SAIPAN — The economic uncertainties brought about by the COVID-19 pandemic are likely to negatively impact the future financial results of the Commonwealth Development Authority and the Northern Marianas Housing Corp., an independent auditor's report stated.

Submitted by Deloitte & Touche LLC, the report stated that CDA and NMHC expect that the payment deferral assistance program for borrowers whose livelihoods were affected by COVID-19 outbreak will negatively impact their future financial results. The related financial impact, the report added, cannot be reasonably estimated at this time.

The report stated that although the suspension of commercial air travel is temporary, "there is considerable uncertainty on its duration, which negatively impacted businesses in the CNMI and resulted in employee furloughs both in the private and public sectors."

During CDA's payment deferral program from March to Oct. 31, 2020, no action was required by the borrower and the deferred payments were added to the end of the loan. Interest accrued with rates ranging from 2% to 9% and averaging 6%.

For NMHC's payment deferral program from March 1 to June 1, interest did not accrue.

In April, CDA transferred $6 million to the CNMI government in in connection with the governor's Executive Order 2020-5 as part of the response to the COVID-19 pandemic. The source of funds was CDA's capital improvement revolving loan fund, which is reserved for future capital improvement projects.

CDA anticipates that these funds will be reimbursed as soon as conditions improve in the Commonwealth of the Northern Mariana Islands, the report stated.

Due to the current shortage in housing and slowdown in loan borrowings, CDA is actively working to launch its rent-to-own home program and invest CDA funds into less risky income-producing investment projects, the report stated.

It added that the biggest challenge for CDA in the past was funding its operations from earnings generated from its loan portfolios and investments. The management addressed this problem through a combination of revenue enhancements, diversification and cost-cutting, the report stated.

As CDA continues to find innovative ways to assist borrowers, it offers a debt-relief program to bring qualified borrowers from a delinquent, nonpaying status to a performing, paying status. The price of this program to CDA is 2% reduction in interest rate on these loans.

CDA believes that if enough of the delinquent borrowers see hope of paying off their loans and preserving their collateral, they will begin to make regular payments, the report stated.


As for NMHC, its program and operating revenues are primarily provided by the federal government through operating subsidies and other minor grants. The operating subsidy for 2018 was $1,272,062.

Based on the CNMI's annual awards and contract with the U.S. Department of Housing and Urban Development, NMHC anticipates that HUD assistance programs will continue into the foreseeable future.

However, the report noted that the U.S. Congress continues to increase Section 8 housing assistance funding. This impacts NMHC's operating capabilities and financial position, the report added.

In 2018, NMHC received $1.24 million in federal funds for its housing program. Such assistance typically comes with use restrictions and generally limits the ability of the housing corporation "to encumber or leverage debt financing against HUD properties in its asset portfolio," the report stated.