Pag-IBIG FundCorporate Headquarters

Petron Mega Plaza358 Sen. Gil Puyat Avenue

Makati City

Circular No. 437

TO: ALL CONCERNED

SUBJECT: GUIDELINES ON THE Pag-IBIG FUND RENTAL HOUSINGCONSTRUCTION LOAN PROGRAM

Pursuant to the approval of the Pag-IBIG Fund Board of Trustees, the Guidelines on thePag-IBIG Fund Rental Housing Construction Loan Program is hereby issued:

I. OBJECTIVES

The Pag-IBIG Fund Rental Housing Construction Loan (RHCL) Program aims to:

1. Engage the participation and involvement of project proponents in rental housingas an alternative mode of shelter provision, through site development and houseconstruction on land owned and/or provided by the project proponent; and

2. Encourage project proponents to construct housing units on their fully developedlots, thus, creating ready inventories of residential housing units for rent.

II. COVERAGE

This program shall be open to employers, private or government sector.

The pilot implementation of the RHCL will be limited to the first rental housing project,and shall be open to State Universities and Colleges only. The pilot stage shall beterminated once an assessment of the pilot project has been conducted, and thefurther implementation of the RHCL program shall be subject to the approval of thePag-IBIG Fund Board of Trustees.

III. LOAN PURPOSE

The loan proceeds shall be used to finance:

1. The site development and construction of residential unit/s, which may includestaff houses, dormitories and other similar dwellings; and

2. The development of residential subdivision or medium/high rise residentialbuildings.

No part of the loan, however, shall be used to purchase or redeem land.

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IV. ELIGIBILITY REQUIREMENTS

1. The proponent must have juridical personality;

2. The project proponent must have the legal capacity to acquire and encumberreal property;

3. The proponent owns or shall identify the land for the housing project;

4. The proponent must have the financial and technical capability in fulfilling itscommitment to the Fund relative to the Pag-IBIG Fund RHCL Program. Thedetermination of the financial and technical capability shall be based on the creditscoring system for wholesale loans of the Fund. For Local Government Units(LGUs), the proponent must submit a Certificate of Borrowing and Debt ServiceCapacity issued by the Bureau of Local Government Finance;

5. The proponent must have a good credit standing among banks, financialinstitutions and other government agencies;

6. The proponent must have a collection system / facility; and

7. The project beneficiaries / lessees must be active Pag-IBIG Fund members andmust have passed the eligibility requirements set by the proponent.

V. FINANCING SCHEME

The project proponent shall be given access to the Pag-IBIG Fund RHCL Programfor site development and development of residential subdivision or medium/high risebuildings, where the units from the project to be financed shall be offered for rent tothe project beneficiaries. Said project proponent shall identify the land to serve asproject site.

VI. LOANABLE AMOUNT

1. The amount of the loan to be granted shall be based on the actual project needas supported by cash flow projection, but shall in no case exceed seventy percent(70%) of the prudent production cost.

2. The aggregate outstanding loan obligation of the projects financed by Pag-IBIGFund shall not exceed the project proponent's debt capacity and SingleBorrower's Limit, at any time.

3. The loan amount for the pilot implementation of the program shall not exceed theallocation for wholesale loans for the year.

VII. INTEREST RATE

The loan shall bear an interest based on the prevailing rates in the Fund's FullRisk-Based Pricing Framework for wholesale loan programs.

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VIII. LOAN TERM

The loan shall be repaid at a maximum term of twenty (20) years.

IX. PROCESSING FEE

The project proponent shall be charged with a processing fee of One Hundred Pesos(P100.00) per unit or Ten Thousand Pesos (P10,000.00) for the whole project,whichever is higher.

X. PROJECT TIMETABLE

The construction of the housing units must commence within six (6) months from thedate of initial drawdown and, must have units ready for rental occupancy after one(1) month from the end of the approved construction schedule for the whole housingproject, or completion of the housing units, whichever comes first.

XI. LOAN RELEASES

Loan releases shall be based on project need, cash flow projection, and compliancewith other requirements, if any. The outstanding obligation at any given time shallnot exceed seventy percent (70%) of the collateral value.

XII. PAYMENT OF LOAN AMORTIZATION

The project proponent shall set aside and appropriate in its annual budget thecorresponding amortization payments for the RHCL, as follows:

1. The first interest payment shall be due at the end of the twelfth (12th) month frominitial release of loan proceeds and shall be paid monthly thereafter, until fullsettlement of the loan.

