ELV (Overview of Credit Process)

OVERVIEW OF CREDIT PROCESS
5 Cs OF CREDIT
Borrower’s willingness and intention to pay. Reflected by the way the borrower takes responsibility through timely fulfillment of obligations
Character Indicators and parameters:

1. Good loan payment experience
2. No negative Data/Not included in OFAC and watch list database
3. No court case for the past 5 year
4. No misrepresentation of facts during loan application
5. Good neighborhood reputation
Types of negative data:

1. Mishandled accounts – accounts not properly handled
CHARACTER
2. Sum of money – a suit for collection of money against defaulted borrower; damages also in the form of money
3. BP 22 – act penalizing the making/drawing and issuance of a check w/o sufficient funds or credits and for other purposes
4. Estafa – committed by a person who defrauds another causing him to suffer damage, by means of unfaithfulness or abuse of
confidence, or if false pretense or fraudulent acts
5. Written Off Term Loan – bad debt declared non-collectable
6. Adversely Classified Account – loan/asset is considered, to some degree, to be impaired or of substandard credit quality and whose
full repayment of principal and accrued interest is questionable
7. Replevin – court action to recover possession for a collateral, sometimes known as “claim & delivery”
8. Foreclosed accounts – accounts that have been issued Certificate of Sale (COS) by virtue of auction sale conducted by the court
sheriff or notary public and with expired redemption period
9. Cancelled Card/Written Off Card
Represents debtor’s ability to generate sufficient cash to meet the loan repayment requirement when the debt becomes due (aka 1st way
out)
Capacity indicators and parameters:

1. Income: regular and from a stable source
2. Rank and tenure of employment
CAPACITY 3. If self-employed, progressive and profitable business operation for at least 2 years
4. Owns residence/if renting, at least 2 years in present residence
5. Owns various real estate properties, cars, and other valuable assets
6. Minimum income of Php 40k for auto
7. Minimum income of Php 40k for housing
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Gross Monthly Income Ratio (GMIR) = [Proposed Monthly Amortization (MA) + other obligations]
Gross Monthly Income (GMI)
For housing loans – 50% max GMIR regardless of residence ownership

For auto loans, if residence is rented or amortized:
1. 30% if income is <40k
2. 35% if income is 40k to >60k
3. 50% if income is 60k or more
60% IF residence is owned or used free
Instances when a co-maker is necessary:

1. Over aged
2. Foreigners
3. All or part of the amortization will be shouldered by the parents
4. Applicant is employed in the parents’ or siblings’ business
5. Single OFWs or spouses are both OFWs
6. Co-maker is the user of the unit
Special Occupation 1 (classified due to instability of income)

1. Professional athletes and trainers
2. Salesmen and insurance agents
Special Occupation 2 (classified due to possible collection problem [PCP])

3. Police/military personnel
4. Court personnel/labor arbiters
5. Media people
6. National, local, and provincial government officials
Unacceptable sources of repayment:

1. Beerhouses/bars/nightclubs
2. Sauna and massage parlors
3. Motels
4. Cockpit/jueteng/gambling joints
5. Networking/pyramiding scheme/multi-leveling scheme
CAPITAL The borrower’s financial strength. The excess of what he/she owns over what he/she owes (aka net worth)
External factors over which the lender does not have control. Economic conditions and outlook may adversely affect the borrower and may
CONDITION put his/her obligation at risk
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Condition indicators and parameters:
1. Local and national legislation (ordinances, memorandum, regulations, and policies & laws that can affect the business operations)
2. Number of players and the market practice in the banking industry
3. Performance and conditions of the industry to which the borrower belongs should be considered at all times when granting loan
(market prices, demand situation, margin of profits, competition, etc)
4. Countries with existing OFW Deployment Ban (Afghanistan, Iraq, Libya, etc)
Property/asset the borrower can make available to the creditor to guaranty payment of the loan. As a security to the loan, it will be liquidated
in case of default to satisfy the obligation (aka 2nd way out)
Collateral parameters:
1. Unit is for personal/business use of applicant; not accommodation
2. Collateral matched with profile
3. Listed among retail lending’s products eligible for financing
4. Downpayment and term complies with scheduled minimum downpayment and max term
5. Term should not exceed remaining economic life of the offered collateral
6. Asset should be acceptable/marketable to secure loan
7. Property should be free from any liens and encumbrances
For housing loans, unacceptable collaterals:

