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<\/p>\nAdeniyi Akinlusi is the President, Mortgage<\/a> Banking Association of Nigeria (MBAN) and Chief Executive Officer, TrustBond Mortgage Bank Plc.<\/p>\n<\/div>\n Adeniyi Akinlusi is the President, Mortgage Banking Association of Nigeria (MBAN) and Chief Executive Officer, TrustBond Mortgage Bank Plc. In this interview with Property & Environment Editor, CHINEDUM UWAEGBULAM, Akinlusi who is a fellow of the Institute of Chartered Accountants of Nigeria (ICAN) and Chartered Institute of Taxation, believes that an\u00a0intervention fund\u00a0for mortgage banks will achieve single digit interest rate. He also listed<\/a> ways to improve National Housing<\/a> Fund (NHF) contribution and create enabling environment for mortgage banking. <\/em><\/p>\n The low penetration of mortgage financing<\/a> has been worrisome. Nigerian workers that contribute 2.5 per cent of their monthly salary to the National Housing (NHF) have been denied right to a safe, decent and affordable home. What has been the problem with the NHF and mortgage in Nigeria? <\/strong> The Federal Mortgage Bank of Nigeria (FMBN) is the custodian of NHF while Primary Mortgage Banks (PMBs) are the conduits through which the funds are disbursed to individual beneficiaries.\u00a0 There are challenges with NHF, some of which have\u00a0to do with misconception that NHF is one\u2019s share of \u2018National Cake\u2019 with\u00a0reluctance to pay back the borrowed NHF loan<\/a> invariably leading to high default rate. Notwithstanding, the demand for NHF loan is higher compared to the contributions received, hence funds available for loan are not adequate to\u00a0meet\u00a0demand.\u00a0\u00a0For instance,\u00a0inspite\u00a0of the fact that loanable amount on NHF has since increased to N15million from previous N5million, the maximum\u00a0loanable value of N15million NHF loan may not be adequate for the price of current housing stock in some areas, especially Lagos, Port Harcourt and Abuja. \u00a0Also, participation level from both private and public organizations\u00a0is\u00a0still low as most organizations are still out of the NHF contribution net.\u00a0\u00a0There is also the problem of inability of subscribers to provide the required equity contribution although this is being addressed with the recent approval of management of FMBN to waive equity requirement for loans<\/a> of N5million and below. This would also be addressed with the introduction of mortgage guarantee scheme with selected insurance<\/a> companies, where the equity not paid at time of disbursement is guaranteed and redeemed on default.<\/p>\n Do government need to further create an enabling environment for mortgage banking. If yes, how?<\/strong> Unlike in other climes, the mortgage banks still lend at very high interest rates, which negate the quest for a virile mortgage sector. What has caused this? Is it possible to streamline the system to offer<\/a> a single digit interest rates, spread over 20 to 25 years? How can this be done?<\/strong> Many organisations and corporate entities have refused to make contributions to the NHF. But MBAN is clamouring for the increase of the monthly NHF Contribution to 2.5 per cent of total salaries of contributors, as against the current 2.5 per cent of the basic salary. Why do you think the workers should have more burdens despite their hues and cries on inability to access the fund? What will you suggest as penalties for corporate organisations that failed to pay contributions to NHF? Do FMBN take them to court?<\/strong> Currently, the Federal Government is promoting a N100 billion Family Home Fund as part of its Social Housing Programme, which will provide inexpensive mortgages to Nigerians. How will these work with the mortgage banks? On the fund, some experts say the micro finance banks will be the best for the scheme. What is also your take on this comment?<\/strong> MBAN has been meeting with FMBN to allow mortgage institutions issue bank guarantees for both NHF and Estate Development Loans. Why is this necessary for the sector?\u00a0<\/strong> Recently, National Assembly refused to make affirmative legislation on the amendment of the Land Use Act 1978. What does this portend to the real estate<\/a> sector, especially on land acquisition for housing development?<\/strong> Mortgage bankers, recently visited the vice president, Yemi Osinbajo in Abuja, what were the major issues discussed? Did your association also push for the re-capitalisation of Federal Mortgage Bank of Nigeria to N500 billion and review mortgage related laws such as foreclosure law?<\/strong> With MBAN being the chief promoter for the Nigeria Mortgage Refinancing Company, are your members satisfied with the operations of the firm, Can you say, the key objectives for setting it up have been met. How?<\/strong> In terms of achievement, I would say that a lot has been achieved and stakeholders are still working hard to make the framework sustainable.<\/p>\n Although\u00a0stakeholders\u00a0still have a lot to do in terms of reducing the cost of funds, market development and advocacy with Federal Government for effective foreclosure process, MBAN would continue to encourage financial inclusion by\u00a0working with other stakeholders to\u00a0develop\u00a0underwriting standards for informal sector\/self-employed\u00a0and non-interest mortgages to deepen the market and for financial inclusion.<\/p>\n Guardian <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"
