CDA issues stern warning to borrowers

While consistently stressing that it discourages the practice of foreclosure of properties by delinquent borrowers, the Commonwealth Development Authority last week warned that it may be forced to forfeit properties of clients whose outstanding loans have not been performing in over two years.

CDA Board Chair John S. Tenorio said the government-controlled lending agency has already instituted flexible repayment terms to provide borrowers the convenience of paying their monthly amortization at an amount they can afford but some clients have persistently failed to serve their payment terms.

“There are loans that are already considered non-performing because the borrowers have not come forward for the long period which indicate that they don’t have plans to pay us back,” Mr. Tenorio said.

Mr. Tenorio said CDA is now reviewing outstanding loan agreements to determine how many and which of the government agency’s delinquent clients should be dealt with foreclosure.

“We want to prevent foreclosure as much as possible because it entails additional expense both to us and the borrowers so we are urging them to continue paying their monthly allotments even at an amount lower that what was stated in the loan agreement,” he said.

Since the local economy started dipping in 1997 due to the Asian financial crisis, CDA has foreclosed mortgaged property of only seven borrowers who were not able to service monthly loan payment, said Mr. Tenorio.

Mr. Tenorio said although his office has diligently worked with CDA clients in order to restructure and revise existing loan agreements, some businesses fell short of the capability to recover from the economic decline.

“There are businesses that we just don’t have any choice but to foreclose [the loans]. They just don’t want to take the initial steps in as much as we like to help them. In that case, we do foreclose the property,” Mr. Tenorio said.

He said, however, that his office has been consistent in providing assistance to its clients, especially those who have approached CDA for help in the revision of their loans in order to prevent foreclosure.

CDA is trying to minimize depriving a delinquent borrower to redeem a mortgaged property since foreclosure is not a very prudent practice especially since majority of the agency’s clients use land title as loan collateral.

Mr. Tenorio emphasized that the current value of the mortgaged property, when foreclosed and sold, would not be enough to cover for the total amount of the loans.

He said the value of the mortgaged properties, which were appraised in 1991 and in 1992 by professional assessors, has dropped by about 65 percent at present.

CDA may be forced to do so, after all. Experts continue to paint a gloomy economic picture, worst, another recession in the CNMI which they expect to happen between now and the year 2005.

This is what analysts call giving more unrelenting stomps to a totally knocked out economy.

Economists said the subsequent decline in the local economy may be spurred by the turtle-paced recovery of the tourism sector and the eventual demise of the apparel industry which has now grown to become the largest private sector employer in the islands.