Monday, 2nd October 2023

Mortgage banks in talks with CBN over expansion plans

By Chinedum Uwaegbulam
23 December 2019   |   3:05 am
Mortgage firms are seeking new strategies to flesh up their operations in the housing finance industry, and have taken decisions on critical success factors that would ensure continuity

Mortgage firms are seeking for new strategies to flesh up their operations in the housing finance industry, and have taken decisions on critical success factors that would ensure continuity and viability of the sub-sector in Nigeria.

With the mortgage sub-sector still caught in a battle for survival, the umbrella body of Primary Mortgage Banks (PMBs) has begun constructive engagement with the Central Bank of Nigeria (CBN) for an expansion of the permissible activities for the banks in the revised operational guidelines.

The Mortgage Banking Association of Nigeria (MBAN) acknowledged that PMBs in particular, as well as mortgage banking sub-sector in general needed to be more profitable and record higher Return on Investment [ROI) to grow the business horizons and attract new investors.

Under the revised operational guidelines, primary mortgage banks were not allowed to grant consumer or commercial loans, leasing, estate agency or facilities management, project management for real estate development and management of pension funds/schemes.

The banks are permitted to engage in mortgage finance, real estate construction finance within the permitted limits, acceptance of savings and time\term deposits, acceptance of mortgage-focused demand deposits, drawing from mortgage funds such as National Housing Fund Facility for on-lending and financial advisory services for mortgage customers.

This was part of the discussions by the delegates at the Year 2019 Annual Chief Executive Officers (CEOs) Retreat held in Lagos, hosted by MBAN, which attracted Managing Director/CEOs of mortgage banks; mortgage brokerage companies; representatives of statutory regulatory/supervisory agencies as well as key stakeholders and corporate companies in the sub-sector.

The delegates suggested the need to embrace “Mutual Shared Services” that would evolve from “shared Model Information Technology (IT) Infrastructure for PMBs in Nigeria to be driven by MBAN.

The idea was mooted as a collaborative approach to deploying IT Solutions by all mortgage banks since the major challenge faced by financial institutions up till now has been the huge capital outlay required to set it up, traceable mainly to the high cost of infrastructure, and integration.

To achieve this, it was proposed that MBAN should come up with strategic initiatives towards “unified and shared services IT infrastructure /platform” with a view to adopting the collaborative approach for improved operational performance and profitability of PMBs’ as well as reducing the risk vulnerabilities in all ramifications.’

Meanwhile, in communiqué signed by MBAN President and Executive Secretary/CEO, Adeniyi Akinlusi and Kayode Omotoso respectively, they said the association resolved that PMBs would be contributing effectively to the development of the sub-sector when they respond promptly to request from the secretariat for data on mortgage loans as well as other activities that would make possible the collection, collation, and analysis of same.

They are agreed that all PMBs must make efforts to invest in the shareholding of Nigeria Mortgage Guarantee Company (NMGC) Plc as the firm minimizes the credit risk to mortgage lenders and drive down the interest rate to the borrower.

“The implication of NMGC’s successful take-off is that our mortgage banks must strive to be very active members both in the shareholding structure and operational mechanism of the company in order to create a situation whereby the mortgage loans originated by the sub-sector would be regarded as moderately low risk, that would, in turn, attract reasonably low premium.”

The delegates identified management succession as a very critical and germane issue, which needed to be fully addressed by PMBs in the immediate term.

“As such it would be expedient that the mortgage banks should take concrete steps to address the issues of succession in management as a major ingredient for sustainability into the future.”

It was resolved also that, each PMB should do a critical self-analysis of its corporate setting with a view to taking the desired steps towards addressing the thorny issue of management succession.

They noted that data submission request from CBN to mortgage banks through MBAN should therefore be accorded both priority and commitment; PMBs should send their annual audited accounts/ financial statements, as well as other requested data to MBAN as a cushion of comfort; and that non-disclosure/confidentiality would be guaranteed for all data received for such purpose.

The theme of the retreat was “Critical Success Factors for Continuity and Viability of the Mortgage Banking Sub-Sector in Nigeria: Mortgage Digitization, Human Capacity Development, and Management Succession”.