Villlar and low-cost housing
luistaylormd
Dear Tong,
To believe in Manny Villar’s “cause”, whatever that may be,
is certainly your prerogative, brod. But it does not allow you to
distort the facts—to say that black is white or that greed is good.
Winnie Monsod’s writings on Villar’s anomalies on the
Paranaque road projects are pretty clear. I don’t need to comment
further on them.
But I will answer as briefly as I can the downright false
and
sometimes outrageous claims you make concerning Villar’s “heroic” role
in the government’s low-cost housing program.
True, Villar built many thousands of low-cost houses over
more than a decade under the Unified Home Lending Scheme (UHLP) of the
socialized housing law (E.O. 90) that he and his CREBA minions drafted
and got Cory to sign in 1986, during her emergency government when she
had legislative powers, by promising the pie in the sky of solving
homelessness in the Philippines once and for all. But he did this to
rake in billions in profits at the expense of the government, not out
of a concern for the homeless poor.
Look at the results of Villar’s thousands of houses under
the
UHLP from 1986 to 1997 (when we reformed the UHLP to prevent Villar
from bankrupting the country). Villar became a billionaire. NHMFC, the
financial coordinator of the program, was bankrupted. The funders
(SSS,
GSIS, Pag-Ibig) were stuck with billions in bad home mortgages
covering
Villar’s houses and flirted with bankruptcy for a while. Eventually,
these bad mortgages had to be covered by the national government using
its tax revenues (including your taxes and mine) because the funders
were covered by a sovereign guarantee. Subsequently (beginning 2003 or
2004), the losses on the bad mortgages had to be written off by
selling
them through special purpose asset vehicles (SPAVS) at a fraction of
their face value.
Meanwhile, look around you. Nearly half of the residents
of Metro Manila still live in squatter areas!
I repeat: Villar became a billionaire while the funders
and the national government suffered many billions in losses and the
housing problem is still there, as intractable as ever. Consequently,
I
strongly disagree with your admiration of Villar’s record in low-cost
housing. It was motivated by greed and, in the end, enriched only
himself and his cohorts at the expense of the government and,
ultimately, the taxpayers.
These outcomes were inevitable because of how Villar and his
buddies designed the UHLP. The roles of lenders, builders, and
financing agencies were jumbled up on purpose to benefit only the
developers. Billions were taken annually from the SSS, GSIS, and
Pag-Ibig and given to the NHMFC to disburse. The owners of the funds
lost all control over how they were lent out. But this control was not
given to the NHMFC, which just allocated mortgage quotas to developers
(the Villar companies had the biggest quotas) from the annual funds of
the lenders and automatically released the face amount of mortgages to
the lenders upon submission of the mortgage papers. No one checked the
creditworthiness of the home buyers. The developers were “originators”
of mortgages—meaning that they went around the malls with blank
mortgage papers, waylaid passersby and enticed them to sign the
papers,
and then went to the NHMFC to cash in.
This diabolical system without any financial controls was
designed by developers like Villar to rake in the profits. It resulted
in default rates of more than 70% in the mortgages and nearly caused a
Philippine economic crisis. It required the coordinated intervention
of
HUDCC, the Dept. of Finance, SSS, GSIS, Pag-Ibig, and HIGC to prevent
a
financial collapse. This was a very real danger then: we need only
look
at the recent US financial crisis to see how bad home mortgages can
drive even the world’s largest economy to its knees.
Naging bilyonaryo si Villar sa low-cost housing at the
expense of Filipino taxpayers. Kumita na siya, Tong. Huwag mo nang
bigyan ng medalya.
Finally, you imply that I am inconsistent in my position on
Villar’s role in this program because you say that HUDCC had “boasted”
of its production of low-cost houses thanks to Villar’s “vision.”
This is not true. I was always critical of Villar’s
profiteering in low-cost housing and never claimed credit for the
houses his companies built. I was appointed HUDCC Secretary General by
President Ramos in June, 1995. I spent a few months going through the
documentation of the housing program and holding intensive discussions
with the developers’ organizations, lenders, the Dept. of Finance, and
the HUDCC financial agencies. Then I wrote a series of memos to
President Ramos that explained the hopelessly flawed nature of the
program, the extent of the financial problems it had created, and what
needed to be done to prevent financial collapse. After getting the
President’s instructions to proceed in 1996, I set up the inter-agency
task force to reform the UHLP and we completed our work and stopped
the
profiteering of the developers in 1997.
Your brod,
Tony Hidalgo
Antonio Hidalgo was the Secretary-General of the Housing & Urban
Development
Coordinating Council from 1992 to 1998.
POSTSCRIPT
Villar used the NHMFC scheme described by Tony Hidalgo above to build
up the assets of C&P Homes, in view of an IPO launched in the
mid-1990s. With the IPO came more pressure to window-dress the books
of C&P Homes to show profitability. This pressure he addressed by
irresponsibly building more substandard homes, massively selling to
borrowers with no paying ability, and then, using his office as
Congressman, force NHMFC to acquire these subprime loans, getting the
lion's share of the allocation in the process. NHMFC was left with
more than 300,000 of these non-performing loans with a face value of
more than P40 billion. Until today, NHMFC is hardly able to collect
on
these loans. One of the usual complaints (and excuse for non-payment)
of defaulting borrowers is that the C&P houses were all
underdesigned and substandard.
Following the 1997 Asian financial crisis, after prices of real estate
plummeted, Villar found himself defaulting on the bonds issued by his
C&P Homes. Several good faith investors and banks suffered huge
reductions in their credits as a result.
To pay off C&P's defaulted loans from banks, Villar forced these
banks to accept lands as settlement payment for the loans. Using his
influenced as Congressman, Speaker of the House and later as Senator,
he forced his creditor banks to accept lands whose only access to
public roads was through his own property. This meant that these
banks
had to pay him for the right of way.
Villar's C&P loans and forced land payments contributed to the high
level of non-performing loans and repossessed properties of banks, the
reason why the SPAV Act had to be passed in 2003. Already a Senator
at
this time, Villar tried to insert a provision in the SPAV bill that
would grant the defaulted borrowers (like himiself) the right to match
the discounted price at which the banks may sell their non-performing
loans and repossessed properties to third party good faith buyers. In
effect, he wanted to give a non-paying borrower like himself the right
to require his lender to accept a fraction of the principal loan as
full payment of the loan. If not for the strong opposition from the
banks, this Villar insertion (not to be confused with the C-5
insertion) would have become part of the law.