U.S. Mortgage Applications Post Biggest Fall in Four Months: MBA

NEW YORK (Reuters) – U.S. mortgage applications to buy a home and to refinance one recorded their steepest weekly decline in four months as some mortgage rates increased to one-month highs, in step with higher bond yields, the Mortgage Bankers Association said on Wednesday.

The Washington-based industry group said its seasonally adjusted index on home loan requests to lenders fell by 7.3% to 425.6 in the week ended April 19. The drop was the biggest since a 9.9% decrease in the week of Dec. 21.

“The strong economy and job market (are) keeping buyer interest high, but rising mortgage rates could add pressure to the budgets of some would-be buyers,” MBA’s chief economist Mike Fratantoni said in a statement.

Interest rates on conforming 30-year mortgages, with loan balances of $484,350 or less, averaged 4.46% last week, marking a one-month peak and edging up from 4.44% a week earlier, MBA said.

Other mortgage rates MBA tracks on average increased from 2 basis points to 6 basis points.

Mortgage rates rose in tandem with Treasury yields last week as investors scaled back their safe-haven bond holdings amid encouraging economic data in China and the United States.

“Borrowers remain extremely sensitive to rate changes, which is why there has been a 28% drop in refinance applications over this three-week period,” Fratantoni said. “Purchase activity also declined, but remains almost 3% higher than a year ago.”

MBA’s seasonally adjusted gauge on refinancing applications fell 11.0% to 1,293 last week. Four weeks earlier, it climbed to 1,786, its strongest since November 2016 when mortgage rates fell to their lowest levels in over 14 months.

The share of refinancing requests versus total applications contracted to 39.4% from 41.5% in the prior week.

The group’s index on purchase mortgage activity, which is seen as a proxy for future housing activity, retreated from a near nine-year high last week.

The purchase index decreased for the first time in seven weeks, slipping 4.1% on a seasonally adjusted basis to 269.3.

MBA’s weekly survey, which began in 1990, covers more than 75% of all U.S. retail mortgage applications.

By Richard Leong

Saffron introduces Limited Company Buy-to-Let mortgage

Saffron Building Society has launched a Limited Company Buy-to-Let mortgage aimed at landlords with multiple properties.

Recent tax changes mean that some private landlords will be better suited to running their investment properties through a limited company. As a result the need for a mortgage to accommodate this situation is set to increase and has inspired Saffron to meet this demand.

The product is for purchase or remortgage up to 75% LTV, can be taken as capital repayment or interest-only and is fixed at 3.17% for two years until 31.10.2021.

Minimum loan is £30,000 up to a maximum of £1 million and the product has a 2% arrangement fee. Overpayments of 10% can be made each year penalty free but there is an early repayment charge of 2% over the two years.

Anita Arch, Saffron’s head of mortgage sales, commented: “With interest rates predicted to remain flat for the next 20 year (according to the Bank of England), many investors continue to see buy-to-let as a solid method to receive a good return on investment.

This said, landlords could be negatively impacted by the current changes in tax law and receive a reduced income as a consequence. Our new Limited Company Buy-to-Let mortgage creates a new option for intermediaries to consider and introduce to their customers to address this.”

Source: By Joanne Atkin

10 ways to get the best mortgage deal – from the experts

Maximise your affordability and bag a great deal by following these top tips

For many first-time buyers and home movers the first question they ask is ‘how much can I borrow?’. It’s often followed by ‘which is the best deal?’

And the answer to either isn’t straightforward.

In today’s mortgage market your affordability is carefully scrutinised, meaning what you can borrow doesn’t just depend on your income. Instead, lenders will carefully check your credit record, your spending habits and your financial commitments.

As for the best deal, it depends on your finances and preferences, as well as your attitude to risk and your life stage.

But with some careful budgeting and the right advice before you apply for a mortgage, you can boost your borrowing power and ensure you get the right deal for your needs.

One mortgage broker – One77 Mortgages – has published its inside tips for homebuyers to secure a great mortgage.

Managing director, Alastair McKee, said: “The mortgage market can be a minefield of jargon, small-print and confusing figures, so it’s no surprise that for many homebuyers and first-time buyers, in particular, the mortgage product they opt for isn’t always the best suited for their situation.

“But with a little bit of research, there are plenty of things you can do to secure a much better deal and make your mortgage work for you, not the other way around.”

Top tips to max your mortgage

Deposit thresholds 
Increasing your deposit by just a small amount can boost you into the next Loan to Value band, meaning a better rate and even potentially less onerous credit scores with lenders. Always work on 5% increments as these are where the best deals are for your price band so based on the current average house price, rather than borrowing 9% (£20,533), stretching the additional few thousand more to a 10% deposit of £22,815 will be far more beneficial in the long run.

