Article 155Supplement v1, p. 155

COMMERCIAL LAWS SUPPLEMENT

subject to a twenty percent (20%) final withholding tax,

except those held by tax-exempt investors.

SECTION

32.

Re-transfer

of

Assets .

-

Where

the

implementation of the Plan or the provision of this Act

requires or provides a transfer of the assets and collateral

back to the Originator or Seller, then the provisions of

Section 28 shall apply to such transfer.

SECTION 33. Incentives for Securitization . - In order to

promote the securitization of the mortgage and housing

related receivables of the government housing agencies

as

may

be determined by the Housing and Urban

Development Coordinating Council (HUDCC) and the

Department of Finance (DOF), the yield or income of the

investor from any low-cost or socialized housing-related

ABS shall be exempt from income tax.

SECTION

34.

Waiver

of

Rights .

-

For

purposes of

securitization pursuant to this Act, the buyer of real estate

on installment payments may agree to waive his rights

under Republic Act No. 6552, the provision of Section 7 of

the said notwithstanding.

ARTICLE V SECONDARY MORTGAGE

INSTITUTION

SECTION

35.

Registration

of

Secondary

Mortgage

Institution (SMI) . - An SMI, which shall be primarily

responsible in providing liquidity mechanism to primary

mortgage lenders/holders as well as in developing a

secondary market for mortgage and housing-related

ABS, shall also be registered with the Commission.

SECTION 36. Registration of Business and Operational

Plan . - The SMI shall also register its business and

operational plan with the Commission and shall, as a

minimum,

be

subject

to

the

same

disclosure

requirements as SPCs.

SECTION 37. Promulgation of Rules . - The Commission,

in

consultation

with

the

BSP

and

the

Insurance

Commission (IC), shall promulgate rule regarding the

ownership, organization, capitalization and operation of

the SMI.

In

promulgating

such

rules,

the

Commission

shall

consider the size of the asset pools to be held by the SMI,

the amount of debt to be issued by it, the extent of its

operation and the powers of the SMI specified under this

Act.

SECTION 38. Powers of the SMI . - For purposes of

securitization under this Act and pursuant to the Plan

submitted to the Commission, the SMI may perform any

or all of the following:

(a) Wholesale purchase of residential mortgages and

housing-related contract receivables;

(b) Buy and sell residential mortgage and housing-related

ABS;

(c) Provide loans to primary lending institutions against

residential mortgages;

(d) Issue housing-related ABS through an SPE, and issue

bonds and other debt instruments;

(e) Perform ancillary functions including, but not limited

to, title insurance, through a subsidiary, wholly or partially

owned by an SMI, and loan servicing; and

(f) Perform such other functions as the Commission may

determine necessary to mobilize and channel funds from

the capital markets to the mortgage and housing finance

sector.

SECTION 39. SMI Capitalization and Organizational

Requirements . - Any SMI established for the housing

sector shall be a stock corporation and shall have a

minimum initial paid-up capital of Two billion pesos

(P2,000,000,000.00): Provided , That the total obligation of

the

SMI,

including

both

actual

and

contingent

obligations, shall not exceed fifteen (15) times its paid-up

capital: Provided , further , That the actual obligations of

the SMI shall not exceed ten (10) times its paid-up capital:

Provided , furthermore , That the ratios indicated herein

may be adjusted by the Commission with approval of the

DOF and BSP upon a showing that the conditions of the

secondary and primary markets and the financial viability

of the SMI warrant such adjustment: Provided , Finally ,

That the investment of financial entities in the SMI shall

be subjected to and be made to comply with rules and

regulations of the appropriate regulatory agency.

Government

financial

institutions

and

government-owned

or-controlled

corporations,

may

collectively hold and own up to a maximum of thirty

percent (30%) of the SMI's capital: Provided , That such

investment does not conflict with their existing charters

A government financial institution may invest up to a

maximum of ten percent (10%) of its total investible funds

in

housing-related

assets

or

five

percent

(5%)

in

non-housing

related

assets:

Provided ,

That

such

investment does not exceed five percent (5%) of the total

amount of each ABS issue.

Within ten (10) years of its incorporation, the SMI shall

offer and list at least twenty percent (20%) of its common

shares in the stock exchange, which period shall be

extendible only upon approval of the Commission in

instances where the lace of financial viability of the SMI

warrants such extension.

SECTION 40. Prohibited Activities of the SMI . - The SMI

shall be prohibited from:

(a) Originating or financing individual mortgage loans;

(b) Providing loans to other parties engaged in a business

other than that approved in the Plan submitted to the

Commission: and

(c) Providing capital equity to other companies.

SECTION 41. Extension of Benefits to the SMI . - The

benefits provided to the transactions entered into by the

SPCs under Sections 28 to 33 of this Act shall also be

granted to the same transactions entered into by the

SMIs for purposes of securitization in accordance with the

provisions of this Act.

SECTION 42. Dissolution of the SMI . - The Commission

shall order the dissolution and liquidation of the SMI

upon a finding that it;

(a) Cannot continue to undertake its business; or

(b) Is not operation actively; or

(c) Is engaging in activities that conflict with its objectives

as an SMI; or

(d) Has fulfilled a condition for dissolution specified in its

Articles of Incorporation.

ARTICLE VI RATING SYSTEM

SECTION 43. Rating ABS . - No ABS shall be issued unless

such ABS has been rated by a duly accredited credit

rating agency.

SECTION 44. Credit Rating Agency . - Every credit rating

agency which now exists or which may hereafter be

formed shall be subject to the provisions of this Act.

SECTION 45. Accreditation of Credit Rating Agency . -

No credit rating agency shall commence rate-making

operations

pursuant

to

this

Act

until

it

shall

have

obtained an accreditation from the Commission under

such rules and regulations as the Commission may deem

appropriate.

SECTION 46. Examination of Credit Rating Agencies . -

Credit rating agencies shall be subject to examination by

the Commission as the latter may deem warranted:

Provided,

That

the

Commission

shall

conduct

an

examination of the credit rating agencies at least once

every three (3) years.

SECTION

47.

Noncompliance

of

Accredited Rating

Agencies . - The Commission may suspend or revoke the

accreditation given to any credit rating agency which fails

to comply with the Commission's lawful order within the

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