Senate Vice President Felix T. Mendiola, Covenant-Rota, said Senate Bill 16-50, also known as the Loan Inequity Reform Act, intends to bring relief to businesses and individuals affected by the economic crisis.
Mendiola said CDA borrowers who used their properties to secure direct loans or loans guaranteed by the government’s financial lending institution are having difficulty refinancing their debts.
Those who are facing foreclosures must still pay substantial deficiency judgments even if their properties are auctioned.
“The Legislature finds that subjecting CDA’s borrowers to deficiency judgments is inequitable because both the borrowers and CDA assumed, at the time the loans were made, that if there were to be a default on the loans, the foreclosure of the property would be sufficient to repay CDA,” Mendiola said in the findings of his bill.
“It is in the best interest of the commonwealth to address this situation by relieving borrowers of CDA from their obligations to pay deficiency judgments,” he added.
According to the bill, if CDA forecloses their properties, borrowers are relieved from facing deficiency judgments.
“The amount collected from the foreclosure sale shall be paid to the borrower, less the full payment of the loan outstanding, including interest, plus reasonable foreclosure expenses,” reads a portion of S.B. 16-50 which remains pending in the Senate.
The bill also seeks to allow borrowers whose properties were foreclosed on or after Jan. 1, 2006 to buy them back provided that CDA hasn’t sold them.
“CDA shall grant the borrower a loan for the full amount of the re-purchased price, charge an interest rate that is equal to the lowest rate charged by CDA to any other borrower and provide for a repayment term of 30 years unless a borrower elects a shorter term approved by CDA,” the bill further reads.
CDA placed different loan programs under a moratorium a few years ago due to high delinquency rate.
The agency’s finances could not sustain more loans because principals and interests loaned to businesses and individuals were not paid on time.