Get your personal details in order
If you’ve failed to update documents to your married name, or you aren’t registered to your current home address, the lender’s computer will literally say no as it won’t be able to find you. This is a shortcut route to having your application declined.

Electoral roll
Once your details are correctly registered, register for the electoral roll. You might not know it, but this has a huge bearing on the scoring system of lenders credit. If you aren’t registered it’s another minor little detail that can see you fall at the first hurdle of a mortgage application.

Forward your post
The £60 it costs to have your mail forwarded for a year will be the best money you’ve ever spent without even realising it. This doesn’t necessarily apply to your mortgage but it will save you money. All too often a client moves house and ended up with a default notice on their phone bill or credit card as they’ve not received the reminder and forgot to pay it.

Don’t forget life cover
With the cost required to get on the ladder, many of us can be forgiven for skipping the add ons a broker may suggest. If there’s one cost you don’t want to skip on, it’s life cover. Understandably, many of us today can only get on the ladder with the help of our partners as a joint income is required. However, if the worst were to happen and illness or even death strikes, the lack of any form of protection cover can result in the whole deck of cards coming crashing down immediately. This is the last thing you need in this situation, so make sure your life cover is in place and up to date.

Overpay where you can
If your mortgage product allows overpayments – make them! You would be surprised at how much even a small overpayment can make on a monthly basis when it comes to the total interest over the lifetime term of your mortgage.

Lock it in
We’re currently in the middle of an artificially low, interest rate cycle and mortgage product affordability is close to record lows. Great news but make sure you lock in on a fixed rate mortgage to make the best of the current climate. However, be aware of any 10 year plus fixed rate products. The fee might be great but over the years we’ve seen best-laid plans fall by the wayside and clients are then hit with huge early exit fees if they need to move or pay their mortgage early.

Working overtime
Any overtime worked can be beneficial towards mortgage eligibility but try to ensure that this overtime is consistent as possible. If there are drastic swings in the hours worked, lenders will often work from the lowest figure when deciding your position in the market.

Knock them down
It’s a buyers market at the moment and if you have the confidence, income and deposit, now is the time to get a great deal on a property by negotiating as hard as you can. As many buyers remain sitting on the fence, sellers are having to adjust their price expectations and the best way to reduce your mortgage costs are to get the property you want for a lower price in the first place! The average reduction is about 10% of the asking price, so use this as a benchmark and push for 15% or more.

Credit score
If you’re looking to buy right now and your credit score is no good, then you’ve probably already had a few lenders slam the door in your face. Your credit score is everything to a lender in this day and age and poor payment history or a low score will put you at a severe disadvantage from the offset. Do all you can to cultivate a healthy score starting NOW and as most lenders base their judgement on Experian, it’s worth the small investment to make sure your reading from the same hymn sheet rather than one of the free credit score providers.

Source: By Christina Hoghton

US Housing Market Struggling Despite Drop in Mortgage Rates

Recent data shows that inventories are increasing, but affordability is still an issue. Mortgage rates have fallen steeply since mid-March. Perhaps lower borrowing costs will eventually lead to increased sales. Provided the labor market remains strong, this could be a good thing for the housing industry.

U.S. housing market data released on Friday and Monday suggests the industry may be cooling despite a steep drop in mortgage rates since the Fed turned dovish in March. Last year, buyers complained that a lack of inventory and expensive prices combined with a jump in mortgage rates due to an aggressive Federal Reserve policy was preventing them from getting the house they desired.

Mortgage Rates

Recent data shows that inventories are increasing, but affordability is still an issue. Mortgage rates have fallen steeply since mid-March. Perhaps lower borrowing costs will eventually lead to increased sales. Provided the labor market remains strong, this could be a good thing for the housing industry. However, given the latest data, all it will take is slower job growth or layoffs to turn housing considerably weaker.


On Friday, when the U.S. markets were closed the U.S. released weaker-than-expected reports on Building Permits and Housing Starts.

Housing Starts Miss Forecast

According to the Commerce Department, U.S. homebuilding fell to a near two-year low in March. Persistent weakness in the single-family housing segment was the biggest drag on the market, suggesting the housing market continued to struggle despite declining mortgage rates.

Housing starts fell 0.3 percent to a seasonally adjusted annual rate of 1.139 million units last month, the lowest level since May 2017. Additionally, data for February was revised down to show homebuilding tumbling to a pace of 1.142 million units instead of the previously reported 1.162 million-unit rate.

