SEVEN officials of the Dagupan branch of the Home Development Mutual Fund (HDMF or Pag-IBIG Fund) were cleared of any liability in connection to previously disallowed transactions totaling P159.84 million after the Commission on Audit affirmed a 2015 decision that lifted the notices of disallowance (NDs).
In a decision dated January 14, 2020, the COA Commission Proper sustained the findings of COA-Regional Office No. 1 in its February 23, 2015 ruling that Pag-IBIG Fund was sufficiently protected in the previously questioned transactions as it did not incur any loss in the grant of developer-assisted housing loans.
Cleared in the COA decision were HDMF Dagupan officials Jerome Avila, Ma. Imelda Mabutas, Rosalina Delos Reyes, Jean Fontanilla, Giovanni Salvador, Allan Pacis, and Gerald Soriano.
COA chairman Michael G. Aguinaldo and Commissioners Jose A. Fabia and Roland C. Pondoc declared that the notices of disallowance were improperly issued against the Pag-IBIG Fund officials because it was based on projections of potential losses.
“An ND requires a finding of an actual loss and not an ‘eventual possible loss’ which is merely speculative,” the COA Commission Proper explained.
Based on the audit records, the loans were granted to Pag-IBIG member-borrowers under a developer-assisted loan takeout arrangement with Le Grand Realty, RTF Construction, and Sky Master Development Corporation.
Under the said scheme, the Pag-IBIG member draws a loan for housing units to be built by the chosen developer and the fund will be released by Pag-IBIG Fund only upon compliance of certain conditions designed to safeguard agency money and the account holders’ interests.
Under HDMF Circular No. 259, the developer undertakes to conduct an evaluation of the member-borrowers’ loan applications before endorsing them to Pag-IBIG Fund; ensure that the accounts are free of encumbrances; that the housing units will be turned over to the member-borrower upon release of the takeout proceeds; and that the Pag-IBIG member can occupy the said housing units immediately.
On December 28, 2010 the Pag-IBIG audit team leader and supervising auditor issued five notices of disallowance covering a total amount of P159,840,114.44 after it found several violations by the developers.
It said site inspection of the supposed project areas showed the lots were bare without even skeletal structures much less livable residential units.
They also questioned the approved housing loans on the basis of incomplete support documents as well as the misrepresentation by the developers that the construction of housing units has been completed.
Additional issues raised include default of payment by borrowers by six months or more, 29 accounts showing member-borrowers did not pay even a single amortization; and a survey of occupants of the finished housing units showed they were not Pag-IBIG members.
However, the COA-RO 1 and the COA Commission Proper noted that the Pag-IBIG Fund was sufficiently protected in the event of breach of agreement provisions by the developers.
“In case a developer breaches its warranties, HDMF may compel the concerned developer to buy back the account. Otherwise, sanction shall be imposed upon the developer and not on HDMF officials. The developers’ breach of warranty has nothing to do with… the loan takeout,” they pointed out.
Where the mortgaged properties are insufficient to cover the loaned amount, the Pag-IBIG Fund also has the option of going after other properties of member-borrowers.
“It cannot be said that HDMF Dagupan did not impose proper sanctions to developers as a result of their breach of warranties. It had suspended the Funding Commitment Agreement with Le Grand Realty, while Sky Master already settled their buy-back obligations. Thus, proper sanctions were meted out,” the COA said.