\nOne of the challenges of mortgage financing\u00a0in Nigeria\u00a0is high interest rate, which can be easily linked to high cost of funds and limited supply of loanable funds\u00a0for long\u00a0duration.\u00a0 But this is gradually being addressed by extending the source of mortgage funding<\/a> beyond the National Housing Fund (NHF) to include funds from the Nigeria Mortgage Refinancing Company (NMRC)\u00a0as well.\u00a0\u00a0Another issue worthy of mention is the\u00a0cumbersome and weak legal regulatory framework for land acquisition,\u00a0which\u00a0make mortgage process complex and expensive for property titling and land ownership coupled with absence of effective Foreclosure<\/a> Law.\u00a0 It is important to note that these mortgage infrastructure deficits have heightened industry risk just as investors are discouraged from injecting more capital in mortgage business due to low level of profitability compared to other vibrant financial sectors.<\/p>\n
\nAlthough, government is\u00a0trying to address this, there are still a lot to be done\u00a0to improve the enabling environment for the mortgage banks through provision of\u00a0intervention funds\u00a0just as it was done for the agricultural sector to achieve single digit interest rate; provision of infrastructure in undeveloped areas and satellite areas to open up more areas; reduction of\u00a0transaction cost and\u00a0deliberate effort to ease\u00a0the bureaucracy of titling and\u00a0registration of property; review\u00a0of\u00a0mortgage related laws in the country and passage\u00a0of\u00a0relevant bills such as foreclosure Law, securitization, mortgage asset registry; and de-risking the sector to attract private capital with effective foreclosure mechanism.<\/p>\n
\nIn Nigeria today, only NHF loan attracts single digit interest rate, which is 6 per cent per annum\u00a0with repayment\u00a0spread over 15 to 25 years.\u00a0 Unfortunately this has proven insufficient to satisfy the yearnings of qualified contributors under the NHF scheme hence, the need for\u00a0other\u00a0sources of mortgage funds\u00a0to complement NHF.\u00a0 So the contribution of NMRC\u00a0through refinancing of mortgages is\u00a0commendable.\u00a0\u00a0However, some of the reasons for high mortgage interest rate include: high cost of funds; dearth of mortgage finance and limited supply of loanable funds with long duration; mortgage infrastructure deficits which heightened industry risk; mortgage industry\u2019s\u00a0low profitability level which discourages investors from injecting more capital.<\/p>\n
\nMortgage Banking Association of Nigeria (MBAN) did not\u00a0clamour\u00a0for application of 2.5per cent on gross salary\u00a0rather\u00a0MBAN\u00a0is advocating for participation of private and public institutions not presently contributing to NHF, as NHF is the only source of\u00a0single\u00a0digit\u00a0interest\u00a0mortgage\u00a0fund in the industry. \u00a0There is no doubt that FMBN is currently doing a lot to improve its\u00a0operations for more efficiency, and\u00a0the drive towards increased\u00a0contribution\u00a0would go a long way to attract more contributors to the NHF scheme. Other ways to improve NHF contribution is\u00a0to continue stakeholders\u2019 engagement\u00a0with continued awareness of benefits of NHF particularly to low income earners.<\/p>\n
\nPrimary Mortgage Banks (PMBs) are also major partners to the scheme and are working closely with Federal Government and CBN on the Family Home Scheme. \u00a0One\u00a0of the ways the N100billion Housing Fund would be impactful is to\u00a0set aside\u00a0some fund to create supply of housing stock and some other fund to support\u00a0demand for housing stock. \u00a0I will also expect that the scheme would leverage on NMRC platform for sustainability of the Family Home Scheme. \u00a0In terms of mortgage transactions, PMBs are licensed to fund mortgages (long term) and have developed special capacity to administer mortgage transactions specially.<\/p>\n
\nActually, FMBN meet monthly with stakeholders like MBAN, REDAN\u00a0etc\u00a0in order to continue to realize the various objectives of NHF\u00a0and improve efficiency.
\nMortgage banks have\u00a0a better understanding of the mortgage business thus issuing Bank\u00a0Guarantees\u00a0would further ease the process for\u00a0potential\u00a0NHF\u00a0beneficiaries\u00a0and estate developers alike.\u00a0 The fact that commercial banks\u00a0are not deeply involved in NHF,\u00a0they tend to create bureaucratic\u00a0bottlenecks for mortgage banks to\u00a0gain access\u00a0to the funds they (commercial banks) guaranteed.\u00a0\u00a0However there are other\u00a0options, which include insurance bonds, which\u00a0are acceptable to FMBN and are being used, thus increasing the funds disbursed by FMBN.<\/p>\n
\nThe process of registering titles would continue to be cumbersome, complex and expensive.\u00a0 Invariably, cost of producing housing units will continue to increase.\u00a0 Also housing stock will continue to be inadequate, as access to land for development remains difficult.<\/p>\n
\nRelevant issues regarding the growth and development of the mortgage industry\u00a0were put forward. \u00a0For instance, the recapitalization of FMBN for sustainability and efficiency, mortgage infrastructure deficit and Formula 1:3:1 for ease of doing business. \u00a0That is,\u00a0one stands for 1 per cent of property as titling cost: the three stands for\u00a0issuance of title\u00a0within\u00a0three days:\u00a0and the last one stands for\u00a0one\u00a0desk\u00a0to start and complete the whole transaction.<\/p>\n
\nMBAN\u00a0is not the chief promoter of NMRC but one of the major stakeholders and was closely involved with Federal\u00a0Government\u00a0and CBN in NMRC take-off. This is the reason for PMBs considerable shareholding in the company.<\/p>\n