CDA revisits lending policy for distressed borrowers

The Commonwealth Development Authority is revisiting its lending policies to help distressed borrowers continue operations, according to newly appointed executive director, Manuel Sablan

From the existing 2 percent interest provided to delinquent borrowers under the debt relief program, the CDA board is willing to extend more assistance by deferring interest payment, allow borrowers to pay what they can afford, and in some cases allow borrowers to write off their loan obligations, he said.

Under the debt relief program, the agency grants a maximum repayment schedule of 30 years for delinquent borrowers who approach CDA for aid.

“We’re going to revisit the lending policies to identify those areas in the rules that prevent us or constraint us from addressing the problems of our loan borrowers,” Sablan said, adding that the board has intensified its willingness to approve more relief options for distressed borrowers.

Sablan defines distressed borrowers as those who are currently doing business but are experiencing severe economic difficulty in meeting its obligation to the agency.

The executive director identified three types of CDA borrowers: those who are in business trying to find ways to meet their payments; borrowers who have closed operation and payment to the agency becomes personal or guarantor’s obligations; and borrowers who have been affected by the bad economy but able to meet their payments.

“Our plan is to work with the distressed borrowers and look at their individual financial positions. We may ask them to pay what they can afford for now based on the status of their business. When the economy improves, that’s the time we may ask them to fulfill the loan obligation,” he said, adding a condition may be set indicating an annual financial review of the business.

Sablan, who just came from a visit to a distressed borrower yesterday morning, said he felt the need to provide immediate assistance and consideration to existing businesses on island.

He narrated how a particular client with a 14-room apartment managed to pay his CDA obligation with only three tenants on his property.

“Our goal is to find a way to sustain and continue their operation in this present difficult times,” Sablan said.

The director emphasized that restructuring the payment schedule will be a great help to problem borrowers.

Sablan said the possible write-off of certain obligation will also be reviewed by the management.

“We would like to see if it is legal for CDA to do that,” he added.

In 2008, CDA reported a delinquent rate of 86 percent—or 68 out of a total 79 borrowers.

Although intensifying collection efforts will help improve the data, Sablan admitted that the current economic downturn remains a factor to consider.

In the economic forum next month, Sablan said CDA and the Department of Commerce will collaborate with the business sector to effectively identify solutions to existing problems.

An investment conference in Honolulu, Hawaii, is also slated this year where CDA hopes to attract new investors to the CNMI.