The Housing Development Loan Project (HDLP), House bill 10-108-10,HD2, SD5 passed both House of Delegates and Senate yesterday at final reading and will now be transmitted to President of the Republic for his action.
The final version of the bill as it was passed authorized both Palau Housing Authority (PHA) and National Development Bank of Palau (NDBP) to receive the loan funds from the Ministry of Finance and lend out funds for housing at 1% interest, or 3% with $10 grant toward principal or 6% with $10k grant for consolidated loans.
Each of the entities will create their own eligibility criteria and process for obtaining and for disbursing the loans.
Palau Housing Authority is authorized to allow loan restructuring for recipients of the earlier housing Loan No. 025-105003, the “first” $5 million loan received from Republic of China to address housing crisis.
Furthermore, PHA is authorized to loan the remaining balance of the “first loan” for home renovations and extensions of existing structures.
Costs of managing the Housing Development Loan Project, according to the bill, will be paid for by the government through appropriations and will not come from the loan itself.
PHA is also tasked with working with stakeholders such as State governments, utility corporations to develop housing subdivisions, “revive abandoned villages and create new green communities and build affordable housing including temporary multi-family dwellings” or apartments.
NDBP is also a designated recipient and administrator of the HDLP. It will lend funds from the $15 million dollar loan for housing loans including loaning to “residential real estate vendors” at 1%, or 3% with $10k subsidy or 6% with $10k subsidy including debt consolidation.
The ceiling of each housing loan issued by PHA and NDBP through this Housing Loan Project will not exceed $60,000 and have term of up to 30 years.
In addition to lower interest rates, the bill also lowered the restrictions for such loans by raising the debt to income ratio to 40% and loan to value ratio of up to 97%. In other words, a person is still eligible to get a loan if his/or her existing debts represents 40% of his/her income or if a person needs to borrow up 97% of the cost of the home he/or she needs.
Bill mandates both PHA and NDBP to return the principle of the loan once National Housing Commission has determined that Palau “housing crisis has been satisfied.”
The National Housing Commission which the bill creates will serve as a coordinating agency for all stakeholders involved with the HDLP, develop plans for housing subdivisions, priorities and guidelines for Palau housing policies and to make a determination of when Palau housing crisis has been resolved.
House of Delegates in two approved memorandums cite number of concerns with the final version of the bill.
Those concerns include constitutionality of mandatory future appropriations contained in the bill, usurping of certain Executive authority, stating that government will reimburse losses of income from interest income for both PHA and NDBP, different uses for the loan and the undefined terms that create uncertainty and lack of clarity.
House of Delegates nevertheless passed the Senate final version with noted concerns. The bill will be transmitted to President Remengesau for his action. (By L.N. Reklai)