Entry of federal mortgage insurance into NMI urged

Representative William S. Torres is urging newly-installed US Department of Housing and Urban Development Secretary Mel Martinez to extend the Federal Mortgage Insurance to the CNMI.

In a letter to Mr. Martinez, the lawmaker insisted an agreement, which would allow the Federal Housing Authority to extend the loan facility to the CNMI, is crucial to the Commonwealth’s housing program.

“Without the proposed agreement…it’d be extremely difficult for the CNMI to conform to and implement the national goal of providing affordable housing for low to moderate income and first-time homeowners,” Mr. Torres noted.

In August 2000, the CNMI Housing Corporation and the HUD signed a memorandum of agreement to meet such a goal. Mr. Torres said since that time the MOA has gone through extensive, reviews, analysis and clarification.

Mr. Torres also revealed that as of now local financing institutions have no recourse in the secondary market because of the non-application of the Federal Mortgage Insurance to the islands. Thus, severely limiting the awarding of mortgages to borrowers.

He also revealed that two of the country’s most important loan underwriters, Fannie Mae and Freddie Mac, have come out in the open indicating their willingness to participate in the CNMI housing market.

However, their entry hinges on the HUD extending the FHA Mortgage Insurance program to Saipan, Tinian and Rota.

Companies like Fannie Mae and Freddie Mac are institutions that purchase loans made by mortgage lenders. Being such, they guarantee that a loan made is of favorable enough terms for the borrower to met and be funded or else they would not earn anything or worse not paid at all.

Making available HUD’s mortgage program in the CNMI through loan underwriters would not only make way to affordable housing in the Commonwealth but also hasten its economic recovery as well, the lawmaker argued.

FHA mortgage insurance programs allows a homebuyer to make a modest downpayment and obtain a mortgage for the balance of the purchase price.

This is made possible by allowing bank, savings and loan associations, mortgage companies, credit unions or other FHA-approved lenders, such as Fannie Mae and Freddie Mac, to purchase the loan, which in turn is insured by the FHA.

Since the lender is protected by this insurance, it can offer more liberal mortgage terms than the prospective homeowners might otherwise obtain.