Home Guaranty Corp. (HGC) President Atty. Manuel Sanchez on Saturday denied that the agency is losing money. In fact, he announced that the corporation had chalked up P399 million in guaranty premium from January to July this year.
HGC’s net worth as of December 31, 2012 stood at P7.26 billion, Sanches said in reaction to The Times’ banner story on Friday, Nov. 1 titled “Home Guaranty bankrupt.”
“We expect to meet our P712 million premium income target before the year ends,” said Sanchez, explaining that “the guaranty business picks up during the last quarter. And that is from guarantee premium alone and does not yet include earnings from collection of receivables and sale of acquired assets.”
“The corporation was hemorrhaging when we came in but we have stopped the bleeding and we are on our way to full recovery,” he added.
The state-owned HGC projects a net income of P554 million in 2015 and P870 million in 2016.
It is mandated to mobilize private funds for public housing through a system of guarantees and fiscal incentives. Since the enactment of its new charter in 2000, HGC has guaranteed P308.66 billion worth of housing loans making possible the purchase and construction of 603,696 housing units.
Under the present administration, a statement from HGC said, it has guaranteed P77.44 billion of private investments in public housing, translating to 51,114 housing units. This, despite HGC’s “under-capitalization,” Sanchez said.
HGC’s 2000 Charter authorized a P50 billion capitalization from the national government. To date, however, the government has remitted only P14.57 billion to HGC through its annual budgets, leaving a balance of P35.437 billion.
“HGC is earning more than we are spending. Our cost of operations is just about half of what we earn,” Sanchez said. “A sizable portion of HGC’s income however, goes to servicing inherited debts.”
Bad business decisions and questionable housing projects which HGC was “compelled” to guarantee during previous national government administrations left HGC heavily indebted.
These “sins of the past” have also left HGC with an inventory of more than P16 billion worth of foreclosed assets, he added. The bulk of these were flagship projects of the national government in the 1990s, funded through the flotation of asset-backed securities.
One of these failed projects is the Smokey Mountain Reclamation and Development Project developed by Reghis Romero and R-II Builders. Romero promised but failed to raise the project financing. To save the project, bonds were floated to raise the needed funds. HGC guaranteed payment for the bonds and assumed all financial obligations to investors amounting to more than P4 billion, including interests. Romero walked away with P6.7 billion for his equity of only P270 million in the project.
Sanchez said the current HGC management has taken vigorous steps to make sure that “sins of the past” do not happen again. Guaranty contracts were reviewed and amended and corrective measures were instituted to strictly enforce the conditions for guaranty enrollments and guaranty call payments.
These reforms are embodied in new guaranty contracts to prevent the excesses of the past.
“What we are also doing now,” said Sanchez, “is recovering HGC’s other assets and going after those who have illegally enriched themselves at the expense of HGC and the government. We are anticipating lots of legal battles.”
The HGC posted better financial performance in 2011 and 2012 than in the previous years. Except for the dip in 2010, there is an increasing trend in the corporation’s annual Operating Revenue as well as in its Income from Operations.
The net income (Revenue less Expenses) of the corporation has always been negative for the past five years due to the more than P1-billion in annual financial charges. The agency, however, managed to bring down that figure year by year, and the Net Income (Loss) in 2012, still stood as the lowest.
In 2012, HGC’s net worth was P7.26 billion, its highest in the last five years. As of December 31, 2012, HGC’s assets totaled P31.69 billion and its liabilities, P24.42 billion.