CDA asks banks to invest more on housing loans

In fresh efforts to beef up the CNMI government’s housing program, the Commonwealth Development Authority has started negotiation with private banks and financial institutions, encouraging them to intensify their long-term loan packages for homes.

Board Chair John S. Tenorio said some of the banking institutions in the Northern Marianas have already pledged to upgrade their portfolio earmarked for long-term housing loans but only up to a limited amount.

Mr. Tenorio explained that private financial companies normally look at loan agreements that stretch up to 20-25 years are too risky especially on the residential side due to prevailing impression that there is not enough market for housing units in the CNMI.

“Banks have shown hesitation in the beginning but we were able to prove to them that there is enough market for homes on the island. We have encouraged some of them to do long-term lending but only on a limited amount as seed fund,” he pointed out.

He explained that commercial banks normally practice self-restriction on the infusion of more capital to residential credit packages because these are normally long-term that stretch from 20-25 years.

“Commercial banks or private financial institutions usually deal with short-term loans but with the persistence of the Northern Marianas Housing Corporation and the CDA, we are able to encourage some banks to give us at least seed funds in providing homes,” he added.

Mr. Tenorio added that CDA managed to entice a good number of private financial institutions to go into long-term housing loans since the market trend has tremendously improved.

“Any commercial bank would limit the amount earmarked for long-term loans because if they put the money in long-term packages, they are not likely to realize the rate of return and it’s a big risk for them,” he stressed.

He said the usual terms given by banks on long-term loans is 12 years but added that nobody can afford a payment of at least $2,000 a month under this prevailing agreement.

CDA has also 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.

Mr. 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.

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.”