BSP Governor is unable to attend the meeting of the
Board, the governor shall designate a deputy governor or such other
officer, as may be allowed under applicable laws, rules, regulations, or
issuances of the GCG, to act as his permanent alternate.

“e, The Secretary of the Department of Budget and Management
(DBM). Provided, That whenever the Secretary of the DBM is unable
to attend the meeting of the Board, the secretary shall designate an
undersecretary or assistant secretary or such other officer, as may be
allowed under applicable laws, rules, regulations, or issuances of the
GCG, to act as his permanent alternate.

“f, Two (2) members to be appointed by the President of the
Philippines in accordance with existing laws, coming from the private
sector who shall be Philippine citizens and residents, of good moral
character, of proven competence and known probity/integrity, and with
special training, expertise, or experience of at least ten (10) years in
any of the fields of economics, business management, finance
(preferably housing finance), law or other relevant areas: Provided,
that in the event of vacancy, the successor appointed to fill the same
shall serve only the unexpired portion of the term of the member he
succeeds.

“They shall serve for a term of one (1) year, subject to re-appointment
in accordance with existing laws.”

(g) Subsection d of renumbered Section 9 is hereby amended to read as
follows:

“Section 9. Powers of the Board. — The Board shall have the following
powers:

‘a. XXX,


“b. xxx,
“o. xxx

“d. On recommendation of the President of the Corporation and in
accordance with Republic Act No. 10149 and other applicable laws, to
create offices or positions necessary for the efficient management,
operation and administration of the Corporation; to approve the
appointment, removal or discipline of personnel holding managerial or
higher level positions for cause as provided by law; and, to fix the
remunerations and other emoluments, of the officers and personnel of
the Corporation; Provided, That all positions in the Corporation shall
be governed by a compensation and position classification system and
qualifications ‘standards approved by the Corporation's Board of
Directors based on a comprehensive job analysis and audit of actual
duties and responsibilities: Provided, further, that the compensation
plan shall be comparable with the prevailing compensation plans in the
private sector; and to establish and maintain a Provident Fund and
determine the corporation's and the employees contributions to the
Fund.

“e. xxx.

(h) Renumbered Section 10 is hereby amended to read as follows:

“Section 10. Meetings. ~ The Board shall meet at least once a month.
Special meetings may be convoked by the Chairperson to consider
such subjects or matters as may be necessary under the circumstances.

“A majority of the directors shall constitute a quorum for the
transaction of corporate business.”

(i) Renumbered Section 11 is hereby amended to read as follows:

“Section 11. Remunerations for Attendance in Meetings. - The
members of the Board, except ex officio directors and their alternates,
shall be entitled to per diems for every meeting actually attended, in
such amount as the Board may deem proper and in accordance with
allowable limits provided under applicable laws, rules, regulations, or
issuances of the GCG.”

(j) Renumbered Section 12 is hereby amended to read as follows:

“Section 12. President. - The Chief Executive Officer of the
Corporation shall be elected annually by the members of the Board
from among its ranks, for a term of one (1) year, pursuant to Section 18
of Republic Act No.10149, otherwise known as the "GOCC
Governance Act of 2011". He must be of good moral character, of
unquestionable integrity and responsibility, and must be of recognized



competence in any of the fields of economies, banking, finance,
commerce or industry. He shall be assisted by an Executive Vice
President and such other officers as may be necessary for the efficient
operation of the Corporation.”

(k) Renumbered Section 14 is hereby amended to read as follows:

“Section 14. Remuneration of the President. - The salary, allowances
and other emoluments of the President shall be fixed and determined
by the Board of Directors subject to the approval of the GCG and
compliance with existing laws, rules and regulations.”

(1) Renumbered Section 15 is hereby amended to read as follows:

“Section 15. Appointment and Discipline of Personnel. ~ The President
shall, in accordance with civil service laws, rules and regulations,
appoint the personnel of the Corporation and prescribe their duties and
qualifications in accordance with the standards approved by the Board,
to the end that only suitable and competent personnel may be
employed, and when warranted, remove, suspend or otherwise
discipline them for cause; Provided, that all appointment or termination
of, or disciplinary actions against, persons holding managerial and
higher level positions shall be subject to the approval of the Board,
upon the recommendation of the President.”

(m) Sections 18 and 19 of P.D. No. 1267 are hereby deleted.

