Delfin Lee’s business model

The provision of affordable social housing to low-income families has been a persistent concern of the country’s successive administrations. The problem proceeds from the perception that the government simply lacks the kind of money needed to fully address the housing needs of the poor. The private sector would rather invest in high-end housing where profit margins are high than risk losing capital in low-cost housing. The unending quest for a suitable housing policy can be glimpsed from the alphabet soup of acronyms of government agencies that have something to do with housing.

In the 1980s, the Cory Aquino administration introduced the Unified Home Lending Program (UHLP) that aimed to motivate private home developers to go into low-cost housing projects by allowing them to tap pooled housing funds from the Government Service Insurance System, the Social Security System, and the Pag-Ibig Fund. The program went full-blast under the Ramos administration, built many homes, and, in the process, also made lucky developers like Manny Villar very wealthy.

The concept was good for as long as people followed the rules. Families that had been renting finally got to own their homes, public funds were put to good use, and private developers earned good money while helping meet a pressing social need. But, as usual, where institutions are weak, even the best programs are soon waylaid. After pouring in about P43 billion into the program, the government, toward the end of the Ramos presidency, suspended further lending. Far too many home buyers were defaulting on their home mortgages.  Many of them turned out to be fictitious borrowers. Loans were being approved with little regard for the beneficiaries’ capacity to pay.  Many housing units that were built, often below specifications, for which the developers had already been paid, remained unoccupied.

The Pag-Ibig Fund, which handles the money contributed by its members, drew lessons from this experience and instituted safeguards to protect the fund. The outcome of these is a set of procedures that require a lot of documentation and validation before a member’s application for a housing loan is approved. To speed up the approval of housing loan applications, Pag-Ibig adopted what was called “desktop processing”—which essentially meant foregoing the long and tedious verification that banks would typically undertake before releasing a loan. The agency took comfort in the fact that, whatever happened, it kept the title to the house and lot until the mortgage was fully paid.

Enter Delfin Lee. The allegation against him is that, during Gloria Arroyo’s presidency, by using connections at Pag-Ibig, he was accorded the fast lane, and he managed to take out P6.6 billion worth of housing loans at concessional rates in the name of thousands of Pag-Ibig members. A good number of them turned out to be bogus borrowers, meaning, they had lent their names, their ID cards, and their signatures to Delfin Lee’s Globe Asiatique Realty Holdings Corp., allegedly in exchange for a payment of up to P5,000. Yet they were not home buyers. Many of them were enrolled as Pag-Ibig members after the company paid 24 months of membership dues in their name.  The company submitted their loan applications to Pag-Ibig, took out the mortgage, and paid the regular monthly amortization.

So, where’s the problem? Apparently, some of these “ghost” borrowers from Pampanga began to worry when auditors from the Pag-Ibig central office and the Commission on Audit began discreetly inquiring into the identities of the supposed borrowers. The supposed borrowers were told that they owed the government a lot of money, and would ultimately be held liable if Globe Asiatique stopped paying the amortization. They sensed that they had become unwitting participants in a racket they did not fully comprehend.

They told their stories to Tonette Orejas, a correspondent of Inquirer Central Luzon. Tonette started gathering documentary evidence over a three-month period. In the course of her research, she ran into some legitimate buyers of Globe Asiatique’s housing units who learned that they were paying the company for homes that had been previously assigned to others. Indeed, it was discovered that some 1,576 homes in the name of Pag-Ibig member-borrowers were actually occupied by tenants or “in-house” buyers of Globe Asiatique. This is what gave rise to charges of double-selling.

Delfin Lee was Pag-Ibig’s most favored housing developer. While ordinary members had to go through a wringer to get a loan approved, Globe Asiatique was known to breeze through the process, often taking out hundreds of millions in low-cost housing loans in one day. Delfin Lee himself projected the high profile of a successful housing magnate. He bought television air time and hosted a show to promote his projects. His name became associated not just with low-cost housing in the provinces but also with ubiquitous skyscrapers on Edsa. He appeared to have perfected a business model that gave him inexhaustible liquidity.

I first took notice of Delfin Lee through a photograph that strangely appeared on the foreign page of the Inquirer. It showed him with his hand resting on the shoulder of a formally-dressed man who turned out to be Jaime Fabiana, then the CEO of Pag-Ibig. The other person in the picture was Pag-Ibig’s then deputy CEO, Emma Linda Faria, who appeared ill at ease and reluctant. I made a comment about that curious photograph, which defied classification as news or advertisement, in my July 18, 2010, column. Little did I suspect that behind Delfin Lee’s broad smile was an explosive story.

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