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HOME DEVELOPMENT MUTUAL FUNDCorporate Headquarters

The Atrium of MakatiMakati Avenue, Makati City

HDMF CIRCULAR NO. 257

TO : ALL CONCERNED

SUBJECT : AMENDED GUIDELINES ON HOUSE CONSTRUCTION FINANCINGLINE

Pursuant to the approval of the HDMF Board of Trustees during the 256 th Board

Meeting held last 20 April 2009, the following Amended Guidelines on HouseConstruction Financing Line are hereby issued:

A. OBJECTIVES

1. To encourage developers to construct housing units on their fully developed lots,thus, creating ready inventories of affordable house and lot packages for sale.

2. To provide developers with a liquidity mechanism that will increase their capacityfor construction of housing units and reduce project financing cost.

3. To provide bridge financing for the construction or completion of housing unitswith approved housing loan applications under the Pag-IBIG end-user financingprogram.

B. ELIGIBILITY REQUIREMENT

1. The proponent must have established a track record of at least three (3) years inhousing development.

If the proponent has previous dealings with the Fund, the proponent must have

an established track record of delivering quality mortgages.

2. The proponent must have a good credit standing among banks, suppliers,financial institutions and other government housing agencies.

3. At any time, the Funds exposure for wholesale loans on projects of theproponent does not exceed the single borrowers limit prescribed by theFund.

C. LOAN FEATURES

1. Loan Purpose

The proceeds of the loan shall be used exclusively for the construction of thehousing units on the property for which the Fund shall release funds; providedthat the proceeds of the loan shall entail the house and lot packages in theproject site to add up to at least seventy percent (70%) of the total units .

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2. Loan Amount / Effectivity of the Line

The line shall be based on actual project need per HDMF evaluation of houseconstruction cost, but not exceeding Twenty Million Pesos (P20,000,000.00). The

line shall be revolving and shall be made available within one (1) year from dateof execution of the Memorandum of Agreement (MOA) between HDMF and thedeveloper, renewable for another year thereafter.

At any time, HDMFs exposure, inclusive of the outstanding obligations in otherinstitutional loan programs, shall not exceed the single borrowers limitprescribed by the Fund .

3. Interest Rate

The loan shall bear an interest rate defined as the prevailing market rate (on

Friday preceding the date of release of proceeds) of 2-year Treasury Notes, plusthree percent (3%). In no case, however, shall the said interest rate fall below therate of 8.5%. The PDST-F yield rate may be used as an alternative basis toTreasury Notes in determining interest rates.

4. Loan Release

The loan shall be released in tranches, the initial drawdown of which shallbe equivalent to fifty percent (50%) of the approved loan. Succeedingreleases shall be made only after ninety percent (90%) of the previousdrawdown has been infused in the project, wherein at least seventy percent(70%) are already in place while twenty percent (20%) are in inventory ofconstruction materials.

The outstanding loan obligation at any given time shall not exceed 70% ofcollateral value.

5. Loan Term

The loan shall have a maturity period of twelve (12) months.

6. Collateral

The loan may be secured by any of the following collaterals:

a. On-site collateral subject to 70% loan-to-value ratio; and/or

b. Off-site collateral, either adjacent or contiguous to the project site, and isclassified as residential and fully developed in terms of land development.However, loan-to-value ratio for off-site collateral shall be limited to 50% ofthe appraised value.

Regardless of whether it is on-site or off-site, the collateral must be fullydeveloped in terms of land development.

The developer shall execute in favor of and deliver to HDMF the Deed ofAssignment of Take-out Proceeds, Real Estate Mortgage, Promissory Notes andTCTs covering the house and lot packages for which HDMF shall release funds.

