A conflict of interest?

The Commonwealth Development Authority disclosed yesterday that all nine senators and 15 members of the House of Representatives have close relatives facing foreclosure proceedings due to delinquent loans.

The agency made the disclosure yesterday in expressing its stringent opposition to Senate Bill 14-48, which seeks to provide credit relief to those with loans in default at the CDA.

The bill forced the CDA to refer the matter to the U.S. Department of the Interior and U.S. Inspector General, as well as the Office of Public Auditor, due to ethical concerns and the possible damage it might cause the CNMI’s financial integrity.

“CDA acts as the depository of all federal CIP money; once CDA is gone, the flow of federal funds into the CNMI will dramatically be impacted, if not ceased,” the CDA said.

The CDA said most lawmakers have suspicious motives in passing the bill, which would benefit their own relatives if it becomes law. The measure is now before acting Gov. Diego T. Benavente for consideration.

In a position paper released yesterday, CDA said that the following senators have good reasons to approve the credit relief bill:

* Luis P. Crisostimo has an uncle and five cousins with loans in default;
* Pete P. Reyes has a first cousin with a loan in default;
* Thomas P. Villagomez has three first cousins in default;
* Senate President Joaquin Adriano has a brother with a loan in default;
* Joseph Mendiola has a sister and himself with a loan in default;
* Henry San Nicolas’s father, aunt, uncle, two first cousins, and one cousin-in-law have loans in default;
* Paterno S. Hocog has a brother with loan in default;
* Paul A. Manglona’s mother, father, one brother, three first cousins, two uncles, and himself have loans “most of them in default”;
* and Diego M. Songao has three first cousins and himself with loans, most of them in default.
In the House of Representatives, CDA disclosed the following:
* Reps. Martin B. Ada’s live-in girlfriend has a loan in default and a first cousin with a past due loan;
* Jesus T. Attao has one brother-in-law, two nephews, one niece, and two cousins with loans in default;
* Oscar M. Babauta has three first cousins with loans in default;
* Joseph Deleon Guerrero has a sister, an aunt, and four uncles with loans in default;
* House Speaker Benigno R. Fitial has three cousins with loans in default;
* Heinz S. Hofschneider has a brother, a sister-in-law, two first cousins, an aunt, two uncles, one cousin-in-law, and two nephews with loans in default;
* Jesus Sn. Lizama has an uncle with a loan in default;
* Janet U. Maratita’s brother and herself have loans in default;
* Arnold I. Palacios’s sister and himself have loans in default;
* Justo P. Quitugua has three uncles-in-law with loans in default;
* Benjamin M. Seman has three first cousins, one nephew, two nieces with loans in default;
* Timothy Villagomez has one first cousin, three uncles, and an aunt with loans in default;
* Ray N. Yumul’s brother, one uncle, and an aunt have loans in default;
* Norman S. Palacios has two uncles, two aunts, and a cousin with loans in default; and
* Crispin M. Ogo has an aunt with a loan in default.

Reports said that Arnold Palacios had abstained during the bill’s passage, admitting that he has an existing loan with the agency, while Reps. Maratita and Yumul were absent during the voting.

Seven Senate members voted in favor of the bill, with only Mendiola abstaining from the voting. Thomas Villagomez was absent.

CDA said that S.B. 14-48, known as CDA Credit Relief Bill, “is a special interest legislation of the worst kind.”

“It is known that the reason for the passage of S.B. 14-48 by the Legislature was because of the aggressive lobbying efforts of several high profile defaulted borrowers,” CDA said.

When reached, House leadership spokesman Charles Reyes Jr. said that in a small place like the CNMI, it is not unusual for lawmakers to have relatives—with loans.

“Whether or not they have relatives is not the point. Besides, everybody is related here. After World War II, there were only 4,000 locals left so we’re bound to have relatives,” said Reyes.

The fact, he said, is that the CDA had allowed the delinquency rate to rise to an alarming level of 83 percent, reflecting on its inefficient collection efforts.

“The problem could have been addressed much sooner had CDA performed its duty [effectively],” he said.

He further noted that CDA’s loan screening process was somewhat flawed in that it failed to pinpoint “loan risk” applicants.

“They could have done better. At this point, it’s really too late,” he said.

The bill seeks to provide relief to delinquent borrowers who have loans administered by 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.

The bill acknowledged 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.

The measure calls on CDA to “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, currently chaired by Rep. Ada, said 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.

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

In the same position paper, CDA said the bill “is illegal and unconstitutional” as it will impair the obligations of contracts.

The agency further said that the measure would bankrupt the CDA, affect its relationships with federal agencies, lose its integrity, and kill upcoming economic development.

“By working hard and by actively managing its loans, CDA has finally begun to collect enough funds to soon to be able to begin lending again. This will cease immediately if the bill becomes law,” it said.