House OKs new CDA credit relief bill

Crossing party lines, the House voted to pass a re-introduced bill granting debt relief to delinquent borrowers of the Commonwealth Development Authority. A previous version of the bill had been vetoed by the Governor’s Office.

House Bill 14-349, titled “to authorize credit relief to CDA borrowers and to prevent demise of CDA,: passed by a majority vote yesterday: six yes, three no, and four abstention.

Those who abstained cited conflict of interest. They are Reps. Martin Ada, Joseph Deleon Guerrero, Janet Maratita, and Justo Quitugua.

Likewise, two members who also cited conflict of interest stepped out during the discussion and voting on the bill. They are minority leader Arnold I. Palacios and Rep. David Apatang.

Three were excused from the session: Reps. Heinz S. Hofschneider, Norman S. Palacios, and Ray Yumul.

Those who voted “yes” for the passage of the bill were House Speaker Benigno R. Fitial, Vice Speaker Timothy Villagomez, Reps. Jesus Lizama, Jesus Attao, Benjamin Seman, and majority leader Oscar M. Babauta, who authored the bill.

Those who opposed the debt relief were Congressman Clyde Norita, Crispin Ogo, and Ray Tebuteb.

Some confusion happened in yesterday’s session when some members who failed to verbally respond when their names were called twice were considered absent. The legal counsel affirmed this, prompting the speaker to order another round of voting to allow members a chance to make known their positions.

Right after the second voting, another issue popped up as to whether the abstention votes would go in favor of the “yes” votes.

House chief legal counsel Joe Bermudez said it cannot be done.

Babauta introduced H.B. 14-349 on June 27.

A similar measure, H.B. 14-48, passed the Legislature last year but it was vetoed by the Babauta administration. In Sept. 2004, then acting Gov. Diego T. Benavente disapproved the credit relief bill, citing unconstitutionality and severe financial impact that the measure could bring to CDA.

The CDA was strongly opposed to the passage of the bill, saying that both the Covenant and the U.S. Constitution prohibit the passage of such a bill because it would impair the obligations of contracts.

It said that the loan agreements entered into by borrowers “cannot be rendered invalid by a subsequent act of the Legislature.”

Benavente had said that CDA’s concern that the measure would bankrupt the agency is sufficient reason to veto the bill. He warned that if it became law, other borrowers would be encouraged to default on their bank loans to be able to access the benefits entailed by the credit relief bill.

It said that if the bank borrowers default, then CDA will be faced with bank demands for $13 million. With only $7 million in reserve, CDA said that it would not be able to cover its debt under these guarantees and would be insolvent.

The credit relief bill seeks to provide relief to delinquent borrowers who have loans administered by the CDA for at least five years.

Meantime, H.B. 14-349 said the difficulty of the borrowers in making repayments are attributed to the structuring of the loans and the setting of the interest rates “without regard to socioeconomic needs of the borrowers” and the CDA’s “failures to provide the resources necessary and adjustments needed to ensure the success of these loans.”

In particular, the bill said that the CDA failed to provide credit and management counseling, concessional interest rate needed and necessary to serve the particular socioeconomic needs, adjust its 9 percent interest, effectively monitored the progress and financial status of projects financed, and provide technical assistance.

The bill also cited the CDA’s failure to hire a comptroller for more than two years, “a position that is most critical in a financial institution.”