CDA urges feds to boost CNMI housing program

The Commonwealth Development Authority has initiated negotiations with two federal agencies to provide the necessary push in trying to encourage private banks into earmarking additional capital for long-term housing loans.

Board Chair John S. Tenorio said there is a slow but consistent growth in the agency’s housing loan program primarily because banking institutions have taken a backseat approach in the approval of credit packages for home acquisition.

He explained that terms for housing loans are normally stretched up to between 20 and 25 years, which private banks and other financing institutions find restrictive due to the absence of ample market in the Northern Marianas in case the property will have to be foreclosed.

Mr. Tenorio pointed out that the CNMI Constitution’s Article 12, which limits land ownership to residents of Northern Marianas descent, continues to get in the way in terms of encouraging private financing companies into intensifying their portfolio for housing loans.

“At this point, we are still in discussion with private banking companies here in the CNMI, trying to encourage them to provide long-term housing loans but most of them still find it a little bit risky,” he stressed.

In order to address the banking companies’ concerns on the absence of ample market for foreclosed properties, Mr. Tenorio said CDA is trying to bring in two federal financing agencies that deal directly to housing programs into the Northern Marianas.

He said that if CDA is able to bring the two agencies here, these will serve as secondary market which will buy the foreclosed properties from the banking institutions. “Still, we are trying to convince them that Article 12 is not going to get in the way.”

At present, CDA is working with the executive and legislative branches in urging the federal government to provide indigenous Northern Marianas residents easy access to private home financing.

A House Resolution has been eyed to strengthen the government-controlled lending agency’s efforts in encouraging private financing institutions to offer guaranteed home mortgage packages to local CNMI residents.

Mr. Tenorio explained that a backing from the United States Department of Housing and Urban Development is anticipated to virtually eliminate the risks that go with the restrictions on land ownership in the Northern Marianas.

Three programs that are now being implemented by the federal housing department provide guaranteed home loan assurance to Native American-Indians, Alaskans and Hawaiians.

Section 184 or the Indian Home Loan Guarantee Program for Native Americans including Alaskans of the federal housing act is available to eligible borrowers on tribal trust.

FHA Section 248 is restricted to Native Americans wishing to purchase, build or refinance on tribal land trust, while Section 247 is limited to owner-occupants who are Native Hawaiians.

Land ownership issues make traditional mortgage financing in the CNMI less attractive than those available on Guam and in the mainland U.S. , according to the CDA board chairman.

The CNMI Constitution restricts ownership of land to persons of Northern Marianas descent. Lands in the CNMI could not be transferred to non-NMI residents except for a 55-year leasehold interest.

Recent studies disclosed that money for purchasing a house can be borrowed at a fixed rate of less than 7.5 percent for 30 years while it is available on Saipan at rates closer to 15 percent.

Banks in the CNMI can only take title to real estate for a limited time, making them vulnerable to difficulties in foreclosing on loans secured by real property.