Loan relief bill nears passage

The legislative measure that seeks to provide credit relief to the Commonwealth Development Authority’s delinquent loan borrowers moved a step closer to becoming law, with the Senate approving it in yesterday afternoon’s session.

Senate Bill 14-48 is now before the governor, who may approve or veto the bill or portions of it. Gov. Juan N. Babauta, who was on an official trip to Guam yesterday, may act on the enrolled bill later this week.

The number of lawmakers who voted in favor of the measure, however, indicated that the measure has a strong chance of becoming law even if the governor vetoes it.

The Constitution provides that the Legislature may reconsider a bill for it to become law despite the governor’s veto, if the measure musters the support of enough lawmakers.

“If two-thirds of the members in each house vote upon reconsideration to pass the bill, item, section, or part, it shall become law,” the Constitution states.

The Senate quickly passed the measure, a day after the House of Representatives approved an amended version of the one the Upper House had earlier passed.

Seven Senate members voted in favor of the bill—or more than two-thirds of the Upper House’s membership—with only Sen. Joseph Mendiola abstaining from the voting. Sen. Thomas Villagomez was absent.

Majority of the House members passed the bill Monday, garnering a unanimous vote from nearly all-16 members who were present, except for Rep. Arnold Palacios, who abstained from voting. Two other members—House Reps. Janet Maratita and Ray Yumul—were absent.

Babauta’s legal counsel, Steven Newman, said he and the Attorney General’s Office would need to review the possible legal implications of the bill if it would become law.

He said the governor’s office has been receiving public comments about the bill, including those that oppose its passage. Newman said the last day for public comments on the bill fell yesterday.

He also noted the CDA’s vehement opposition to the bill. Earlier, the CDA said that legislative intervention to condone delinquent loans would result in financial disaster for the government’s money-lending agency. The CDA earlier reported that delinquency rate on loans has ballooned to some 83 percent.

The bill recognized that the high rate of delinquency threatens the CDA’s loan programs, but it also emphasized the unstable economic conditions that contributed to many borrowers’ inability to repay the loans.

It said that the CDA should “make accommodations to assist these borrowers who are currently facing difficult and uncertain times and ensure the repayment of the loans.”

The House Committee on Commerce and Tourism recognized that the CDA might suffer initially if it would provide credit relief to certain delinquent borrowers, but added that the measure ensures full repayment of the principal amount of the loans.

“Relief for borrowers that have defaulted or are at risk of defaulting is provided for in the interest obligations, penalty provisions, and foreclosure procedures,” the committee said.

The bill seeks to provide relief to delinquent borrowers who have loans with the CDA for at least five years. According to the bill, relief may be provided if the loans have been the subject of court judgments, have been defaulted on, or at risk of being defaulted on if relief is not afforded.

It seeks to prevent the CDA from filing foreclosure or default collection proceedings—or any court proceeding—on any delinquent loan without first meeting with the borrower and making “good faith attempt” to resolve the outstanding indebtedness.

“For qualified borrowers who have paid CDA an amount of money sufficient to cover the principal amount of the loan plus any costs incurred in default collection proceedings, CDA shall consider the loan paid in full and discharge the debtor, guarantor, and others obligated on said loan from further liability,” the bill states.

“[The] CDA shall waive accrued interest and penalties, reduce monthly payments, and/or extend terms of payment so that the principal loan amount may be paid in a regular and systematic manner and ultimately permit qualified borrowers to repay the principal amount borrowed,” it states further.

The bill aims to declare the loan as fully paid upon foreclosure of the collateral, and the expiration of the redemption period to recover the property. It seeks to prevent the CDA from collecting on delinquent loans beyond the amount of the collateral property. “There shall be no deficiency judgments entered.”

The bill also seeks to reduce annual interest rate on all outstanding loans to between 4 to 9 percent.

For qualified borrowers who do not qualify for the enumerated relief, the bill provides that the CDA shall not apply more than one-half of each future payment to interest, regardless of accrued interests and penalties.