TO CURB CLIMBING DELINQUENCY RATE CDA moves to educate borrowers

The Commonwealth Development Authority is assuming a new role other than being the government’s premier lending arm: an educator of its clients on ways to become better borrowers.

Development Authority Board Chair John S. Tenorio noted the importance of a good credit history in a borrower’s future loan applications, while stressing that the move is primarily aimed at curbing the agency’s increasing loan delinquency rate.

Derelict borrowers are less likely to obtain loans from either government or private financial institutions even if they are able to settle their existing obligation.

According to Mr. Tenorio, financial institutions are very particular in the consistency of the borrowers’ ability to pay their monthly obligations. “Those who have persistently failed to settle monthly dues are more likely to be turned down by credit companies.”

This is one of the reasons behind the development authority’s decision to mobilize its people to conduct a series of consultations with existing borrowers.

However, the counseling has been initiated by CDA in order to halt the rising number of delinquent borrowers which have reportedly jumped to 15 percent during the January-May period, from 13 percent 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.

But a big slice of remiss loan payment collectibles are actually caused by 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.

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 will 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.

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