Teno OKs lease-to-own scheme

First-time homebuyers unable to obtain financing now have a bigger chance of owning their dream house after the government has approved recently a lease-to-own program aimed at assisting low-income families.

Gov. Pedro P. Tenorio signed last week Public Law 12-15 or the Lease-to-Own Housing Program Act to pave the way for implementation of such a scheme on the islands amid stumbling blocks encountered by many families in trying to build their own homes.

“I sign this bill because I applaud the efforts of the Legislature to create innovative programs to deal with the issues facing our islands, in this instance, the barriers to home ownership for our lower income families,” he said in signing HB 12-115.

The governor said there are many hardworking families who, because of limited income and the burden of existing obligations, do not have the financial means to raise funds for a down payment or even qualify for a conventional home mortgage.

“To these families, a program such as the one contemplated by this legislation is a godsend,” added Mr. Tenorio.

Sponsored by Rep. William S. Torres, the measure was driven by key problems facing most first-time homebuyers such as high interest rates, limited funds to meet closing cost and down payment requirements.

By establishing a mechanism by which they can have the opportunity to own the house they are leasing, these families will be able to realize their dreams of building their homes, according to its proponents.

The lease-to-own program would also allow the government and private sector to invest jointly in affordable housing developments, giving options to tenants to exercise purchase of their units within three to five years, they said.

“This program would encourage public and private partnership in providing for a creative financing mechanism which could benefit the families who can afford to purchase homes given financial assistance for closing costs and down payment,” the bill stated.

Under the new law, the Northern Marianas Housing Corporation is tasked to participate in such program in order for it to extend mortgage financing to prospective homebuyers or acquire loans granted by the banks on behalf of these individuals.

NMHC is also empowered to purchase or build — and to incur debt if necessary — houses which the corporation would own and lease under this program.

To be eligible, a tenant has to exercise his option to buy the property within five years or lose his chance of owning the house, according to the law.

Although positive of its benefits to the people, Mr. Tenorio expressed concern over serious problems in implementing the program at this time.

There is very little, if any, existing housing inventory in the Commonwealth that could be made available under the program, he told lawmakers.

PL 12-15 also does not offer incentives to private developers to undertake construction of housing developments, while NMHC does not have the funding to acquire existing mortgages or guarantee payment in the event of default, he said.

“I urge that the Legislature, together with the affected agencies as well as private banking institutions, institute a review of this program and make recommendations for bringing this very worthy program to reality for our low-income families,” said Mr. Tenorio.