Financing mortgage with commercial paper
The flow of liquidity needed to fire off the much-anticipated mortgage financing in the country has been more of pipe dream. This is because of the long-term nature of mortgage financing, which is in short supply.
The data from the National Pension Commission (PenCom), however, showed that the sector operators, as at June 30, 2019, invested N940.68 billion out of the N9.33 trillion total pension fund assets.
Among the list of the investments were N105.05 billion in commercial papers; N23.67 billion in mutual funds; REITS, N14.37 billion; private equity fund, N31 billion; real estate properties, N250 billion; infrastructure funds, N29.17 billion; open/close-end funds, N9.29 billion and cash/other assets, N214.21 billion.
These, directly or indirectly, find their way in funding initiatives in the capital-sapped mortgage industry. Of course, with the estimated 20 million housing deficit, there may not be end to opportunities for financing in the sector.
From sector operators to state actors, it was a unanimous decision that the Mortgage Warehouse Funding Limited (MWFL) was designed to complement the Nigeria Mortgage Refinance Company (NMRC) by serving as a support to the sector through provision of short- term up-front funding.
Consequently, MWFL, under its N20 billion Asset-Backed Commercial Paper Programme, has pre-financed its first series of mortgages to one of its member mortgage banks- Trustbond Mortgage Bank Plc.
A total of four mortgages were pre-financed to the tune of N88.5 million and funds have been disbursed to TrustBond Mortgage.
This short-term pre-financing vehicle will enable the mortgage bank to begin to expand its origination capacity and ensure the availability of mortgages for intending home owners in Nigeria, while ensuring the steady growth of the mortgage sub-sector in the nation’s housing market.
MWFL Chairman, Sonnie Ayere, said that it is gratifying to finally see MWFL fund its first bank at a holding duration cost of 9.59 per cent.
“Like everything else, proof of concept is most important and that hurdle has now been scaled. The Conduit is now looking forward to funding more of its member banks and giving them the firepower to go out there with a 100 per cent confidence to give mortgage financing to Nigerian citizens wishing to get on to the property ladder,” he said.
Also reacting to the development, President of Mortgage Banking Association of Nigeria (MBAN), Niyi Akinlusi, noted that successful completion of Series 1 funding by MWFL with pre-finance Of TrustBond’s mortgages of over N88 million is very significant for the mortgage industry and the larger economy.
“It is the last piece of the jigsaw puzzle in connecting the mortgage industry to the money market, after linking the mortgage market to the capital market through the bond issuance activities of NMRC in the capital market.
“This signposts the beginning of continuous flow of liquidity from the money market to the mortgage industry and another major initiative in making Nigerians home owners and reducing the national housing deficit of over 20m units”, he said.
The primary mandate of MWFL is to provide short term liquidity to member mortgage banks to enable them originate new eligible mortgage loans strictly based on the Mortgage Sub-sector Uniform Underwriting Standards.
Already, the current membership of MWFL include Abbey Mortgage Bank Plc, Brent Mortgage Bank Limited, Homebase Mortgage Bank Limited, Imperial Homes Mortgage Bank Limited, Jubilee Life Mortgage Bank Limited, Lagos Building Investment Company Limited, Mayfresh Mortgage Bank Limited, TrustBond Mortgage Bank Plc, CityCode Mortgage Bank Ltd and Infinity Trust Mortgate Bank Plc.
MWFL is sponsored by several mortgage banks, MBAN, NMRC, Lion’s Head Global Partners, through the African Local Currency Bond Fund, DLM Advisory Partners Limited and CitiHomes Finance Company Limited, a CBN-licensed financial institution.