Traders had forecast housing starts increasing to a pace of 1.23 million units in March.

Unimpressive Building Permits

U.S. building permits dropped 1.7 percent to a rate of 1.269 million units in March, the lowest in five months. Government data showed that building permits have now declined for three straight months. Additionally, permits for single-family housing dropped to a more than 1-1/2-year low in March. This development singles tougher time ahead for housing starts.

Early last week, a survey showed that though builders reported strong demand for new homes, they continued to highlight “affordability concerns stemming from a chronic shortage of construction workers and buildable lots.”

Mortgage Rates

Existing Home Sales Fall More than Expected

To complete the trifecta of weak housing data, the National Association of Realtors said on Monday that U.S. home sales fell more than expected in March, pointing to continued weakness in the housing market despite declining mortgage rates and slowing house price gains.

Existing home sales dropped 4.9 percent to a seasonally adjusted annual rate of 5.21 million units last month. February’s sales pace was revised down to 5.48 million units from the previously reported 5.51 million units. Economists had forecast existing home sales would fall by 3.8 percent to a rate of 5.30 million units last month.

James Hyerczyk

Recapitalization and the Challenge of Effective Mortgage System in Nigeria

Mortgage banks play a very critical role in a country’s housing sector, so much so that the effectiveness or otherwise of housing policies are largely dependent on how functional the mortgage system is. In Nigeria, the case is not different. Mortgage banks are very important, but their inability to meet up with the necessary requirements that will help address Nigeria’s housing deficit has remained a major cause of concern.

Most primary mortgage banks in Nigeria are embroiled in debts, equity crisis and insolvency. This, among other reasons bordering on poor performance has recently prompted the Central Bank of Nigeria (CBN) to announce a recapitalization plan by raising capital requirements for Primary Mortgage Banks (PMBs) by 73.3% to a total of N13 billion as a whole, from N7.5 billion in 2013.

A breakdown of the financial requirements of the sub-sector shows that operators of national category of the PMBs are required to shore up their capital base to N8 billion, which is an increase of 60 percent compared to N5 billion it stood in 2013. Regional licence (formerly state), operators are expected to increase their financial base by 100 percent to N5 billion from N2.5 billion six years ago.

According to Ibrahim Tukur, Director, Financial Policy and Regulation Department, CBN, the new guidelines introduced enhanced requirements for capital, risk management, internal control, and corporate governance. Notwithstanding the measures put in place, the mortgage sub-sector according to him continued to struggle against the headwinds occasioned by unfavourable macroeconomic and other developments.

The CBN’s draft half-year 2018 report indicated that there were 34 licensed PMBs in operation at end-June 2018, comprising 11 national and 23 state PMBs, same as at the end of December 2017. Total assets of the PMBs decreased marginally by 1.0 percent to N384.37 billion at the end of June 2018, from N388.58 billion at the end of December 2017, due largely to losses from loan impairments in the review period.

Investment and credit growth has slowed down significantly given lower capacity utilization rate and bankers’ rising risk aversion due to non-performing assets (NPAs).

Is Recapitalization the right way?

A lot of people in the industry are agreeing with CBN that the bad loans problem facing mortgage banks in Nigeria, if left uncontrolled, can lead to a systemic failure in the banking system. The country’s housing finance system needed a very strong incentive to revive the plunge of its growth momentum. And it has come in the form of a recapitalization measure.

This recent decision by CBN is not new, not even in Nigeria. It has been seen in various countries around the world, especially those keen on reviving a failing mortgage system.

This move by CBN for the immediate recapitalization of mortgage banks is seen by many as brave. Any risk in the mortgage banking system, if left uncontrolled, can bring about systemic failures in the financial sector.

According to experts, considering that not all mortgage banks will be able to raise capital from the markets, the recapitalization will definitely provide some cushion to the mortgage banks to manage their risk and credit capital-related requirements and cater to the demand for loans.

The downturn in the investment cycle holds back the demand for credit at this juncture. While there have been no clear details from the CBN about how this recapitalization will work, one can relate it with the recapitalization move of the early 2010s, wherein the industry experienced winding downs, mergers and acquisitions and reorganizations.

If consolidation of mortgage banks can make them relevant, competitive, efficient and profitable, then this move by the industry regulator is seen as a right step in the right direction.

But some sceptics also believe that this might not be a magic wand, mostly because that there is no transparency in financial reporting and the entire system is compromised and lacks corporate governance. Since the early 2010’s, not only has the percentage of troubled assets gone up, the provisioning for expected losses has also grown substantially. This has led to a dent in mortgage bank lending and in turn, investment and growth. Furthermore, mortgage banks need capital to meet the Basel III norms.

