MORTGAGE BANKING/HOUSING FINANCE SECTOR IN NIGERIA AND CHALLENGES PROGRESS AND PROSPECTS

CHALLENGES

Major challenges confronting the Mortgage Banking Sector as identified by the Stakeholders are as listed below:

 

• Difficulty in access to Land Title and Documentation Constraints
• Cost of Titling or Title Transfers which averages over 15% of the Value of the Property across the 36 States of the Federation, including Federal Capital Territory.
• Process of obtaining Governor’s Consent to Mortgage which is very slow, cumbersome, unreliable, inefficient and very expensive.
• Lack of Foreclosure Laws on defaulting Mortgage loans.
• Weak Structure of the Mortgage Banks prior to Consolidation/Reforms by the Central Bank of Nigeria (CBN), but which had been completely rectified Post -Reforms.
• High Interest Rates on Mortgage Loans ranging from 18-20% p.a which are clear impediments and challenges to affordability.
• Lack of Adequate Housing Supply Stock to support High Volume of Mortgage Loans.
• Poor Infrastructure to support housing construction, also having causal effects that lead to exceedingly high spreads and expenses in lending.
• Cumbersome Legal and Legislative frameworks for land acquisition. The existence of a cumbersome process of title documentation on land ownership which is reinforced by an inadequate cadastral system makes mortgage financing very difficult. This has also been regarded as one of the factors responsible for slow disbursement of funds under the NHF Scheme.
• Draft Bills having effects on the Mortgage Banking Sector that had been pending with the National Assembly for amendments since Year 2001 are listed below:

 

• Land Use Act 1978
• National Housing Fund (NHF) Scheme Act 1992
• Mortgage Banks Act 1989 (Subsumed in BOFIA)
• Federal Mortgage Bank of Nigeria (FMBN) Act 1993
• The Trustees Investment Act 1962
• The Nigeria Social Insurance Trust Fund (NSITF) Act 1993
• The Insurance Act 2002
• The Investment and Securities Act 1999
• The Federal Housing Authority (FHA) Act 1990
• Securitization Bill
• Foreclosure Law Bills – Residential Mortgage Act and Residential Mortgages (Incentives) Act.

 

• The Structure of Bank Deposit Liabilities:- The nature of bank deposits in Nigeria is short term; thus Mortgage Originating Banks that include Mortgage and Commercial Bank tend to avoid fund mismatch i.e. borrowing short term but lending long term, which is critical in mortgage financing. The key issue that emerges therefore revolves around how to ensure adequate long term lending by Mortgage Originators, rather than the current short term lending practice.
• Lack of Awareness/ Public Apathy

 

PROGRESS ACHIEVED TO DATE

• Consolidation/Reforms of the Mortgage Banking Sector

The Consolidation/Reforms carried out by the Central Bank of Nigeria (CBN) on the Mortgage Banking Sector are at the conclusion phase with the Minimum Regulatory Capital of N5billion and N2.5billion for the National and State Authorisation Licences respectively.

Consequently, the CBN had recently issued new, robust Guidelines for the Emerged Mortgage Banks that engage in mortgage business operations, in the post-consolidation era.

In effect, the newly emerged Mortgage Banks are well poised to extend Mortgage Loans to the teeming populace in Nigeria to finance their Affordable Housing needs.

• Scope of Permissible Activities for the newly emerged Mortgage Banks as contained in the most recent Guidelines issued by the Central Bank of Nigeria
• 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 (e.g. National Housing Fund Facility) for on-lending
• Financial advisory services for mortgage customers
• Other activities the CBN may approve from time to time
• Nigeria Mortgage Refinancing Company (NMRC) Plc.

MBAN and its Member-Mortgage Banks took the initiative and the lead in coordinating the establishment of a Liquidity Facility Company in Nigeria via Tiers 1 and 2 Capital from local and foreign stakeholders such as the Mortgage Banks, Commercial Banks, Federal Ministry of Finance Incorporated (MOFI), Sovereign Wealth Fund (SWF), International Finance Corporation (IFC) and Shelter Afrique which resulted in the Incorporation of the Nigeria Mortgage Refinancing Company (NMRC).

The Company would provide access to long-term funds needed to boost the Mortgage Banking Sector towards an increase in affordable housing and homeownership.

• Expunging the Land Use Act of 1978 Nigerian Constitution

MBAN has a strong track record for advocating policies and changes to laws which aim at realising the goal of affordable housing for Nigerians.

MBAN in collaboration with other Stakeholders formed a Coalition Group known as the Land Use Act Amendment Advocacy Group (LUAAAG) to push advocacy for removal of the Land Use Act 1978 from the Nigerian Constitution. A Position Paper to that effect was duly submitted to the National Assembly Committee on Amendments to the Constitution of the Federal Republic of Nigeria.

 

• MBAN/CBN/IFC Uniform Mortgage Underwriting Standards

MBAN in collaboration with the Central Bank of Nigeria (CBN) and International Finance Corporation (IFC) are at the concluding stages of crafting new Uniform Mortgage Underwriting Standards for the Mortgage Banking Sector. The Standards would form the planks for the re-financing of mortgages created by the Mortgage Banks through the avenue of Nigeria Mortgage Refinancing Company (NMRC).

