Key Policy and Effect
- The circular sets a quantitative limit on total real estate loans of Universal Banks (UBs) and Commercial Banks (KBs), using specified exclusions.
- The limit applies based on the calculation formula stated for real estate loans, specifically net of interbank loans.
- Trust departments of UBs/KBs are exempted from the prescribed limit on real estate loans.
Definitions: “Real Estate Loans”
- The circular defines “real estate loans” to mean loans granted:
- To individual households for financing the acquisition, construction and/or improvement of housing units and the acquisition of any associated land that is or will be occupied by the borrower; and
- To land developers/construction companies and other borrowers for the acquisition and development of land and/or the construction of buildings and structures, including housing units for sale/lease and/or for use in retail/wholesale, manufacturing or other income-generating purposes.
- The definition explicitly includes loans granted to bank officers and employees for the same housing purposes when those loans are covered by the bank’s fringe benefit plan and the plan was approved by the Monetary Board.
Coverage and Exclusions (What Counts)
- Total real estate loans of UBs/KBs are subject to a cap, but the computation excludes the categories enumerated below.
- The circular excludes from the total real estate loans (for purposes of the cap) loans that fall under these categories:
- Loans extended to individual households for acquisition, construction and/or improvement of housing units and acquisition of associated land the borrower occupies, regardless of amount.
- Loans extended to land developers/construction companies for the development and/or construction of socialized and low-cost residential properties intended for sale to individual households, consistent with HUDCC existing guidelines.
- Loans to the extent guaranteed by the Home Guaranty Corporation (HGC).
- Loans to the extent collateralized by non-risk assets under existing regulations.
- For purposes of the cap, the circular provides the required calculation: excluded items are subtracted, and the result is measured net of interbank loans.
Quantitative Limit on Real Estate Loans
- The circular states that total real estate loans of UBs/KBs (after applying the enumerated exclusions) shall not exceed twenty percent (20%) of the total loan portfolio.
- The limit is computed net of interbank loans.
- The circular requires that the twenty percent (20%) cap applies to UBs/KBs collectively under Section 1397 as amended.
Specific Non-Coverage Rules
- The circular provides that “real estate loans” shall not include loans for the construction of highways, streets, bridges, tunnels, railways, and other infrastructure for public use.
- The circular directs that purchases by banks of receivables under Contract to Sell (CTS) executed between real estate developers and home buyers on a with recourse basis are considered loans to real estate developers and are classified as commercial real estate loans.
Special Rules for Trust Departments
- Trust departments of UBs/KBs are exempted from the prescribed limit on real estate loans.
HUDCC Socialized and Low-Cost Levels
- Under existing HUDCC guidelines, socialized and low-cost housing loans are defined through the following levels and loan ceilings:
- Low-cost Level 1-A (Socialized): P300,000 and below
- Level 1-B: Above P300,000 to P500,000
- Level 2: Above P500,000 to P1,250,000
- Level 3: Above P1,250,000 to P3,000,000
- The circular ties the exclusion for developer/construction company loans to these HUDCC-defined socialized and low-cost property categories intended for sale to individual households.
Reporting Requirement: Annex “A”
- The circular requires use of the revised template of Report on Real Estate Exposure as part of the Financial Reporting Package.
- The report template forms part of the Financial Reporting Package issued under Circular No. 512 dated 03 February 2006, as amended.
- The revised template of the report is attached as Annex “A.”
Publication and Effectivity
- The circular takes effect fifteen (15) calendar days following publication in either the Official Gazette or a newspaper of general circulation.
- The circular is adopted on 04 Feb. 2008 by the Monetary Board, through the Officer-in-Charge Nestor A. Espenilla, Jr. (signed).