CDA delinquency rate up 2%

The Commonwealth Development Authority has recorded a two percent increase in delinquency rate, indicating a distressing growth in the number of remiss borrowers during the first three months of the year, Board Chair John S. Tenorio said.

The two percent rise in the January-March loan payment delinquency brought to 15 percent the development authority’s overdue collectibles.
CDA reported a 13 percent delinquency rate by end-December 1999.

Mr. Tenorio said if the increase in the delinquency rate of the government’s prime lending agency would continue at the first quarter level, it may translate to more than $2 million in unpaid and overdue collectibles from its $80 million portfolio each year.

Records obtained from CDA noted that the financial institution’s monthly collections fell by more than 40 percent from the average $700,000 to only $400,000 during the first three months of the year.

However, Mr. Tenorio explained that a big chunk of overdue loan payment collectibles are actually a product of the recently-implemented payment scheme which gives borrowers longer grace period to settle their outstanding credit.

The new measure also restructures debts provided by CDA in what seems to be a step taken to help businesses keep afloat in light of the CNMI’s contracting economy.

“It’s more like of a voluntary increase on the part of CDA because we have lengthened the grace period and cut down on the borrowers’ monthly payment to help clients avoid foreclosures,” he said.

Under existing local statutes, loans are considered non-performing if borrowers failed to service their monthly obligation within 90 days.

Mr. Tenorio said the current delinquency rate is still lower compared with those of other island-nations in the Pacific which can be attributed to the programs extended by CDA to its borrowers that include a flexible payment scheme.

CDA has been working out with borrowers on an agreeable reduced amount to prevent any setback in the payment of their loans, as he remains confident the new payment scheme will work to the advantage of both the agency and the borrowers.

The government-owned financial institution is expected to implement the reduced payment system in at least two years or when economic experts predict a major turnaround of the local economy.

The flexible payment scheme was instituted to prevent more foreclosures, especially by businesses who have existing loans from the development authority.

Still, Mr. Tenorio believes that the increasing delinquency rate indicate that local businesses continue to crumble from the adverse effects of the worst economic crisis ever to hit the region, which drew fewer visitors into the Northern Marianas.

Majority of those who are not able to meet the terms of their loan agreement are operating either tourism-related or apartment-rental businesses.

Despite the sharp increase, Mr. Tenorio said the delinquency rate is still at a tolerable level as he stressed that his office remains committed at further reducing the number of delinquent borrowers.