(n) Section 20 of P.D. No. 1267 shall be re-designated as Section 17 and

amended to read as follows:

“Section 17. Tax and other Exemptions. — Notwithstanding the
provisions of any general or special law to the contrary, the
Corporation, its assets, properties, contracts, documents, instruments
and transactions, including all income and earnings, shall be exempt
from the payment of all taxes, duties, fees, assessments and other
charges including costs, service and filing fees, appeal bonds, and
supersedeas bonds in any court or administrative proceedings,
automatically without need for any administrative confirmatory
ruling/issuance from any government agency or instrumentality, Such
tax exemptions on income and earnings shall cease once the
corporation receives the full amount of its authorized capital.”

(0) There shall be inserted five new sections after renumbered Section 17 to be

designated as Section 18, Section 19, Section 20, Section 21, Section 22
and Section 23, which shall read as follows:

“Section 18. Registration, Notice and Disclosure Statement, and
Securitization Plan for Housing-Related Asset-Backed Securities
Issuances. - For purposes of the registration, filing of notice and
disclosure statement, and approval of the securitization plan for


housing-related asset-backed securities issued by or backed by assets
of or originating from the Corporation, and the costs/fees relative
thereto, the Securities and Exchange Commission (SEC) shall, in
coordination with the Corporation, formulate and implement
simplified, streamlined, abbreviated and expedited documentation,
disclosure, registration and approval requirements and processes, and
lower the costs/fees therefor, to accelerate the issuance of such
securities and maximize the funds available for housing development.

“Notwithstanding the provisions of any general or special law to the
contrary, as the government's secondary mortgage institution, the
Corporation shall be exempt from the rules and requirements on
ownership, organization, capitalization, operation, prohibitions and
dissolution for Secondary Mortgage Institutions under the
Securitization Act of 2004.

“Section 19. Income Tax Exemption for Asset-Backed Se
Consistent with the state’s policy of promoting the securitization of
mortgage and housing-related receivables of government housing
agencies, the yield or income of investors from any low-cost or
socialized housing-related asset-backed securities issued by the
Corporation directly or thru a special purpose entity under the
Securitization Act shall be exempt from income tax, automatically
without need of any ruling or issuance from any government agency or
instrumentality. Such securities issuances shall likewise enjoy all tax
exemptions and incentives granted under the said Act.

“All of the Corporation’s transactions and related documents involving
the transfer, sale and re-transfer of assets including collaterals and
security interests thereto to or from a Special Purpose Entity in
connection with its securitization programs shall be exempt from value
added tax, documentary stamp tax or any other taxes, as well as from
applicable registration and annotation fees. Transfers of assets by
dation in payment by the obligor to the Corporation shall not be subject
to capital gains tax. These exemptions shall apply automatically
without need of any ruling or issuance from any government agency or
instrumentality.

“The original issuance of ABS and other securities related solely to
such securitization transaction, such as, but not limited to, seller's
equity, subordinated debt instruments purchased by the originator, and
other related forms of credit enhancement shall be exempt from VAT
or any other taxes imposed in lieu thereof but subject to DST. All
secondary trades and subsequent transfers of ABS, including all forms
of credit enhancement in such instruments, shall be exempt from DST
and VAT, or any other taxes imposed in lieu thereof. These shall
automatically apply without need of any ruling or issuance from any
government agency or instrumentality.



“Section 20. Exemption from Dividend Requirement. — The
corporation shall declare and remit dividends to the National
Government pursuant to Republic Act No. 7656, computed based on
the effective equity of the government in the corporation. It shall be
exempt from such dividend requirement if the governments actual or
effective equity in the Corporation is reduced to zero.

“Section 21. Compliance with balanced-housing requirement. -- The
Purchase of socialized housing-related asset-backed securities issued
by NHMFC directly or thru a Special Purpose Entity shall be
considered as alternative compliance to the UDHA balanced housing
requirement.

“Section 22. Synergy among government agencies. -- All securitization
of housing accounts/receivables of government housing agencies and
banks or financial institutions shall be done by, thru or with the
participation of NHMFC (including, but not limited to, as issuer,
advisor, program manager and/or arranger).

“Section 23. Transfer of housing-related accounts/receivables. --
Government housing agencies and banks/financial institutions are
encouraged to periodically allocate and sell, transfer or assign to
NHMFC a portion of their seasoned housing-related mortgages and
receivables/accounts for securitization, to further develop and expand
the secondary market for home mortgages and housing-related asset
backed securities.”

(p) The succeeding sections shall be renumbered accordingly.

SEC. 2. Separability Clause. - All laws, decrees, executive orders, rules and
regulations inconsistent herewith are hereby repealed, amended or modified
accordingly.

SEC. 3. Repealing Clause. - If any provision of this Act is declared
unconstitutional, the remainder of this Act or any provisions not affected thereby shall
remain in full force and effect.

SEC. 4. Effectivity. - This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a newspaper of general circulation.

Approved,