2-year suspension of payments threatens CDA loan program

House Speaker Eli Cabrera (R-Saipan) is proposing to allow Commonwealth Development Authority borrowers to suspend for two years their loan principal payments to CDA because of economic hardships but this early, officials warn that the bill not only threatens the agency’s existing loans of $36.5 million but would also put a moratorium on new loans for two years if no payments to previous loans are received.

Cabrera said his House Bill 17-301 “is not a loan forgiveness measure.”

“This legislation allows CDA direct loan borrowers to elect to suspend loan payments for two years,” he said in his bill.

Just the same, some lawmakers are lukewarm to the idea.

Rep. Fred Deleon Guerrero (Ind-Saipan) said he’s not necessarily supporting such proposal because people have already been making adjustments to make payments on their loans.

“If we suspend payments on the principal, we are also ready to put a moratorium on CDA loans to new borrowers because of a lack of available monies,” he told Saipan Tribune.

House floor leader George Camacho (Ind-Saipan) said he understands that times are hard but this bill has to be looked at carefully. “How harmful will that be for CDA? We need to make sure the benefits outweigh the cost,” he said.

CDA loan manager Oscar Camacho expressed surprise yesterday that such a bill was introduced without consulting CDA, whose operations and loan portfolio will surely take a hit from the proposal if signed into law.

“This bill gives false hopes to borrowers. It will derail every effort we do to assist borrowers through our debt relief program,” Oscar Camacho said.

CDA’s debt relief program, he said, has been successfully helping delinquent borrowers restructure their payments to avoid foreclosure.

“But what a bill like this does is tell borrowers not to pay their loans for two years. Responsible borrowers, I hope, will continue to make their payments,” he added.

Camacho and CDA comptroller Danny Militante said at stake here is CDA’s total loans of $36.5 million, including delinquent loans of $22.3 million.

“What does the Legislature want? To close down CDA for two years because they’re trying to promote non-payment of loans for two years?” Camacho asked, adding that CDA will submit to the Legislature a formal position paper on the bill that he describes as unnecessary. He pointed out that CDA already has a program that helps borrowers deal with the economic hardships.

Camacho and Militante said their statements are their own comments and not the official position of CDA at this time. CDA executive director Manuel Sablan was not available yesterday.

Senate President Paul Manglona (Ind-Rota), for his part, said if this House bill reaches the Senate, he will support it.

“Businesses and borrowers need all kinds of relief because of high cost of doing business such as electricity. Even the federal government is providing relief to borrowers because of the economic situation,” he said.

Manglona said CDA should consider trimming its operating revenue so it can accommodate this proposal to suspend by two years the principal loan payment to CDA.

Rep. Joseph Palacios (R-Saipan) and Rep. Trenton Conner (R-Tinian) separately said they do not support it.

“Because it was a contract negotiated in good faith. Maybe to suspend the interest [payment] but not the principal,” Conner added.

Cabrera’s HB 17-301 amends Title 4 of the Commonwealth Code Section 1003(32).

It specifically provides that “beginning with the effective date of this provision, subject to the conditions set forth herein, all loans made directly by the authority shall offer borrowers a forbearance option to suspend principal payments for a period of two years.”

It also says, “This option shall not be available to indirect loans permitted via syndication or other means, loans guaranteed by the authority, and to non-principal interest payments on all loans.”

Cabrera’s bill states that due to poor economic conditions, CDA is encountering an alarmingly high rate of loan defaults.