Mortgage banks get nod to collect, disburse housing fund

WITH the unexpected downturn in the financial market creating vast scale of funding gap in housing market, mortgage operatives have secured the approval of the apex mortgage institution to deepen the National Housing Fund (NHF) scheme and ensure it fulfills the needs of prospective homeowners.

The Guardian gathered that Federal Mortgage Bank of Nigeria (FMBN) had succumbed to pressure from officials of the umbrella body of primary mortgage banks (PMBs) – Mortgage Banking Association (MBAN) to allow its members to be involved in the NHF scheme operations.

For several years, MBAN had made representations to FMBN, where it argued that the paucity of funds dogging the sector could be eliminated, if the NHF is harnessed and PMBs are the engine room for the monthly collection process, transaction cycle time could be shortened.

Then, FMBN was wary of allowing its fund to be kept with PMBs to prevent loss of funds with operators and was ascertaining their risk profile as the industry was undergoing recapitalisation, pointed out that some of them might not meet the minimum regulatory capital of N2.5 billion and N5 billion. It subsequently approved list of 25 PMBs that would cross the consolidation hurdle of the Central Bank of Nigeria (CBN). Now, about 35 mortgage banks would benefit from the exercise.

Essentially, under the new development, mortgage banks would commence collection of monthly contributions and monthly loan repayment from the NHF contributors on behalf of FMBN. The apex mortgage would also establish direct debit systems/ accounts with mortgage banks to drive the new initiative. The Guardian gathered that FMBN is to commence placements of the deposits with PMBs as soon as the proposed systems are completed.

The NHF scheme entitles all Nigerians above the age of 21 years in paid employment to a low interest in government funded loan. Members of the scheme contribute 2.5 per cent of their monthly salary to the fund through the FMBN and maximum amount obtainable under the scheme has been pegged at N15 million. The borrowed capital is repayable over a maximum of 30 years at thwarts of six per cent interest.

Recently, the Board of FMBN expanded mortgage loan originators which on-lend NHF loan to include universal banks, insurance firms, pension funds and microfinance banks subject to their meeting the criteria and requirements laid down for Primary Mortgage Institutions (PMIs) and the provisions of their enabling laws and regulatory authorities.

The board also increased down payment or equity contribution of property value by NHF applicants in the following proportion: N5 million loan and below, 10 per cent equity contribution; loan between N5 million and N10 million, 20 per cent; while loan between N10 million and N15 million attracts 30 per cent equity contribution.

However, statistics show that 3.77 million workers nationwide have so far contributed N106 billion to the fund as at March 2013. Out of the amount, N101 billion has been disbursed to beneficiaries to enable them build, buy or renovate their houses. The amount was contributed by 28 states while eight of the states are not still contributing to the fund.

Amongst the decision reach by apex mortgage bank and MBAN was that mortgage banks that have received clearance from CBN and FMBN would be allowed to issue bank guarantees to FMBN under the real estate development window of FMBN to create level playing field with commercial banks.

MBAN had proposed issuance of bank guarantees by PMBs with N5 billion/ N2. 5 billion shareholders’ fund to be accepted for both NHF and estate development loans.

When both parties met in Abuja, MBAN president, Dr. Femi Johnson told officials of FMBN that though there had been marked improvements in the disbursement of the approved NHF loans, there would be need to work towards the transaction cycle of 180 days, which would be of immense benefits to all stakeholders and to improve the opinion of the public on the scheme.

He urged FMBN to fast track the automation of the NHF process. “ There is the dire need to conclude automation process of the NHF scheme, very quickly. The need to re-visit the issue of increasing the monthly contributions to 2.5 per cent of the total salary of contributors, as against the current 2.5 per cent of the basic salary, in order to enhance the volume of the fund,” he said.