CDA eyes tighter rules on execution of OK’d loans

The Commonwealth Development Authority is seriously looking at instituting stricter measures that would compel borrowers whose loans have been approved to close the agreement before the law-mandated 90-day deadline.

CDA officials expressed concerns on the increasing number of direct and guaranteed loan packages that have been approved but are yet to be closed due to the inability of the borrowers to complete the required documents.

Board Chair John S. Tenorio said loan packages that are not sealed within the 90-day period may be re-channeled to other clients since CDA has been swamped with loan applications, which indicate that more people are in dire need of fresh funds.

Mr. Tenorio noted that there was a time when over $6.9 million worth of loans approved by CDA were not closed until after the 90-day period, with the borrowers asking for more time to secure the needed documents.

Under existing regulations, borrowers have to close a loan transaction at least 90 days following approval.

In 1998, CDA approved $6.9 million worth of loan packages, $2.5 million of which were okayed in November of that year. The loan agreements remained opened until January of last year.

Majority of the approved agreements that are yet to be signed by the borrowers, CDA and a private financing institution are guaranteed loans.

“The borrowers are still yet to meet the terms and conditions of both the banks and the CDA. Unless they do, the loan transaction will not be closed. They have to fulfill those things in order for the banks to execute the loan document and in order for us to execute the loan guarantee to the bank,” Mr. Tenorio explained.

The CDA chief also called for an immediate review of credits which remain open despite approval. He was inquiring about reports that a number of borrowers have failed to close their loans within the 90-day grace period.

Mr. Tenorio said there should be a reason behind the borrowers’ apparent inability to seal their guaranteed loan agreements within the 90-day period, as he pressed for a closer look at the situation.

“We may need to write to them to inquire about the status of their loans. If they fail to close the loans within the grace period, we may have to cancel,” he stressed.

Although CDA grants borrowers extra time to meet the terms and conditions set by the executing financial institution, Mr. Tenorio said the development authority is also mandated to attend to other clients.