By Gerardo R. Partido
Variety News Staff

THE Guam Housing Corporation posted a nearly $1 million profit in fiscal year 2006, the Office of the Public Auditor said in an audit report released yesterday.
GHC reported a $963,000 increase in profit, which was a 7 percent increase from last year’s $902,000.
GHC has two divisions: the Housing Division which enables individuals to secure mortgage financing if they are unable to qualify as borrowers through conventional means, and the Rental Division, integrated into GHC in 2003, which provides low-cost rental apartments and houses to eligible individuals and families.
Of the $963,000 increase in net assets, the Housing Division contributed $634,000, or 66 percent, while the Rental Division contributed $329,000, or 34 percent.
The Housing Division’s operating revenues decreased 5 percent to $2.3 million from last year, while its operating expenses increased 2 percent to $2 million.
However, OPA said the decline in revenues and increase in expenses were offset by interest income which more than doubled from $129,000 to $280,000.
The Housing Division’s $634,000 increase in net assets was a 6 percent decline from the prior year of $671,000. According to OPA, this reflects the increasing challenge GHC faces when traditional mortgage lenders are able to offer lower interest rates than those offered by GHC.
“This challenge is reflected in the corporation’s declining loan portfolio which is now at $24.5 million compared to $36.3 million in FY 2002. Although loan origination jumped 200 percent from last year to $2.2 million, this was offset by loan payoffs totaling $1.7 million which contributed to GHC’s declining loan portfolio,” OPA pointed out.
Loan delinquencies contributed to the declining portfolio and GHC’s 15 percent delinquency rate is higher than the standard of most mortgage lending institutions.
However, OPA did note that improved loan servicing and collection efforts have proven to be successful. The $2.3 million of loans in arrears 90 days or more in FY 2006 is an improvement from prior years, and a significant 46 percent decrease from last year.
Loan foreclosures in FY 2006 totaled $374,000, an improvement of 66 percent compared to $1,115,000 loans foreclosed in FY 2005. Foreclosed assets sold in FY 2006 increased to $826,000, a 94 percent improvement compared to FY 2005.
GHC’s cash and cash equivalents rose 24 percent to $12,953,625 compared to last year and is further indication of GHC’s challenge in originating new loans. OPA said this correlated to a 113 percent increase in interest income on bank deposits for FY 2006 totaling $336,000.
The Rental Division’s increase in net assets of $329,000 reflects a 42 percent increase from prior year profit of $231,000. Although the Rental Division’s operating revenues declined 2 percent from last year to $779,000, its operating expenses decreased 14 percent from last year, to $505,000.
Thus, OPA said the Rental Division’s significant decrease in operating expenses compensated for its nominal decrease in revenues, thereby contributing to its higher net earnings.