Despite the huge benefits that can be derived from adoption of Model Mortgage Foreclosure law, about 32 states in the country have not domesticated its terms and principles. The inertia by states is compounding the process of homeownership by residents, as well as inhibiting housing investments, Victor Gbonegun writes.

Many property developers and mortgage operators are avoiding investments in states that have not created an enabling environment for housing developments and adopted the Model Mortgage Foreclosure Law (MMFL).
[ad]
The Guardian gathered that the absence of foreclosure law in these states may have further compounded the slow growth in housing and mortgage operations, as operators are averse to risks posed by the failure of off-takers to fulfill mortgage responsibilities. The law safeguards mortgage banks and private investments in the real estate sector.

Over the past five decades, affordability has remained a big challenge in the industry because of the high cost of construction, high interest rate and low income of the average Nigerian worker. Most mortgage banks charge as high as 22 to 28 per cent for housing mortgages depending on individuals’ monthly earnings. But the majority of Nigerians cannot afford this, as incomes are depleted by rising inflation and a poor economy. As a result, many people wallow in consistent homelessness, and substandard houses.

In other climes, the fastest and easiest access to homeownership is through affordable mortgage, which comes in single digits over a longer period of time, which could span 30 years or above. However, the situation is not the same in Nigeria, as the rates are far beyond the reach of low-income earners, come in double digits and shorter period for repayment. Industry experts say this has not helped the sector to grow.

The mortgage banking and housing finance industry in Nigeria contribute just 0.38 per cent to the nation’s growth domestic product whereas in other countries within the continent, the contribution could be as high as 39 per cent.

The MMFL was developed by the Nigerian Mortgage Refinance Company (NMRC) to facilitate easy access and affordable mortgages through creation of a mortgage board. Currently, only four states, namely Lagos, Kaduna, Nasarawa and Ekiti have enacted the MML.

The four states have worked and are still improving the process of property rights and digitisation process of land administration, while the other 32 states have not domesticated the law, which would boost access to affordable housing, de-risk the mortgage firms and housing industry.

Essentially, the law establishes a mortgage registry; reduces the time stretch it takes to issue Certificates of Occupancy by delegating top government officials to sign the governor’s consent rather than the governor alone; and makes land ownership transfer easy, among other benefits.

The Guardian learnt that where there is difficulty, investors, including banks, often price the difficulty into the interest rate. So, where the risks are higher with possibility of not recouping investment, higher interest rates are charged unlike in states where the foreclosure law has been passed and the risks are minimal, the people enjoy lower interest rates, low equity contributions and other benefits from the states.

Speaking further on the issue, former President of Mortgage Bankers Association of Nigeria (MBAN), Dr. Femi Johnson, said the model mortgage foreclosure law is supposed to help streamline and ease the process of mortgage transactions and goes beyond foreclosure in itself but describes how the states should structure their property desk in terms of property approvals and others.
[ad]
He said one of the things that stop investment or money from coming into a state or an environment is the lack of foreclosure law. He observed that the law doesn’t only protect the bank but also the borrower.

“So, instead of going through many different desks and taking a long time, sometimes up to two years to get transfer of title from one person to another, it suggests how the process should be streamlined. It tends to bring efficiency to the process of transferring titles on property from one person to another and creating mortgages upfront and how foreclosure should be handled.

“We also know that if we have done all the necessary things as given by that law, it is easy to foreclose on the property and get our money back. But if there is no law assuring that the bank or investors can get their money back, they become reluctant to invest in such states,” Johnson said.

For instance, he explained that “an investor who is doing business in Kaduna State can ask for 10 per cent equity, when the law is in place to protect him. However, if the same person goes to another state that doesn’t have the law, he can request for 40 per cent down payment on a house and so, fewer people will afford houses there.”

Johnson, who doubles as the founder of Homebase Mortgage Bank Limited disclosed that mortgage operators have tried in the past to ensure that state governments embrace the law through the Governors’ forum by making presentations to them. However, he observed getting appointments with governors has not been easy.

A mortgage expert, Mr. Gboyega Olunrunfemi, said it was important to actively engage states to consider domesticating it, especially if it is a law that was passed at the federal level.

Olorunfemi said: “There is need for capacity development and synergy at all levels of governance as it speaks volume in domesticating the law in states.”
Meanwhile, the Minister of Housing and Urban Development, Ahmed Dangiwa, has pledged the Federal Government support for an enabling environment for investment in real estate and growth of mortgages in states.

He said the government will drive the passage of model mortgage foreclosure law in all the states of the federation as part of efforts to ensure that investments in the housing and mortgage sector are protected.
[ad]