The Securitization Act of 2004

Section 35

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

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

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

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

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

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

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

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.