CDA adjusts approved home loan target

The Commonwealth Development Authority has adjusted its target to seal at least 1,000 home loan agreement by the end of the year to 2001 due to slowdown in lending activities by private financing institutions.

Board Chair John S. Tenorio said there remains a strong demand for home financing but private banks have taken a conservative approach on long-term loans primarily because of Article 12 restrictions.

However, Mr. Tenorio pointed out that CDA was able to encourage some of the banking institutions operating in the Northern Marianas to earmark a portion of their portfolio for long-term housing loans to meet the demand.

“We actually don’t have much of a problem when it comes to the ability of our clients on the residential side in paying their dues on time especially now when the people have learned to adjust with the economic downturn,” he told an interview.

He stressed that being able to strike a thousand home loan agreements in a seven-year period is already an achievement for the Northern Marianas Housing Corporation, a subsidiary of the government-controlled lending agency.

Mr. Tenorio said NMHC managed to close only 600 home loan agreements be end of last year, short from the original target of 1,000 housing loan packages.

“We were targeting to close 1,000 home loan agreements by year 2000 but due to financial difficulties and external market forces, we fell short by 400 from our target,” Mr. Tenorio said.

The CDA chief also mentioned as a major factor the restrictions imposed by Article 12 which limits to the indigenous people the right to own land in the Northern Marianas.

This brings banks at a higher risk since it could not forfeit land or real estate properties entered into as collateral in case the borrower defaults in payment.

In turn, some banks and other financial institutions are trying to reject home and commercial loan applications backed by land and real estate properties as collateral, Mr. Tenorio said.

At the same time, he explained most home loan applicants fail to satisfy the minimum salary requirements set by financial institutions due to widespread reduction in work hours which reflected in the employees’ paychecks.

Mr. Tenorio disclosed that NMHC has approved roughly about 600 housing loans within the last two and a half years and intends to close more home loan agreements this year.

Interest rates have dropped from 10 percent to 11 percent two years ago to between eight percent and nine percent now.

Mr. Tenorio said CDA is now processing 300 housing loan applications with almost half of it expected to be closed in the next couple of months while NMHC targets to approve the rest by this year.

CDA has been receiving an average of 20-40 housing loans every month, making CDA a major instrument in ongoing housing projects which include the construction of almost three hundred residential units.