 

• Advocacy With National Pension Commission (Pencom)/Pension Operators Association (PENOP)

MBAN is exploring the possibility of optimising access to mortgage/housing finance through the platform of the Amended Pension Fund Scheme as a veritable source of long term funding for the mortgage sector to provide affordable housing to the RSA Contributors in particular and the totality of Nigerians, in general.

• Advocacy with FMBN

Through successful collaboration with the Federal Mortgage Bank of Nigeria (FMBN), MBAN is working to agree obtainable measures for the reform and/or implementation of the following:

• National Housing Fund (NHF) Scheme
• Sustained exclusion of non-mortgage originating financial institutions in the on-lending window of the NHF Scheme
• Placement of Term deposits with Mortgage Banks as done with Commercial Banks i.e. expanding the scope to include Mortgage Banks
• Collection by Mortgage Banks of NHF Monthly Contributions from the bona fide Contributors to the Scheme, on behalf of FMBN, to deepen and strengthen the Scheme.

PROSPECTS/FUTURE OF THE SECTOR

There would be a huge jump in Public-Private-Partnership (PPP) activities in Nigeria through the example of NMRC

• The Sector would catalyse Secondary Mortgage Market Development in Nigeria
• NMRC would deepen the capital market by raising funds via issuance of high-quality, long term Securities by way of Bonds.
• There would be promotion of Standardised mortgage practices, legislative reforms and process improvement via the Sector
• The Existing Portfolio of Mortgages in Nigeria would grow from 20,000 to a projected figure of 200,000 in the next 5 years.
• The Sector would promote affordable housing through re-financing of mortgages created by Mortgage Loan Originators.
  • The Sector is set to facilitate delivery of 75,000 housing units per annum in Nigeria.
• It would assure Employment generation of at least 300,000 direct and 488,000 in-direct jobs after the initial project period on an annual basis.
• Gradual production in Interest Rate that would result in Macro-economic stability.
• In the long run inculcation Mortgage Culture which would led to Higher Home-Ownership and Social Stability.
• There would be decrease in corruption and its practices among Nigerians.
• Contribution on the Mortgage Banking /Housing Finance Sector to GDP of Nigeria would grow from the current 0.5% to at least 5.0% in the Short Run.

 

MORTGAGE BANKING ASSOCIATION OF NIGERIA (MBAN)

MBAN was incorporated on August 06 1992 under the Companies and Allied Matters Act (CAMA) and is recognized by the Central Bank of Nigeria (CBN); Nigeria Deposit Insurance Corporation (NDIC) and Capital Market Agencies such as Securities Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) as the Self-Regulatory Organisation (SRO) and Catalyst for development of the Mortgage Banking/ Housing Finance Sector in Nigeria.

MBAN on regular basis, provides inputs for the formulation of National Housing/ Urban Development Policies and Debates/Fora as they affect the Sector and its Member-Mortgage Banks. The Association is also committed to building Ethics and Professionalism, enhancing the Human Capacity for the Sector as well as providing reliable mortgage related information to consumers and investors.

The Mortgage Banking Association of Nigeria (MBAN) is the Umbrella body for all Mortgage Banks licensed by the Central Bank of Nigeria to engage in Mortgage Business in Nigeria. Its main focus is to ensure the access to mortgage finance for provision of affordable housing through effective advocacy for improved legal/regulatory/operating environments for home-ownership finance in Nigeria.

 

WHAT WE DO!!

• Membership Drive & Development

MBAN has strived to ensure it bears continued relevance to its three (3) Broad Categories of Membership as listed below:

• Mortgage Banks
• Professional Mortgage Brokers
• Individual Employees in the Sector

 

 

• Advocacy

Taking into account the needs and concerns of our members, MBAN works to foster an effective and competitive market place by promoting a legislative, regulatory and operational environment in which the businesses of mortgage banking service providers can prosper. We engage policy makers, regulators, foreign investors, institutions and individuals to ensure that the interests of all our Mortgage Banks and Mortgage Professionals are adequately represented in nationally relevant issues of Mortgage banking / Housing Finance and delivery in Nigeria.

Most Significantly, MBAN is deeply committed to providing affordable housing to Nigerians via mortgage arrangements in tandem with the Vision 20:2020.

• Human Capacity Building

MBAN is committed to promoting professional excellence through our array of training, professional certification programmes and events. Through carefully designed Individual, Corporate and Sector-wide interventions, we also provide guidance to our Members for increased profitability and business growth.

• Industry Resource

We provide our Members, Governments/its Agencies, Investors and other Stakeholders with accurate and up to date news and information about home ownership financing and delivery in Nigeria. We also offer guidance and inputs for policy formulation, investment decisions and durable research on the Sector.

• WHO WE REPRESENT!!!

MBAN represents the Mortgage Banks, Professional Mortgage Brokers and Individual Employees in the Sector that form the three (3) Broad Divisions of our Membership as the first-layer Stakeholders/Mortgage Sector Operators in Nigeria.

 

 

Mortgage Banking Association of Nigeria (MBAN)

Skye Bank Building (4^th Floor)

No 30, Marina

Lagos

0802-7339-813, 01-4546-653

www.mban.org.ng

info@mban.org.ng