2. The principal payment on the loan shall commence on the month immediatelyfollowing the completion of the project or the approved construction schedule,whichever comes first, and shall be paid monthly thereafter until full settlementof the loan.

3. The payment for the insurance premiums shall commence on the monthimmediately following the initial loan release.

4. The due dates for the payments of the interest, principal, and insurancepremiums shall coincide.

5. The project proponent may request for a different payment arrangement, subjectto the approval of the Pag-IBIG Fund Board of Trustees,

6. The payment for the interest, principal, insurance premiums and/or penalties maybe paid to Pag-IBIG Fund through Auto Debit Arrangement with banks.

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7. Partial payments shall be accepted but the unpaid portion of the amount dueshall be charged with the applicable penalty. Any amount paid by the projectproponent shall be applied in accordance with the order of priority underSection XII, Item No.9 herein.

8. Any portion of the amount due that remains unpaid after the due date shall becharged with a penalty of 1/20 of 1% for every day of delay.

9. The monthly payment shall be applied according to the following order of priority:

9.1. Penalties, if any;

9.2. Non-Life Insurance Premium;

9.3. Interest; and

9.4. Principal, if applicable.

XIII. COLLATERAL

1. The security shall consist of a First Real Estate Mortgage (REM) over the landand/or building/improvements comprising the rental housing project and anyimprovements that will thereafter exist on the project site.

1.1. If the land is alienable, the project proponent shall facilitate the unitizationof title. For vertical development projects, the property shall be covered byindividual Condominium Certificate of Titles (CCTs). Likewise, for horizontaldevelopment projects, it shall be covered by individual Original/TransferCertificate of Titles (OCTsITCTs).

1.2. The subject property shall be appraised by Pag-IBIG Fund. Pag-IBIG Fundshall appoint its own project engineers and personnel to coordinate with theproject proponent for the rental housing project, and inspect the project atany time during business hours.

2. In case the subject property/ies cannot serve as collateral for the loan, the RHCLmay also be secured by any of the following, whichever is applicable:

2.1. For LGUs, a Deed of Assignment of Internal Revenue Allotment (IRA) shallbe executed in favor of Pag-IBIG Fund with the conformity of theDepartment of Budget and Management.

2.1.1. For this purpose, the LGU shall inform its depository bank to retainthe amount corresponding to the loan obligation and maintain it in aTrust / Escrow Account in favor of Pag-IBIG Fund.

2.1.2. Pag-IBIG Fund shall allow partial release of the IRA and/or rentalpayments assigned to the Fund in proportion to the payment of loanobligation.

2.2. A Letter of Guaranty (LOG) stating that the amount equal to a year'samortization of the loan granted by Pag-IBIG Fund shall be set aside andappropriated annually until the said obligation is fully paid, through any ofthe following instruments:

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2.2.1. Internal Operating Budget allocation, which will be evidenced by acertification from the Treasurer, the Chief Administrative Officer, orthe Budget Officer, to be submitted on a yearly basis until the loanobligation is fully paid;

2.2.2. Certificate of Time Deposit and other bank certificates;

2.2.3. Trust I Escrow Account;

2.2.4. Government Securities (Treasury bonds, bills, notes, etc.); and

2:2.5. Other instruments acceptable to Pag-IBIG Fund.

In case of default, the project proponent shall assign to Pag-IBIG Fund theamount in the instruments mentioned in the preceding paragraph.

2.3. A Deed of Assignment of Usufruct of the Land and Building shall beexecuted in favor of Pag-IBIG Fund; provided, the maintenance thereof andthe necessary acts of administration shall rest upon the assignor or theproject proponent.

LGUs shall agree not to sell or encumber the property/ies used in the housing projectwithout the prior written consent of the Fund. For this purpose, the LGU shall executea Deed of Negative Pledge with an undertaking that in the event the subjectproperty/ies are sold/encumbered, the proceeds thereof shall be assigned to Pag-IBIG Fund as payment for the LGU's outstanding loan. In connection thereto, theLGU shall submit the owner's duplicate of the OCTITCT of the subject property/iesto the Fund.

Additional security may likewise be required by Pag-IBIG Fund, if necessary.

XIV. INSURANCE

The subject property/ies of the RHCL shall be covered by non-life insurance for anamount equivalent to the appraised value of the housing components of the projector the loan amount, whichever is lower. The non-life insurance coverage shall startfrom the date of initial loan release up to the full settlement of the loan obligation bythe project proponent.

