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Operatives seek intervention fund, mortgage guidelines

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Femi Johnson

Femi Johnson

Amid the economic recession in the Nigerian mortgage sector, the operatives have called on the federal authorities to further create an enabling environment for mortgage banking through the provision of an intervention fund.

The Mortgage Banking Association of Nigeria (MBAN) is also seeking the review of the stringent regulatory condition, which to some extent has prevented mortgage finance inclusion such as robust operational guidelines to enhance profitability.

The sub-sector has successfully advocated for the amendment of the Pension Act to enable withdrawals from Retirement Saving Accounts for down payments on equity contributions. In addition to the establishment of the Nigeria Mortgage Refinance Company (NMRC) Plc, which provides long-term funds, loan origination is now being linked to the money markets through the establishment of Mortgage Warehouse Funding Limited (MWFL), that ensures short-term liquidity.

MBAN President, Dr. Femi Johnson that spoke at the 12th Edition of the Mortgage Banking Sub-Sector CEOs’ Annual Retreat held in Abuja, also wants new operational guidelines in respect to loan margins, diaspora lending, FX denominated and matched lending, and loan loss provisioning.

Nigeria’s GDP is projected to grow from $481.07 billion in 2015 to $1.3 trillion by 2030. Residential and commercial real estate could contribute $644 billion to this growth if housing and urban development is properly harnessed to make Nigeria economy realize its full potential.

For individuals and households, home ownership has a notable, financial benefit of wealth accumulation through house price appreciation. A house could also be used as a collateral for loans to meet critical financial needs/obligations, such as starting a business. Thus, home ownership provides individuals and households with greater economic security. Consistent mortgage repayment also builds a strong credit history for the homeowner.

“We need to develop and implement a mortgage bankers tariff that is different from the regular banking tariffs, and mortgage banks need to be allowed to develop housing microfinance products and mortgage-related consumer and commercial loans, “ he said.

To further boost inclusion in mortgage finance, the sub-sector has initiated the Collateral Replacement Indemnity (CRI). This serves to increase Loan to value (LTV) of mortgage facilities from 80 per cent to 95per cent.

MBAN president stressed that the national rate of home ownership in Nigeria is indeed very low and this will not improve unless there is expanded access to mortgages. “A lot has been done in the recent past to create an enabling environment for mortgage banking and housing finance as well as to deepen the mortgage market. This includes the seamless integration of mortgage bank customers onto the BVN platform and the issuance of NUBAN numbers to customers to facilitate online transactions.”

He described the low penetration of mortgage financing as worrisome, saying, “every Nigerian deserves the right to a safe, decent and affordable home, and as stakeholders in the housing sector, we all have a role to play in making this a reality.

The sub-sector needs to engage more with credible local and international agencies in order to further develop affordable funding structures.”

In similar vein, the Director, Other Financial Institutions Supervision Department, Central Bank of Nigeria (CBN), Ahmad Abbullahi, said: “There is no magic cure that can create an effective housing finance system overnight. The basics have to be in place before a market can grow and flourish.

“This means achieving relative macroeconomic stability, access to pool of long-term capital, creating the necessary legal and regulatory infrastructure to back collateralized lending, encouraging competition among housing finance institutions, and ensuring that the appropriate risk-management frameworks are in place.”


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