Edward Okon is a middle-aged man who left higher school 26 years ago at the age of 24. Okon’s immediate plans on leaving school were to work for six years and marry at the age of 30. Thereafter, he would start processes leading to owning a home he would call his home before his 40th birthday.
That was a long term plan because he reasoned that the only easy, simple and convenient way for him to own a home from his not-too-big salary was to take a mortgage loan and pay back by installments.
Because of its low-interest rate and long repayment period of 6 percent and 20-30 years respectively, Okon decided for the National Housing Fund (NHF). He approached one of the primary mortgage banks (PMBs) to subscribe for the fund. His experience there was anything but cheering.
After subscribing and contributing for one year instead of the statutory six months requirement, Okon’s long trek to obtaining a loan via his contribution began. His PMB made impossible demands from him, leading to his anger and decision to suspend his application for the elusive loan.
That was how Okon’s faith in his country’s mortgage system almost died and his dream of owning a home through mortgage was deferred.
Though, through frugal living and co-operatives, Okon has been able to build his housing, a modest three bedroom bungalow in a Lagos suburb, his interest and hope in the Nigerian mortgage system came alive again when the Federal Government, in another round of intervention, set up the Nigerian mortgage refinance company (NMRC) in 2014.
NMRC was launched into the Nigerian mortgage market as a secondary mortgage institution aimed to raise liquidity in the mortgage system and drag down the interest rate on mortgage loan to an upper single digit or a spread of double digits. Its operation was also expected to catalyze the development and delivery of affordable housing to Nigerians within the low-income bracket.
It is a private sector-driven company with the public purpose of developing the primary and secondary mortgage markets by raising long‐term funds from the domestic capital market as well as foreign markets for providing accessible and affordable housing in Nigeria.
The company whose mandate is mainly to increase liquidity in the mortgage system by refinancing mortgages originated by the primary mortgage banks (PMBs) came on a very high pedestal of providing cheap and long term funds, reducing interest rate to single digit, increasing the country’s housing stock by 720,000 annually, and creating 300,000 indirect jobs.
To Okon and many other Nigerians, particularly the mortgage operators, this was a new dawn because the company would issue long term bonds in the capital market as efficiently as possible and channel the proceeds to refinance member-institutions at a competitive rate, bringing to an end, or reducing to the barest minimum, the huddles posed to mortgage lending to real estate.
True to this expectation, NMRC has visited the capital market from where it raised N8 billion with which it has refinanced mortgages originated by six mortgage institutions including Stanbic IBTC, Imperial Homes, Sterling Bank, Sun Trust Mortgage Bank, Trustbond Mortgage Bank, and Homebase Mortgage Bank which got N1.8 billion, N1.7 billion, N1.6 billion, N1.3 billion, N700 million and N500 million respectively.
It has gone back to the market and raised more capital. By the end of last December, the company announced to the world that it has raised N18 billion from the market.
But it remains to be seen by Okon and his brothers and sisters what purpose this refinancing function has served Nigerians, four years after. The effect of the refinancing of the six mortgage institutions is yet to be felt in the housing sector as there is no news anywhere of any mortgage loan applicant, especially NHF contributors, that have been given loans to buy, build or renovate houses as a result of this.
The second capital raise by the company raised expectations that more mortgage institutions, especially the PMBs, will be refinanced and more mortgage applicants will be able to access mortgage to buy or build their homes.
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Officials of the company assured that when they raised another capital, it would come at a lower interest rate and PMBs will be able to access the funds at a lower interest rate, if not at single digit, at least, at lower double-digit.
However, Femi Johnson, MD/CEO, Homebase Mortgage, explained in an interview that it took the company this long to return to the capital market because the Securities and Exchange Commission (SEC) requires it to have expended about 70 percent of the earlier capital before returning to raise more capital.
The high-interest rate has been the bane of mortgage access for home ownership in Nigeria as many mortgage applicants and home seekers cannot afford the commercial interest rate of between 20 percent and 25 percent charged on mortgage loans with very short repayment period.
The role NMRC is expected to play in this direction is to provide liquidity for the mortgage market and, consistent with its mandate to promote wider spread of home ownership, accessibility, and affordability, the company has come with some initiatives that have also failed to show impact.
The ‘Housing/Mortgage Market Information Portal (MMIP)’ is one of such initiatives aimed to enable it to gather data for intelligence and profiling of federal, states civil servants and informal sectors (off-takers) for affordable housing.
Another initiative is the Mortgage Market System (MMS) which is a transformational change that integrates the entire housing market, covering construction finance, primary and secondary mortgage. The system which is available to all players in the housing industry has the benefit of removing duplications of effort in gathering data and documents; improving the turnaround time, reducing the cycle time of transactions and helping in making homes more affordable.
But, affordable housing is made possible more by an affordable mortgage which is not available at the moment. And Okon wants to know how long he has wait to see and access an affordable mortgage.
Source: Chuka Uroko