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7. Loan Payment

The loan shall be paid as follows:

a. Interest interest on loan shall be paid quarterly, with the first payment

due at the end of the first quarter from date of the initial loan release.b. Principal principal is due on the 12 th month from date of initial loan

release.

c. Application of take-out proceeds at least 70% of the mortgage take-outproceeds due the developer from HDMF shall be applied to theoutstanding principal at any time after the initial release of the houseconstruction loan.

Should the take-out proceeds fully cover the developers outstanding loan

balance and accrued interest charges, HDMF shall remit any remaining amountthereon to the developer.

In the event that the house and lot packages for which the Fund shall releasefunds shall be financed by institutions other than HDMF, or in case of cash sales,the corresponding TCTs shall be released to the developer only upon payment ofthe redemption value.

In the event that no take-out is effected during the loan term, the principal andany accrued interest due thereon shall be due and demandable upon loanmaturity.

8. Penalties

The developer who fails to pay his loan obligations when due shall be charged apenalty of 1/20 th of 1% of any unpaid amount for every day of delay.

9. Default Provision

In the event the developer fails to pay his loan obligations upon maturity, theoutstanding loan, including accrued interest, shall be considered due anddemandable without notice or demand. The Fund shall likewise register the REMon the TCTs securing the loan and institute foreclosure proceedings. Allexpenses pertaining to the registration of the REM shall be for the account of thedeveloper.

D. PROJECT ACCREDITATION CRITERIA

1. Site / Location

The project must be characterized by the availability of basic socio-economicinstitutions such as government centers, churches, hospitals/health centers,schools, public markets and commercial establishments within a five-kilometerradius, and must be accessible to public transport.

2. Project Development

The project design must conform to the standards of BP 220 or PD 957,whichever is applicable.

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The site subject of house construction must be fully developed. The proceeds ofthe loan shall entail house and lot packages in the project site to add up toat least seventy percent (70%) of the total units .

3. Permits and Licenses

The following permits and licenses must have been secured at the time of loanapplication:

a. DAR Conversion Clearance or Exemption;b. Environmental Clearance Certificate (ECC) from the DENR; andc. Development Permit.

Meanwhile, the License to Sell shall be submitted prior to initial loan release.

4. Marketing

a. House & Lot Packages The selling price of the house & lot packagesshould not exceed P2 Million Pesos.

b. Market - the prospective buyers must preferably be Pag-IBIG members.

To ensure market viability, 30% of the total number of units must haveconfirmed buyers.

5. Project Timetable

The construction of the housing units must commence within thirty (30) days fromdate of release of the loan and must be completed within twelve (12) months.

E. OTHER PROVISIONS

1. Loan Processing Fee

The developer shall pay a processing fee of 1/4 of 1% of the approved loanamount or P50,000.00, whichever is lower, inclusive of a non-refundable filing feeof P10,000.00.

2. Service Fee

The developer shall pay a service fee of 0.1% of the amount for drawdown.

3. Penalties

Failure to pay the obligation upon maturity or when it becomes due anddemandable, shall subject the developer to a penalty of 1/20 th of 1% per day ofdelay on any unpaid amount.

4. End-User Financing Preferably, at least fifty percent (50%) of the house and lot packages generatedfrom the project shall be financed by HDMF under its end-user financingprogram.

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5. Commitment Fee

The developer shall submit a schedule of drawdown, the first of which shall notbe later than sixty (60) days after the signing of the MOA. The developer shallpay a commitment fee equivalent to 1/4 of 1% of amount of line approved. If

availments are made as scheduled, said fee may be refunded. Otherwise, it shallbe forfeited.

6. Approving Authorities

The Senior Management Committee shall have the authority to approveapplications for availment of the House Construction Financing Line.

7. Amendments

These guidelines may be amended, revised or modified by the Senior

Management Committee in furtherance of the objectives of the program,provided that the amendments, revisions or modifications herein adopted areconsistent with the mandate of the Fund under its charter and existing laws.

This Circular takes effect immediately.

JAIME A. FABIAAOfficer-in-Charge

Makati City _________________ 2009