Fund to sell member home loan program

The NMI Retirement Fund will sell its member home loan program to relieve it from the “burden” of handling the program which it says has been yielding low rate of investment return, high delinquency ratio, and other concerns.

The Fund’s board of trustees during its meeting Friday said the option was decided after extensive assessment of the program in the committee level.

The matter, they revealed, has also been on the board’s table for quite some time but never been acted upon formally.

The member home loan program is among the four local investments of the Fund, which in the past, was suspended. The agency has invested $5.5 million in this program of which a significant amount has yet been collected from borrowers.

Fund administrator Richard Villagomez reported Friday that there are 106 total loans under the program of which 31 are considered bad loans or delinquents. Of these bad loans, it was disclosed that only two can be potentially collected by the agency while the rest are considered “dead accounts.”

From January 2011 to November 2011, Villagomez reported that cash flow from the program was $639,000 which is equivalent to only 7.91 percent return from portfolio. Although he reported that some of the delinquency loans are still making payments for its cash flow, there are “aging receivables” that have yet been resolved.

He said a request for proposal is being prepared for the formal board announcement of the board’s intention to find a buyer. The board is expected to formally adopt the RFP in their next board meeting.

Villagomez did not disclose the amount that may not be collected from the bad accounts, but based on the records last year, bad loans amounted to nearly $800,000 as of December 2010. The Fund failed to generate the expected revenues because collection effort was hampered by the current economic situation.

In July 2010, the board reopened the program with the infusion of $1 million as revolving fund in the hopes that it may help the agency in paying for its other obligations.

The home loan program allows a short-term loan payment. Despite the suspension of the member home loan program, the Fund earlier confirmed that a significant number of existing borrowers have sought assistance to the agency-not in the form of payment deferment but through reduction of loan interest that continue to drag them down. The suspension of the program was also an advice of the Fund’s former investment consultant Wilshire Consulting.

Board chair Sixto K. Igisomar, during a break in the meeting Friday, disclosed that the board had tried several steps to save the program but it seems only things left to do is outsource or sell the entire portfolio, probably to a bank.”

“Historically, there are issues about the program and we’re trying to balance the cost associated to this program. Although there are great benefits to members, there were also some challenges and areas that the Fund believes require its attention,” he said.

Igisomar said the decision to sell the portfolio is also due to the intention of the board to focus on the pension program. He revealed that the Fund’s counsels, for many years, have also been facing huge tasks of addressing issues for the home loan program such as foreclosures, demand letters, and other notices.