CDA curbs non-performing loans

The number of loans issued by the Commonwealth Development Authority that are considered non-performing remained at a tolerable level primarily because of recently-enforced measures that reduce average monthly mortgage by borrowers, according to Executive Director Marylou S. Ada.

CDA has launched a program aimed at educating its clients on ways to become better borrowers, underscoring the importance of a good credit history in their future loan applications.

This has been complemented by a counseling program, also initiated by the development authority, to halt the rising number of delinquent borrowers and non-performing loans which soared to 15 percent during the first quarter of the year.

Ms. Ada disclosed non-performing loans are currently concentrated on the real estate sector due to the tremendous increase in vacancy rate of commercial and residential spaces, which has reached 45 percent since the departure of too many Korean businesses in 1998.

“There is a tremendous increase in the number of non-performing loans in the apartment and commercial space rental sectors since a lot of businesses have moved out. We have a really high vacancy rate now,” she told reporters in an interview.

However, she stressed measures have already been installed to clear the road for a reduction in the volume of non-performing loans by allowing borrowers some form of flexibility in their monthly payment.

Ms. Ada pointed out the number of non-performing loans currently being handled by CDA actually comprise an insignificant portion of the government-controlled lending agency’s portfolio because of the flexible terms offered to borrowers.

“Most of the loans are actually not considered non-performing because borrowers are religiously servicing their debt but not on the original amount previously agreed upon by them and the CDA,” she added.

Also, the development authority is mobilizing its credit and business experts to visit CDA clients who may be needing technical or professional assistance, especially on their ability to keep their investments afloat and continue paying their outstanding loans with the agency.

“We do on-site visit. In conjunction with that, we step in and see if the borrowers need technical or marketing assistance, as well as financial guidance, or whether an additional loan is needed to keep their businesses going,” Ms. Ada said.

These programs have been instituted by the lending agency in order to prevent more foreclosures of properties since this process is not a very prudent practice especially since majority of CDA’s clients use land titles as loan mortgages.

“Right now, based on studies, to foreclose a property would not be a wise practice because the appraised value of the collateral or holding has tremendously decreased,” according to CDA Board Chair John S. Tenorio.