New and Used Car Talk Reviews Hot Cars Comparison Automotive Community

The Largest Car Forum in the Philippines

Page 1 of 4 1234 LastLast
Results 1 to 10 of 31
  1. Join Date
    Aug 2007
    Posts
    820
    #1
    What do you think guys? Is it possible? Or does the Philippine economy is more better or robust than the US? How much of it is Real Estate Related?

    Did'nt the Asian Financial Crisis before which brought our Peso to its level now was also related to Real Estate problems of our neighboring countries?

    I am just concerned that we have so much Megabuck projects like Condominiums and Sky scrapers now in Manila and I really do wonder if we can actually afford to have them?

    Sorry po if I am confused or misled..Just trying to see what I can learn from the current crisis.

  2. Join Date
    Aug 2008
    Posts
    1,099
    #2
    hindi mangyari yan dito. matindi ang screening ng mga bangko dito sa mga loans. halos lahat di-collateral

    pero yun mga citi financial and other american style finance companies/institution, baka magbago na ng policy

  3. Join Date
    Oct 2002
    Posts
    3,872
    #3
    I think in the US, a lot of banks and investment houses traded mortgage-backed securities. Meaning, an aggregate amount of loans secured by mortgages, but subject to very high interest rates, or sub-prime rates, because the borrowers were generally high-risk (i.e. bad credit history). So, banks and financing companies are able to generate cash for these securities (at lower amounts than the face value of the security) and the investment houses get their money later when the borrowers pay their loans off.

    The dominos started falling when the borrowers started defaulting on their loans which resulted in a lower value for these securities, if not becoming outright worthless.

    In the Philippine setting, there is no trading of these kinds of securities so there is very little exposure. There are, however, some banks who are able to buy such securities (supposedly, very little exposure) through international trading houses and they're probably writing their investments off as we speak.

  4. Join Date
    Nov 2005
    Posts
    45,927
    #4
    We have mortgage backed securities here.

    As in LOCALLY orginated.

    It is orginated by the National Home Mortgage Finance Corp. (NHMFC)

    from an ABS-CBN news article:

    The newly bailed out US housing firms, Fannie Mae and Freddie Mac, have a Philippine version: the National Home Mortgage Finance Corporation (NHMFC).
    It works this way: The banks and residential property developers lend to house buyers. Since the banks and developers cannot lend to more aspiring house buyers if they have to carry big chunks of these housing loans or mortgages in their financial books, NHMFC comes to the rescue by buying these mortgages from the banks.

    NHMFC then turns these mortgages around, then securitize or document them as financial currencies that they could then sell as bonds to potential investors. They are like financial intermediaries between people who would like to park their money in bonds and housing loan borrowers who signed a mortgage document where they promise to pay in a future date.
    can subprime happen here?

    it can.

    will the govt just let it happen?

    i hope not.

  5. Join Date
    Oct 2002
    Posts
    40,038
    #5
    tingin ko hinde, the banks here are not as aggressive as their counterpart in the US.

  6. Join Date
    Feb 2008
    Posts
    14,181
    #6
    IMO No it won't happen here. Banks here are more strict on handing out housing loans unlike in the US were they just hand out loans to anyone without any documents at all to prove credibility and income during the bubble years.

  7. Join Date
    Feb 2008
    Posts
    14,181
    #7
    IMO No it won't happen here. Banks here are more strict on handing out housing loans unlike in the US were they just hand out loans to anyone without any documents at all to prove credibility and income during the bubble years.

  8. Join Date
    Nov 2005
    Posts
    45,927
    #8
    If ur a banker and u make housing loans, AND you keep the loans on your books, it is in your best interest to make sure the borrowers are well-screened.

    BUT...

    If ur a banker, and u make housing loans, and a govt corporation buys all the loans you make, then you wouldnt really care much about screening borrowers well.

  9. Join Date
    Dec 2005
    Posts
    617
    #9
    YES & NO...


    If the Asian Financial Crisis in the late 90's did not happen, malamang na it would have paved the way for a more relaxed lending environment typical of what happened in the US.


    When the crisis hit, Philippine bank lending practices were already relaxed and in the continuous process of futher being relaxed as they are, among others, making a killing on profits, as indicated by the following:
    • Percentage of Loan Amount vs Collateral Value was starting to increase from what used to be a 60% standard loan to collateral value
    • Adherence to Financial Statement Ratios of borrowers were slowly being deviated and it's getting easier to secure deviation approvals
    • Introduction of derivative lending practices led to the low priced dollar & yen (i.e. so-called samurai loans) swap loans. This made borrowers very eager to borrow because of low finance rates and banks very eager to lend because of relatively lenient requirements and very good yield (i.e. spelled as "GREED")
    • The equivalent of the sub-prime mortgage was starting to build up on the commercial level or should i say, already rampant to a certain extent and had it cascaded down to the consumer level, then it would have wreaked greater havoc
    Among other reasons, the bubble burst when so-called dragon economies in asia could no longer sustain the artificial growth and the forex market could no longer hold on to the artificially high php25:$1 exchange level (i.e. with equivalent scenario in other asian countries) because of trading & market forces in asia.

    :boom:

    Just imagine, what used to be a $1 million dollar swap loan at php25:$1 exchange rate where the borrower got a net proceed of php25,000,000 and paying low single digit loan rates, though still a $1 million dollar loan...






    ...suddenly becomes a php40,000,000 loan because of the currency adjustment to php40:$1... Thats a 60% increase in principal that the borrower has to pay but did not enjoy a single penny of it... Chain reaction na ang kasunod...
    • Borrower could not pay sudden hike in payments due.
    • Banks collateral cover suddenly is short (i.e. if what used to be the php25MM loan was 70% secured by a php 36MM real estate collateral, it is now a 40MM loan vs 36MM collateral.
    • To regain required regulatory collateral position, bank needs additional collateral from borrower or make him pay the difference or increase the banks, unsecured loan position (i.e. the latter of which will screw the banks adequacy rating, while the other two will screw the borrower and simply not feasible)
    • Borrower defaults, Bank liquidity suffers
    • etc. etc. etc.
    In short, it has all the makings of a grand bubble pero naudlot at hindi gaano napilay.

    Remember, nauso after the crisis yung property auctions held by banks and even those sold to foreign banks at a steep discounts to dispose of the non-performing assets.

    Had the bubble expanded and lasted a couple more years and the so-called artificial dragon economy played longer by the puppets and puppeteers, it would have been a bigger, louder
    :boom::boom::boom::boom:

    p.s. it has been a while and i'm trying to recall the facts since it happened kaya paki-correct na lang po kung meron akong na-miss or something similar...
    Last edited by slamtaz; September 17th, 2008 at 11:11 AM.

  10. Join Date
    Jun 2005
    Posts
    787
    #10
    Financing companies relaxed their credit standards and offered very low initial monthly payments for "subprime" borrowers who wanted to buy homes. But these monthly payments step up sharply after a couple of years, leading to the defaults of many subprime borrowers who can't meet the higher payments.

    For those in the Philippines, look around you... doesn't this sound very familiar? Check out all the "easy payment schemes" of a number of real estate companies who advertise that you can buy a condo for "only P12k a month".

    And wasn't it just recently that we've been reading about this big condo boom locally?
    Last edited by creepy; September 17th, 2008 at 04:18 PM.

Page 1 of 4 1234 LastLast
Subprime Mortgage Crisis sa Pinas - Can it happen?