1. Located in PCP and underdeveloped subdivisions
2. Inaccessible by regular land transportation
3. Interior lots w/o right-of-way or less than 3m right-of-way
COLLATERAL
4. Under Area for Priority Development (APD) unless with clearance to mortgage is obtained from HLURB
Collaterals to be offered to Ka Negosyo:
1. Industrial property/warehouse
2. Shopping malls
3. Memorial lots
4. Lots exceeding 10,000sqm (1 ha.)
5. Commercial buildings
6. Schools, agricultural lands, raw lands
For auto loans, unacceptable collaterals:

1. Special use vehicles (armored car, funeral car, tow trucks, ambulance)
2. Second hand imported vehicles
3. Vehicles more than 5 years old
4. ROPA from other banks
5. Remodeled/cloned vehicles
ELV | Page 3 of 4
CREDIT PARAMETERS
AUTO LOANS HOUSING LOANS
1. Qualified Applicants 1. Qualified Applicants
o Individual – of legal age but not >70 upon maturity of loan o Individual – of legal age but not >70 upon maturity of loan
o Corporations/partnership o Corporations/Partnership
2. Purpose – for personal use of applicant; not an accommodation 2. Loan Purpose
3. Collateral o Housing Loan
o Brand new units § Acquisition
o Second hand units (not >5 years old) § Construction
o Brand new imported (subject to car appraisal and car § Home improvement/renovation
history) § Reimbursement (transfer of ownership is still 120
4. Loan Amount – minimum of 200k days)
5. Downpayment § Refinancing (<40% increment)
o Brand New, minimum (20%), 10% to 15% (with parameters) Increment – (loan amount – OB)/loan amount
o Second hand, depends on year model (subject to set limits) o Property Equity Loan (PEL)
6. Loan Term § Acquisition different from collateral
o Brand new – 12-60 months § Construction/renovation different from collateral
o Second hand – 12-60 months (subject to set limits) § Refinancing (>40% increment)
§ Reimbursement (transfer of ownership exceeds
120 days)
§ Personal consumption
3. Collateral
o Housing loans – residential properties
o PEL – residential and non-residential
4. Loan amount – minimum of 400k
5. Loan term – max 20 years (depends on purpose and loan transaction
Loans to spouses of Unibankers:

1. Limited to one commercial housing loan at a time
2. Income of employee-applicant and spouse may be considered for eligibility
3. Eligible co-borrower shall be limited to 2nd degree relatives of the employee-applicant
4. Loans shall be priced at regular commercial rates
Loans to foreigners:
1. Can avail of housing loan to buy a condo when: with immigrant visa, married to an immigrant/permanent resident, or under Special Resident Retiree
Visa
2. To avail of housing loan to buy a house and lot, they must be: married to a Filipino Resident or is with dual citizenship
ELV | Page 4 of 4

ELV (Overview of Credit Process)

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OVERVIEW OF CREDIT PROCESS

Character Indicators and parameters:

Types of negative data:

Capacity indicators and parameters:

For housing loans – 50% max GMIR regardless of residence ownership

Instances when a co-maker is necessary:

Special Occupation 1 (classified due to instability of income)

Special Occupation 2 (classified due to possible collection problem [PCP])

Unacceptable sources of repayment:

For housing loans, unacceptable collaterals:

For auto loans, unacceptable collaterals:

Loans to spouses of Unibankers:

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