CDA eyes program to curb increasing delinquency

The Commonwealth Development Authority is eyeing the institution of a program that would help curb the increasing volume of delinquent borrowers in light of worsening economic condition on the island.

CDA corporate division officials will sit down today to discuss possible ways to assist borrowers cope with their financial obligation amid hard economic times, according to Development Authority Board Chair John S. Tenorio.

The government’s major lending arm has been swamped with concerns on the increasing delinquency rate, as well as requests from borrowers for loan restructuring to allow them more time to settle their credit.

Mr. Tenorio said borrowers have also started seeking advise from the development authority on how they can continue to pay their dues on time without sacrificing other basic necessities.

CDA recently launched a program aimed at educating its clients on ways to become better borrowers, underscoring the importance of a good credit history in their future loan applications.

Borrowers who have persistently pay their monthly dues on time in the past are less likely to obtain loans from either government or private financial institutions even if they are able to settle their existing obligation.

Financial institutions are very particular in the consistency of the borrowers’ ability to pay their monthly obligations. Mr. Tenorio said those who have persistently failed to settle monthly dues are more likely to be turned down by credit companies.”

This is one of the reasons behind the development authority’s decision to mobilize its people to conduct a series of consultations with existing borrowers.

At the same time, CDA initiated the counseling to halt the rising number of delinquent borrowers which soared to 15 percent during the January-May period, from 13 percent by end-December 1999.

If the increase in the delinquency rate would continue at the first quarter level, it may translate to more than $2 million in unpaid and overdue collectibles from its $80 million portfolio each year.

Records obtained from CDA noted that the financial institution’s monthly collections fell by more than 40 percent from the average $700,000 to only $400,000 during the first three months of the year.

However, a big chunk of remiss loan payment collectibles are actually caused by the recently-implemented payment scheme which gives borrowers longer grace period to settle their outstanding credit.

In what appears to be a step taken to help businesses keep afloat in light of the island’s dwindling economy, the new measure also restructures debts provided by CDA.

The government-owned financial institution will implement the reduced payment system in at least two years or when economic experts predict a major turnaround of the local economy.

The flexible payment scheme was instituted to prevent more foreclosures, especially by businesses who have existing loans from the development authority.