Article XII prohibits foreclosure prevention initiative

The U.S. Department of Housing and Urban Development said that Article XII of the CNMI Constitution prohibits the federal government from implementing foreclosure prevention initiatives such as the Federal Housing Administration Secure Plan in the CNMI.

HUD Honolulu Field Office Director Gordan Furutani said with 60 percent of CNMI homeowners facing foreclosure, foreclosure prevention programs are needed in the island.

The FHASecure plan, a foreclosure prevention plan, allows families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing.

In addition, FHA implements risk-based premiums that match the borrower’s credit profile with the insurance premium they pay- that is riskier borrowers pay more.

Furutani explained that the way FHA Secure works is for the borrower to borrow money from the lender that would help pay for the borrower’s mortgage. HUD backs the borrower by allowing the lender to loan the money, however if the borrower fails to make payments to lender, HUD will pay the lender off, and in turn HUD will claim and own the borrower’s property and house.

“There is no FHASecure plan on Saipan because your land is inalienable. The law states that you would have to be a Northern Marianas Descent to own land in the CNMI and this prohibits us from implementing this sort of program,” Furutani said.

Last August, President Bush announced HUD’s new FHA Secure plan that would help an estimated 240,000 families avoid foreclosure by enhancing its refinancing program.

According to HUD Secretary Alphonso Jackson, “Many hard-working American families who were able to make their mortgage payments under the initial teaser terms of the exotic loan are now struggling to make ends meet because their rates have doubled or tripled,”

“FHASecure will bring stability to the housing market and give eligible families who were in good financial standing before their loans reset a chance to keep their homes,” he adds.

Article XII is a provision in the CNMI Constitution that restricts ownership of land in the Commonwealth to persons of Northern Marianas descent.

Section 805 of the Covenant requires the Commonwealth to maintain this land ownership provision for 25 years after the termination of the Trusteeship agreement.

This mandatory 25-year period will end in 2011. After that date, the Commonwealth may continue, revise, or suspend Article XII as it sees fit.

“If we can take the land and the house we could implement the program but the law says you have to be a Chamorro [or a Carolinian]. So that prohibits us from implementing the program. The FHA program is a program intended to help stop foreclosures,” Furutani said.