Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Quezon City
SIXTEENTH CONGRESS

Second Regular Session

6029

HOUSE BILL NO.

Introduced by Reps. Ibarra “Barry” M. Gutierrez Ill, Benhur L. Salimbangon, Winston
“Winnie” T, Castelo, Edgar R. Erice, Jose Christopher Belmonte, Pryde Henry A. Teves,
Ma. Victoria Sy-Alvarado, Cresente C. Paez, Rodel M, Batocabe, Julieta R. Cortuna,
Juan Johnny R. Revilla, Catalina Leonen-Pizarro, Joseph Stephen Paduano, Sherwin
Tugna, and Terry Ridon .

EXPLANATORY NOTE

This bill seeks to strengthen the National Home Mortgage Finance Corporation by
amending Presidential Decree (P.D.) No. 1267. This bill aims to ensure that the National
Home Mortgage Finance Corporation is able to keep up with the developments in housing-
related financial instruments and the investment instruments market in order to respond
better to the state’s obligation to produce mass housing for its citizens.

Toward this end, this bill intends to broaden the mandate of the corporation to
include the development of the secondary market for housing-related financial
instruments. This would allow the corporation to securitize housing-related receivables'or
assets aside from mortgages and issue housing-related asset-backed securities. These
securities are proposed to be made exempt from the registration requirements under the
Securities Regulation Act to accelerate their issuance in order to increase funds for
housing development.

‘Additionally, this bill expands the functions of the corporation to include
development or promotion of or investment 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 allow the corporation to accept equity participation from other
government financial institutions through conversion of existing obligations to equity or
subscription to unissued shares of stock and likewise from private investors and
multilateral agencies if it serves the attainment of the corporation's mandate.

The approval of this measure is, therefore, earnestly sought.
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HON. BENHUR L. SALIMBANGON HON. Tarra “Bana GSTIERREZ II!



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HON. PRYD# HENRYA TEVES

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HON. JUAN JOHNNY R. REVILLA

HON. SHERWIN TUGNA TEPHEN PADUANO

HON. TERRY RIDON


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
Second Regular Session

6029

HOUSE BILL NO.

Introduced by Reps. Ibarra “Barry” M. Gutierrez Ill, Benhur L, Salimbangon, Winston
“Winnie” T. Castelo, Edgar R. Erice, Jose Christopher Belmonte, Pryde Henry A. Teves,
Ma. Victoria Sy-Alvarado, Cresente C. Paez, Rodel M. Batocabe, Julieta R. Cortuna,
Juan Johnny R. Revilla, Catalina Leonen-Pizarro, Joseph Stephen Paduano, Sherwin
Tugna, and Terry Ridon

AN ACT
TO STRENGTHEN THE NATIONAL HOME MORTGAGE FINANCE CORPORATION FOR
MASS HOUSING ENDEAVORS, AMENDING FOR THE PURPOSE PRESIDENTIAL DECREE
NUMBERED 1267

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

Section 1, For purposes of this Act and in order to strengthen the National
Home Mortgage Finance 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
for the purpose 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 for, 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


tb)

operationalization of new housing-related financial programs,
instruments, products and investment vehicles require the support and
assistance of the Government and the private sector.

Sections 3, 4, and 5 are hereby amended to read as follows:

i)

2)

“Section 3, Capitalization. - The corporation shall have an
authorized capital cock of Fifty Billion Pesos
(Php50,000,000,000) divided into Fifty Million Pesos
(Php50,000,000) 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.

‘On recommendation of the Board of Directors and subject to the
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 unissued 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.”

“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 and support new housing-related
financial projects, programs, products, instruments and
investment vehicles, and cultivate capital markets for the
purpose, to effectively increase and optimize the funds available
for housing and home development.”

“Section 5. Power and Functions. - The corporation shall have
the following powers and functions:

{a) To purchase in wholesale or retail manner, acquire, sell,
discount, refinance, or otherwise deal in home or residential
mortgages and participations therein, —housing-related
contract receivables, conveyances, asset-backed securities
and other financial instruments, and develop, promote, and
provide for a secondary market for the purpose, 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 housing-related financial projects,
programs, products, instruments and investment vehicles,


including Real Estate Investment Trusts (REIT) arid Reversed
Mortgages, under such terms and conditions as may be
prescribed by the Board of Directors of the corporation;

(c) To act as, and perform the functions of, a financial advisor,
program manager, and arranger as well as perform other
roles necessary to facilitate the housing-related asset-backed
securitization projects or issuances of other public or private
entities;

(4) To borrow funds from domestic or foreign private or public
financial institutions as, may from time to time, be required
for its operations, as well as issue bonds, promissory notes,
debentures, and other debt instrument in local or foreign
currenc) '

(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 (BSP) and other government entities,
including government-owned and controlled corporations,
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; K

(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 in the exercise of any of its powers and
functions or in the attainment or furtherance of any of its
objectives and purposes;

(i) 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;

(3) 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,


{c)
(d)

(e)

(fy

{k) To promulgate such rules and regulations, and to do or cayse
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.”

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

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.

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

"Section 7. Investment of Funds. - Funds of the corporation not invested
in home mortgages shall be kept in cash on hand or on deposit, or
invested in securities issued by the National Government, BSP, and other
government entities, including government-owned and controlled
corporations.

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 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;

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 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;

fe. The Secretary of the Department of Budget and Management (DBM):
Provided, That, whenever the Secretary of the DBM is unable to


(g)

(hy

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
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 ranagement, 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.”

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
XXX

“d. On recommendation of the president of the corporation, 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 employee's contribution to the fund. ‘

"en xXx”
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.



(i)

(i)

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{m)

(n)

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

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.” a

Renumbered Section 12 is hereby amended to read as follows:

“Section 12. President. - The Chief Executive Officer of the corporation
shall be the President who 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 Numbered 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 economics, 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.”

Renumbered Section 14 is hereby amended to read as follows:

“Section 14. Remuneration of the President. - The salary of the
president shall be fixed and determined by the Board of Directors. The
board may authorize the payment of allowances and other emoluments
to the president of the corporation.”

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.”

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

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.”

(o) There shall be inserted three new sections after renumbered Section 17
to be designated as Section 18, Section 19, and Section 20 which shalt
read as follows:

“Section 18, Exemption from Registration Requirement for Housing:
Related Asset-Backed Securities Issuances, - Notwithstanding the
provisions of any general or special law to the contrary, all asset-backed
securities issued by the corporation, directly or through a special
purpose entity under the Securitization Act, shall be exempt from the
registration requirement under the Securities Regulation Act.”

“Section 19. Income Tax Exemption for Asset-Backed Sécurities. -
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 through a special purpose entity under the
Securitization Act shall be exempt from income tax. Such securities
issuances shall likewise enjoy all tax exemptions and incentives granted
under the said Act.”

“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 government’s actual or effective equity in the
corporation is reduced to zero.”

(p) The succeeding sections shall be renumbered accordingly.

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

Sec. 3. 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, This Act shall take effect fifteen (15) days after its publication in the
Official Gazette or in a newspaper of general circulation,

Approved,