CDA notes modest property foreclosure

Despite the rising number of delinquent loans, the Commonwealth Development Authority has reported that it managed to minimize foreclosure of properties of remiss borrowers who now comprise more than 20 percent of the agency’s overall clientele.

However, Executive Director Marylou S. Ada said CDA may still be forced to forfeit properties of clients whose outstanding loans have not been performing in over two years unless they approach the agency and ask for a loan workout.

Since the local economy started dipping in 1997 due to the Asian financial crisis, CDA has foreclosed mortgaged property of only seven borrowers who were not able to service monthly loan payment.

The government-controlled lending agency has already instituted flexible repayment terms to provide borrowers the convenience of paying their monthly amortization at an amount they can afford but some clients have persistently failed to serve their payment terms.

“There are loans that are already considered non-performing because the borrowers have not come forward for the long period which indicate that they don’t have plans to pay us back,” Ms. Ada said.

She disclosed that CDA is now reviewing outstanding loan agreements to determine how many and which of the government agency’s delinquent clients should be dealt with foreclosure.

Ms. Ada pointed out that CDA wants to prevent foreclosure as much as possible because it entails additional expense both to the agency and the borrowers “so we are urging them to continue paying their monthly allotments even at an amount lower that what was stipulated in the loan agreement.”

Although CDA has diligently worked with its clients in order to restructure and revise existing loan agreements, some businesses fell short of the capability to recover from the economic decline.

“There are businesses that we just don’t have any choice but to foreclose the loans. They just don’t want to take the initial steps in as much as we like to help them. In that case, we do foreclose the property,” Ms. Ada said.

She maintained, however, that the agency has been consistent in providing assistance to its clients, especially those who have approached CDA for help in the revision of their loans in order to prevent foreclosure.

CDA is trying to minimize depriving a delinquent borrower to redeem a mortgaged property since foreclosure is not a very prudent practice especially since majority of the agency’s clients use land title as loan collateral.

The current value of the mortgaged property, when foreclosed and sold, would not be enough to cover for the total amount of the loans.

The value of the mortgaged properties, which were appraised in 1991 and in 1992 by professional assessors, has dropped by about 65 percent at present.

CDA may be forced to do so, after all. Experts continue to paint a gloomy economic picture, worst, another recession in the CNMI which they expect to happen between now and the year 2005.

This is what analysts call giving more unrelenting stomps to a totally knocked out economy.

Economists said the subsequent decline in the local economy may be spurred by the turtle-paced recovery of the tourism sector and the eventual demise of the apparel industry which has now grown to become the largest private sector employer in the islands.