However, the financial crisis which hit the country in 1984 up to the early part of 1986 caused the collapse of a relatively successful home-financing program of the government.  Since a sizeable portion of NHMFC funds came from the financial market, in addition to funds coming from contributions of PAG-IBIG members, the 30% to 40% interest rates in the financial market made it impossible for NHMFC (whose lending rate was pegged at 9%) to operate viably.

With the assumption into office of the Aquino Administration in 1986, there was already a felt need to reorganize the government housing agencies and define their new mandates.  Executive Order No. 90 on December 17, 1986, gave fresh mandates to the five housing agencies, NHMFC included. As the major government home mortgage institution, NHMFC was tasked to operate a viable home mortgage market, utilizing long-term funds principally provided by the Social Security System (SSS), the Government Services Insurance System (GSIS), and the Home Development Mutual Fund (HDMF), to purchase mortgages originated by both private and public institutions that are within government-approved guidelines. It was also charged with the development of a system that will attract private institutional funds into long-term housing mortgages.

In view of the above, NHMFC’s clientele was expanded to include among others, borrower-members of SSS and GSIS (in addition to PAG-IBIG members), and even non-members of these institutions, as well as developers of low-cost housing projects.  And among the qualified originators were added: private developers, government agencies, community associations, local government units and non-government organizations, together with private financial institutions.

Until 1995, NHMFC was operating under the Executive Order No.90 mandate, but ceased to do so with the signing of a Memorandum of Agreement on Housing Finance with the Department of Finance, Department of Budget and Management, and the Funders (SSS, GSIS & HDMF) which transferred the processing and payment of mortgages to HDMF in 1996.

Despite the suspension of the UHLP, the Corporation continuously administered the Community Mortgage Program (CMP) as amended under R.A. 7279 - UDHA of 1992. Further, the Abot-Kaya Pabahay Fund Program, which was created under R.A. 6486 in 1990 continued to be administered by NHFMC. In December 1994, R.A 7835 (or the CISFA 1995) was enacted into law and further amended R.A. 6846 and provided for the continuing funding support for the CMP and the Abot-Kaya Pabahay Fund Program.

The economic slowdown of 1998 took its toll in the asset recovery program of NHMFC. The Corporation continuously failed to register positive financial marks. Early on the Estrada Administration, a Memorandum, dated May 20, 1999 from the President addressed to HUDCC, DOF, DBM and SEC was issued, constituting them into a Task Force to prepare the appropriate disposition plan for NHMFC.

Then President Estrada issued Executive Order 195 dated December 31, 1999 directing all government-owned and controlled corporations under the HUDCC and the Presidential Commission on Mass Housing (PCHM) to prepare their respective Rationalizing and Streamlining Plans. The E.0. also mandated, among others, NHMFC to re-direct its operations to the development and provision of a secondary mortgage market to finance mortgage take-out and fast track the disposition of existing mortgages. The E. O. provided the President’s policy direction with respect to NHMFC.

In the 1st quarter of 2002, as part of an overall rehab program, NHMFC hired Punongbayan & Araullo/Ernst & Young (P&A/E&Y) as its Financial Advisor. In the last quarter of the same year, the Corporation undertook a Restructuring Agreement with the Funders (SSS & HDMF) and started the processing for the Sale of the Non Performing Loans (NPLs) of the UHLP portfolio.

In 2003, NHMFC announced the competitive auction sale of the NPLs after pre-qualifying potential bidders. This sale is part of a strategy that will reposition the Corporation to meet the future affordable housing needs of the Filipino people. This realignment process actually started during the second quarter of 2002 with the direct involvement of Senior Management of the NHMFC, SSS, HDMF, HUDCC & the DOF.

NHMFC’s realignment included the formal restructuring of its P46 B outstanding debt balance with SSS and HDMF and obtaining approval from all the required government bodies to implement its plan to dispose of the portfolio of delinquent loans. This complex approval process required a consensus among all the parties and took more than one year to achieve.

In June 20, 2004, Executive Order 272 authorized the creation of the Social Housing Finance Corporation, a wholly-owned subsidiary of NHMFC.  One year after, or in June 21, 2005 the Community Mortgage Program (CMP), and the amortization, as well as the developmental component of the Abot-Kaya Pabahay Fund (AKPF) Program of NHMFC, was officially entrusted to the SHFC. Mandated to be the lead government agency to undertake social housing programs for the low-income earners, SHFC has assumed the implementation of the AKPF and CMP, which for more than 17 years now, has been the most affordable, long-term microfinance facility to meet land tenure and housing security requirements of those so-called "poorest of the poor."  It is now recognized as the most successful housing program for the homeless and the underprivileged sector of our society

Because of the Spin-off of the CMP and AKPF programs to SHFC, and the sale of its Non-performing Loans (NPLs) to Balikatan Housing Finance, NHMFC in September 2006 began the process of rationalizing its manpower structure.  The Plan for Reorganization was approved by DBM and CSC in November of 2006 and was implemented and completed in June of 2007.  The Manpower complement of NHMFC was reduced by half, with the new structure downsizing its functions related to collection activities and CMP, and instead focusing more on establishing a Secondary Mortgage Institution.

In August 2007, NHMFC engaged the services of Ernst & Young Transaction Advisory Services Inc. to act as Financial Advisor, assist in the maiden securitization and lay the building blocks for the transformation of NHMFC into an SMI.  EY TASI conducted due diligence on the low delinquent accounts of NHMFC and is assisting the corporation in matters of finance, accounting, regulatory and legal implications of the securitization transaction.

In August 2008, NHMFC brought on board the securitization expertise of Standard Chartered bank as underwriter and Lead arranger for the maiden securitization issue, along with the Trustee and Special Purpose Trust, namely, DBP and PNB respectively.