NHMC pushes for entry of Fannie Mae, Freddie Mac

The Northern Marianas Housing Corporation wants the legislature to make amendments to the Commonwealth Constitution which would allow companies like Fannie Mae and Freddie Mac to re-enter the CNMI.

According to NHMC Board Chair John S. Tenorio, Article 12 of the Commonwealth Constitution prevents foreign companies to acquire land in the CNMI.

Article 12 is the Land Alienation Law of the Commonwealth and states that foreign companies cannot own land.

He argued that such restrictions makes it almost impossible for housing loan secondary market players like Fannie Mae and Freddie Mac to do business in the Commonwealth.

Mr. Tenorio contended that entities like Fannie Mae and Freddie Mac should be allowed to acquire land because they use it to “collaterize” the loan they extend to housing loan applicants.

“If we have a secondary market like Guam and the US Mainland, then we will have no problem. But because of Article 12, there is a limit to who should own… it’s up to the lawmakers if they want to change Article 12 or not,” Mr. Tenorio stated.

According to Mr. Tenorio, Fannie Mae and Freddie Mac were already present in the CNMI market some 13 years ago. However, a change in leadership in the U.S. Department of Housing and Urban Development and a change in lawyers forced the two loan underwriters to leave the CNMI.

Aside from Article 12, loan underwriters like Fannie Mae and Freddie Mac, according to Mr. Tenorio, are on the lookout whether there is a market for more homes, capability of applicants to pay after 10 years as well as if there would be foreclosures. Loan institutions also judge a market by their readiness for a $50 million loan program.

Furthermore, Mr. Tenorio said that if secondary market players like Fannie Mae and Freddie Mac are to enter the CNMI home financing market, the NHMC will easily double its ability to provide home financing to the CNMI.

“With Freddie Mac and Fannie Mae backing us up I believe we could do more. We could do twice as much because of the existence of a secondary market. Right now, it’s just the persistence of the NHMC that is keeping our programs going,” Mr. Tenorio said.

The NMHC has just secured a $3.5 million line of credit from Hong Kong and Shanghai Bank. The amount is on top of the $2 million it received from the Bank of Hawaii.

According to the NMHC chair, if the CNMI had a secondary market, those funds could have been sold to another financial institution.