XV. WARRANTIES

The project proponent shall provide the following warranties:

1. Documentation

The project proponent warrants that all documents, inclusive of the individualtitles and the corresponding Deeds of Assignment, submitted to Pag-IBIG Fundrelative to the program, are valid, binding and enforceable in all other respectsthat they purport to be.

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2. Title/Ownership of Property

The project proponent warrants that the property is free from all liens,encumbrances and adverse claims, that the title/ownership papers have novitiating defects, which could have been found or discovered with the exercise ofproper diligence and technical skills.

The project proponent warrants in favor of Pag-IBIG Fund that no suit, action orproceeding before any court and/or governmental authority is pending or, to thebest of its knowledge, threatened, which may affect the project proponent's titleto the land or its right to the possession thereof, and no judgment or order hasbeen issued which has or is likely to have any adverse effect on such title or rightof possession.

3. Project Development

The project proponent warrants that the project shall be developed andcompleted in accordance with the developmental plans approved by thegovernment agencies and other regulatory bodies concerned.

4. House Construction I Building Construction

The project proponent warrants that the residential units have been constructedin accordance with the plans and specifications approved by the concernedregulatory agencies, as well as with the local ordinances, and that there are nohidden defects whatsoever in the construction of the said units.

5. Misrepresentation

The project proponent warrants that any of its employees or agent allowed totransact or do business in its behalf has not committed any act ofmisrepresentation.

6. Compliance with Laws, Rules and Regulations

The project proponent warrants that all pertinent laws, rules and regulations havebeen complied with. The implementation of the Pag-IBIG Fund RHCL Programshall be subject to the provisions of Republic Act No. 9653, otherwise known asthe "Rent Control Act of 2009".

7. Occupancy of Housing Units

Upon completion of the housing project, the lessees shall occupy property/iesimmediately.

XVI. DEFAULT

The project proponent shall be considered In default in any of the followingcircumstances:

1. Failure to pay three (3) monthly amortizations, which includes interestpayments and principal payments, if applicable;

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2. Failure to complete land development and/or construction of units within theapproved construction schedule; or

3. Violation of or failure to perform any of the obligations in contracts entered intowith Pag-IBIG Fund.

XVII. EFFECTS OF DEFAULT

Upon the occurrence of default, the Fund may exercise singly or collectively anyof the following:

1. Declare the outstanding obligation, together with accrued interest, penalties,fees and other obligations immediately due and demandable. Said amountshall likewise be subject to the following:

1.1 The unpaid amount shall continue to be charged with a penalty equivalentto 1/20 of 1% of the amount due for every day of delay;

1.2 It shall continue to bear interest at the stipulated rate from the time theobligation becomes due and demandable;

2. Foreclose the mortgage securing the loan;

3. Enforce the Deed of Assignment executed in favor of the Fund underSection XIII, Item Nos. 2.2 and 2.3 herein, and other rights and remediesprovided in the loan agreement for the RHCL;

4. To apply, at its option, at any time, the project proponent's monies, which forany reason and under any contract, are presently or hereafter come into thepossession or control of the Fund in full or partial payment of the projectproponent's obligation in the loan agreement;

5. Enforce any and all rights, actions and remedies provided for under the loanagreement evidencing the loan;

6. The proponent shall be required to execute a Deed of Assignment of HousingRentals and Other Income from the rental housing project in favor of Pag-IBIGFund, obligating the proponent to remit the rental to the Fund, and giving thelatter the option to collect, or to accept payment, directly from the lessees ofthe project; and/or

7. Avail of other remedies provided by law.

XVIII. APPROVING AUTHORITY

All applications for the RHCL shall be subject to the approval of the Pag-IBIG FundBoard of Trustees.

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XIX. AMENDMENTS

Amendments to this Guidelines shall be approved by the Senior ManagementCommittee pursuant to the authority bestowed on it by the Fund's Board ofTrustees to formulate and issue guidelines and procedures in the furtherance ofthe objectives of this program consistent with the mandate of the Fund under itscharter and existing laws.

XX. MECHANISM ON RESOLUTION OF ISSUES

Any issue in the interpretation and implementation of this Guidelines shall, as muchas possible, be resolved by the concerned officer. Matters that are not therebysatisfactorily resolved shall be escalated to the next higher approving authorities.

XXI. EFFECTIVITY

This Circular takes effect after fifteen (15) calendar days following the completionof its publication in the Official Gazette or in a newspaper of general circulation.

Makati City,

10 July 2020

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