CDA delinquency rate climbs to 15 percent

Posted on Jan 14 2000

Local businesses continue to crumble from the adverse effects of the worst economic crisis ever to hit the region as manifested in the increasing delinquency rate reported by the Commonwealth Development Authority, the government’s lending arm.

In an interview, Development Authority Chair John S. Tenorio disclosed the agency’s loan payment delinquency rate climbed to 15 percent by end-December 1999.

CDA registered a 13 percent delinquency rate by end-1998, which is almost double the figure from the previous year’s 7 percent.

Mr. Tenorio stemmed down the sharp increase in the number of delinquent borrowers to the slow rally of the local economy due to the dramatic decline in visitor arrivals to the Northern Marianas last year.

He noted that majority of those who are not able to meet the terms of their loan agreement are operating either tourism-related or apartment-rental businesses.

“We are continuously working with our borrowers to give them flexibility in the payment of their loans but because of the downturn of the economy, delinquency rate is really high,” he told reporters.

Mr. Tenorio said the increase in the delinquency rate can also be partially attributed to the new payment scheme recently implemented by the Development Authority which gives borrowers a longer grace period.

“It’s more like of a voluntary increase on the part of CDA because we have lengthened the grace period and cut down on the borrowers’ monthly payment to help clients avoid foreclosures,” he said.

Under existing local statutes, loans are considered non-performing if borrowers failed to service their monthly obligation within 90 days.

The current delinquency rate is still lower compared with those of other island-nations in the Pacific. This can be attributed to the programs extended by CDA to its borrowers that include a flexible payment scheme.

Mr. Tenorio said CDA has been working out with borrowers on an agreeable reduced amount to prevent any setback in the payment of their loans.

He explained that in the absence of a healthy economy, CDA deemed it necessary to stretch out loans and implement a reduced payment system in at least two years.

He pointed out that the program is part of CDA’s efforts to help local businesses surive the tough economic times. “If they encounter problems with their present payment, we arrange the specific amount that is agreeable to both the CDA and the borrower.”

He stressed that the flexible payment scheme was instituted to prevent more foreclosures, especially by businesses who have existing loans from the Development Authority.

Despite the sharp increase, Mr. Tenorio said the delinquency rate is still at a tolerable level as he stressed that his office remains committed at further reducing the number of delinquent borrowers.

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