Published On: Mon, Oct 22nd, 2012

Benefits of mortgage reform, recapitalisation, by CBN


THE first tentative outlines of the shape of things to come for mortgage operatives in Nigeria could begin to emerge in few months time, as officials last week unfolded proposals toward the articulation of a more workable guide to stimulate growth of the sector.

The effort, coming at the instance of the Central Bank of Nigeria (CBN), is the latest attempt to instill confidence in the mortgage sector among the populace and subdue the challenges identified as the bane of mortgage finance in the country.

The factors include weak capital, dearth of long-term funds, absence of mortgage Refinance/liquidity Company or a secondary market, high cost of funds, titling challenges, poor legal framework, inadequate housing delivery systems and high cost of property transactions.

But senior CBN officials who addressed mortgage bank’s chief executive officers and other delegates at the 2nd Housing Finance, Investment Conference and Exhibition  (HOFEX) organized by the Mortgage Banking Association of Nigeria (MBAN) insisted that the new initiatives, which include revised guidelines for Primary Mortgage Banks (PMBs) and recapitalization with 18 month time-line expected to end on April 30, 2013 will strengthen and refocus the PMBs for optimal performance.

The CBN Director, Other Financial Institutions Supervision Department, Femi Fabamwo said that the reforms are aimed at repositioning and strengthening the PMIs as vehicles for housing and home ownership delivery, fostering the emergence of well capitalized PMBs and promoting a robust mortgage finance system through market support initiatives.

Fabamwo, represented by a Deputy Director, Mr. Okwo Ezewu explained that the reform will further improve the capital base of operators, such that they are better positioned to fulfill their licensing mandate, enhance the ability of the Mortgage Loan Originators (MLOs) to create mortgages through the operations of the mortgage liquidity company.

According to him, it would also enhance the entry of additional ‘specialized players’ like mortgage insurers, mortgage brokers, rating agencies and credit bureau to the industry, spawning a multiplier effect, catalyse a downward slope in interest rates as a direct benefit of mortgage insurance, enhance accessibility of the lowerinformal income group to housing finance products and bring about increased inflow of foreign direct investment (FDIs).

He said that exercise would also increase mortgage debt as a percentage of the Gross Domestic Product, making it comparable to what obtains in other emerging economies, and create employment and enhance wealth creation.

“Governments in most countries in the world and more so in developing economies have come to realise the importance of housing finance as a tool that can unleash exponential growth once properly harnessed, hence we have witnessed a preponderance of policies deliberately targeted at stimulating growth in the sector, “ he said.

Fabamwo said that if the reform initiatives are as successful as expected, loans sizes and tenor will increase tremendously, interest rates will become lower and eventually single digit, housing stock is expected to increase exponentially, and mortgage insurance will become a key product for insurance companies.

He advised mortgage operators to address internal challenges such as: poor product packaging, capital inadequacy and human capacity building to ensure that they can meet their core objectives and remain sustainable.

The Lagos State Governor, Mr. Babatunde Fashola assured that the State Government is not resting on its oars to provide affordable Housing for the teeming population of about 18million people in the State.

“We have innovated a Home Ownership Mortgage Scheme tagged LAGOSHOMS. It is a rent-to-own scheme targeted at first time Home Owners, “

He said stated that a legal framework is in place to protect the rights of the Mortgagee and Mortgagor. Part of this legal framework includes Lagos Mortgage and Property Law 2010; Tenancy Law 2011 no. 33 vol 9044; Housing Arbitration Rules 2011 and a creation of Mortgage Departments in the state High Court, whose sole purpose is to hear mortgage foreclosure matters in order to dispense such cases expeditiously.

Fashola, represented by the Commissioner for Housing, Mr. Bosun Jeje said that a department supervised by the Ministry of Housing has been created to regulate transactions in the Real Estate sector. “The attempt of Lagos State Government to provide accommodation for the teeming populace has also resulted in the construction of over 886 housing units across the state. These housing units can be found in Gbagada, Epe, Ikorodu, Ikeja, Mushin, Lekki and Badagry.”

Earlier, MBAN President, Mr. Abimbola Olayinka said that HOFEX is an annual event to bring products and services nearer to the public and assure Nigerians that their home ownership dreams can actually become reality.

He is optimistic that the consolidation in the sector will bring about a new dawn in the mortgage banking sector, and also disclosed that MBAN is planning a mortgage refinancing vehicle to tackle the liquidity problem in the country.

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