Making Things Right
A mortgage servicing and asset management platform takes on the daunting task of helping low-income families pay off their loans and finally-some after more than a decade-own their homes.
Juno Henares-Chuidian, Head of Corporate Communication of BFS to its borrowers has a lot on her plate.
First, she has to bust misconceptions that BFS is a real estate company or a mortgage bank. Neither is it a collections agency nor is it a charity house.
Second, she has to make sure those misconceptions are held at bay and re-introduce-nay, re-educate borrowers on the values of good debt and money management.
A recent survey commissioned by Mastercard reports that Filipina women rank high among her Asian sisters when it comes to financial literacy but this writer begs to differ we come in sixth with a score of 66.6 for Basic Money Management, and come in ninth at 55.6 for Investment.
According to the Philippine Consortium on Migration and Development (PhilComDev), one of the organizations involved in the recently launched Pinoy Wise Campaign in the United Arab Emirates (a series of road shows to promote financial literacy):
“Around 700.000 migrants work in the UAE. About 60 percent of them are professional and skilled workers, while the rest are service workers in the different industries and domestic workers. Embassy officials revealed that the relatively good wages that the Filipino professionals and skilled workers receive, many are deeply in debt.
“One embassy official revealed that at one time, eight out of 10 they handled had to do with indebtedness and that not a few Filipinos have been jailed for this. Many Filipino migrants are tempted to take out up to five credit cards to sustain their consumerist lifestyle in the UAE and the demands of their families back home. They are also not aware that the attractive interest rates displayed by financial institutions are different from the effective interest rates applied on their loans. It is hoped that the awareness they gain from the seminars will result to a change in their behavior, such as in staying away from the temptation of buying signature items, channeling this instead into savings.”
This is likewise echoed in one of Development Bank of the Philippines’ priorities for its programs under Chairman Francisco del Rosario Jr.: financial literacy for teachers.
Closer to home, one only has to look at his/her office “paluwagan” (literally,”to be unburdened of”) to see how Pinoys have mastered the art of “utang” (borrowing)-even when they don’t have to.
A Partnership of Shelter
A little background: BFS is the asset management and servicing arm of a leading fund manager (or the Fund) for its investments in the Philippines, Minority-owned by the Asian Development Bank and the International Finance Corporation, it was created when the fund manager agreed to take over the National Home Mortgage Finance Corporation’s highly delinquent loans. (The NHMFC was created during President Corazon Aquino’s time as a mother agency to handle all funding for housing for GSIS, SSS, and Pag-ibig).
Saddled with huge and growing arrears, the NHMFC sought the advice of a giant auditing firm, which then led them to a bidding among global opportunities funds. The fund manager not only gave NHMFC, a 49 percent stake in the portfolio, but cash upfront as well: initially calling it the “Balikatan” portfolio, they created a platform that carries its current name, BFS.
“The partnership between the Fund and NHMFC is a prime example of a sound business proposition that is doing extremely well by addressing the most human basic need of shelter,” a primer on BFS says.
Since the NHMFC transferred 52,000 of its more-than-decade old, highly delinquent low-cost mortgage loans to BSP in 2006, for example, 33,000 of these have already been cleared.
Myths and Reality
Unfortunately (and understandably however, some homeowners who have left their debts unattended due to lack of diligence from the concerned parties, have developed a sense of entitlement to the properties and homes they’ve lived in for the past several years. Some have forgotten the contract they signed and believe what they have now is subsidized by government.
The occasional discussions Chuidian and her team with the homeowners associations – all 2,400 of them from up in Ilocos to Tawi-tawi-have also spun rumors that all BFS is after is land.
In practice, BFS does not foreclose properties, “We really don’t want that to happen, but if it happens, we do have the people to sell –but the less property we own, the better,” Chuidian explains. Having properties on hand take up too much time and effort – the foreclosed properties have to be managed, assigned caretakers, made sure the surrounding areas are secure. “We don’t have a property agenda.”
BFS likewise does not have a financing restructuring agenda though they have those services as well. “That’s not our core business. If you can get a better deal somewhere else, go ahead (BFS charges 14 percent).”
“We just want to resolve the accounts so they can be monetized and pay off NHMFC. Because to be fair, this money belongs to other funders like the GSIS and SSS. It’s a huge, huge job.”
What doesn’t reach the rumor mill is that BFS is most lenient to the worst offenders – the ones who have not made any effort to pay of their decade-old loans and yet have gone to great lengths to improve their homes. They are offered huge discounts on payments on the homes they are hard pressed to give up.
“We have a lot of resolution strategies, “says Chuidian. “Borrower friendly loan structuring schemes, a swap deal for a smaller home and we make leeway for special circumstances, like when a family member is sick and the debtor is especially hard up.”
More on Her Plate
BFS’ record of hundred-percent success rate in all these negotiations demonstrates it is well positioned to lead in opening up the capital markets in the Philippines for more opportunities in mortgaged financial assets because of the volume of its portfolio.
BFS is ready to open up outside the Balikatan portfolio, “and even outsource, take over other portfolios,” discloses Chuidian. Currently, BFS handles two small bank portfolios. She boasts that the 300-strong BFS team is at top of their game in this area. “We’re very well-skilled. On top of that, we’re like a mortgage academy. We have international standards: our people in the executive committee have international experience, we follow international best practices.
As its literature reads: BFS is the only fully-integrated mortgaged servicing and special asset management expert in the country anchored on international best practices in repositioning, rehabilitating and financial engineering of mortgaged real estate assets. “We‘re the only business of its kind here,” asserts Chuidian.
BFS’ services is not confined to Filipinos. End to-end servicing is available to foreigners – “especially for those with distressed loans when the market took a downturn in the States,” adds Chuidian. “We can actually handle many of their processes in the value chain here –like review legal documents; handle paperwork – at much lower cost.
For all its pioneering mortgage servicing and special assets management functions, the most important contribution BFS might be giving to Filipino society is its thrust for financial literacy. “Learn how to pay your utang,” says Chuidian. Soon through a video show in its office in Makati, they’ll be showing clips on how to save, debt management, money management. We really want to help the Filipinos. We want to avoid what happened in the States: when everyone was so over-extended.
At end 2008 and start of 2009, if one can remember: “bad mortgage loans in the United States were being securitized until it grew into a $12 trillion business that crippled the world economy colossally, rendering many American families homeless.”
“In the end we just want to bring it right, where things should be,” ends Chuidian. “We want you to own your home.”
