Art. 12 restrictions hamper NMHC’s home loan program

The exclusive right to own a land granted by the CNMI Constitution to people of Chamorro and Carolinian descent remains a major hindrance in the growth of real estate financing in the Northern Marianas, according to Housing Corporation Executive Director Marylou S. Ada.

Ms. Ada said Article 12 in the Commonwealth Constitution which restricts land ownership in the islands to local residents hamper the housing corporation’s efforts to move home mortgage financing to a much better scale.

“Article 12 is the great hindrance to any of our home loan program primarily because only people of CNMI descent can own land,” she said in an interview.

She explained that because of this restriction, chances have become slim for both private and government financial institutions which gave out the loan to sell the property in the open market in case of foreclosure.

Financial institutions are actually faced with a major difficulty in bringing the foreclosed property to the open market since potential buyers are limited only to those who are of Northern Marianas descent.

Ms. Ada stressed that from among the culturally-qualified buyers, the market will be trimmed further to identify those who actually have the financial capability to buy the foreclosed property.

“In case of foreclosure, when banks sell it in the open market the potential buyers are limited because those who may be interested and have the capability but are not qualified under the restrictions imposed by Article 12 can’t participate in the process,” she pointed out.

The housing corporation chief also noted that NMHC face the same dilemma with its program on homesteaders since foreclosed property in government homesteads cannot be sold unless the buyers are homesteaders themselves.

“There are limitations [imposed by the Article 12] and that is a great hindrance in our efforts to bring our mortgage financing program to a much better scale,” she added.

Aside from the slowdown in economic activities, Development Authority Board Chair John S. Tenorio also blame the restrictions on Article 12 in CDA’s failure to meet its target to approve 1,000 home loan agreements by end of last year.

Mr. Tenorio noted that banking institutions have taken conservative attitude toward giving out advances due to Article 12 restrictions which has forced CDA to lower by 40 percent the number of home loan agreements it projected to close by end-December 1999.

The housing corporation managed to close only 600 home loan agreements by end of last year, short by 40 percent from the original target of 1,000 housing loan packages.

Article 12 brings banks at a higher risk of not being able to see return of investments since it could not sell to non-Chamorros and non-Carolinians 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, Ms. Ada said NMHC has been conducting a series of community outreach programs including regular discussions with homeowners to help them fortify their capabilities to pay outstanding loans, thereby preventing foreclosure.

The housing corporation holds dialogues with new and existing homeowners every quarter where issues relating to problems faced by the borrowers, such as difficulty in servicing outstanding loans, are being discussed.

“We teach them how to become responsible homeowners by paying their mortgage on time. We also teach new homeowners not to purchase other things that will put pressure on their budget which may complicate their ability to pay home loans,” she said.