Experts say that the capital required by mortgage banks is far in excess to what the CBN has announced for troubled loans and to meet the Basel III requirements. Mortgage banks operating within the shores of Nigeria are technically insolvent. This is also the case with FMBN, where the government has been recapitalizing it through budgetary provisions. The current announcement is a timely wakeup call and is nearly double the amount already injected by the previous recapitalization.

Saving Nigerian Mortgage System

Based on popular opinion, redeeming the Nigerian Mortgage System will require the convergence of relevant stakeholders in a discussion that will produce concrete resolutions.

The excessive incursion of commercial banks into mortgage businesses have also been largely blamed for how defective the country’s mortgage system is. Commercial banks need to reduce their overbearing influence in the mortgage space.

For state owned mortgage banks, the stake of the government should be brought down considerably in these banks so that they can operate in a flexible manner with an overhaul in the governance structure with an independent board and competitive approach. In the end, it is very crucial to ensure that a clear message is sent out to the banks that the government is not available to rescue them every time their loan book goes-off beam.

The nation needs policy makers that are housing specialist who have the requisite knowledge and competence and not just political figures who do not understand the role of housing in an economy.

The primary impediment to the development of a virile mortgage banking sector is the Land Use Act (LUA) 1978 because it affects every aspect that relates to the acquisition of affordable housing ranging from basic human rights to mortgage lending. The successful amendment of this land use act will effect certain changes that would ultimately encourage processes that would facilitate the delivery of affordable housing in the country.

The success of Family Home Funds, FMBN and NMRC largely depends on having vibrant mortgage banks around the country to originate new loans. If this can be effectively tackled with the required will and expertise, then Nigeria can begin to look ahead.

By  Ojonugwa Felix Ugboja

Housing Finance Reform: Regulatory Oversight for a Stronger Secondary Mortgage Market

American families participate in our housing finance system in two ways — as consumers who purchase and rent homes, and as taxpayers who provide critical capital support in the amount of $258 billion for Fannie Mae and Freddie Mac (the government-sponsored enterprises, or GSEs). Under the current system, should another housing downturn occur, taxpayers will be on the hook to keep the GSEs solvent and the housing finance system functioning. As the Administration has repeatedly stated, this status quo is unsustainable and comprehensive, legislative housing finance reform is necessary to fix vulnerabilities in the system.

This final issue brief will lay out how regulatory oversight of the secondary market can guide a reformed system to serve consumers and financial institutions of all sizes, as well as promote the safety and soundness of a stronger housing finance system. As we noted in our previous issue brief, an explicit government guarantee on a defined-class of mortgage-backed securities (MBS) is a key ingredient in providing broad and affordable access to housing for American families. Discussions of regulatory priorities in housing reform often focus on the safety and soundness of the housing finance system, but regulators today, and in the future, also have an important role in making sure all consumers — and not just financial institutions and mortgage investors — benefit from the government guarantee.

Regulatory Oversight to Promote Consumer Benefits

Taxpayer support makes it possible for secondary mortgage market institutions, which connect mortgage lenders and investors in a single market, to participate in a system with government-guaranteed MBS that has clear benefits. In exchange for this support, these institutions have a responsibility to pass these benefits on to American families. A strong regulator in a reformed housing finance system should have the authority to encourage participating institutions to meet these responsibilities.

In our first brief, we laid out our support for a requirement that secondary market institutions provide broad access to credit for consumers. Any institution that benefits from being able to issue securities with a government guarantee needs to serve a broad range of markets across all geographic areas. Without this mandate, these institutions may choose markets selectively. A future system should extend the benefits of a government guarantee to a wide range of creditworthy borrowers from all communities.

American families also benefit when lenders of all sizes have equal access to the benefits of government-guaranteed MBS. In the past, larger lenders enjoyed certain price concessions from the GSEs that were not available to smaller lenders. The regulatory framework for the secondary mortgage market should support fair competition across all lenders, regardless of size or type.

Promoting a level playing field for lenders large and small has a number of benefits for American families. First, it fosters competition among mortgage lenders that, in turn, benefits consumers through greater innovation and lower mortgage rates offered to borrowers. Second, it provides competitive access to funds that smaller institutions use in providing mortgages, which has both local and economy-wide benefits. From rural to urban settings, community banks, credit unions, and local lenders are in an advantageous position to assess and address the credit needs of their customer base. Moreover, a diverse market presence from lenders of all sizes can lead to more effective risk assessment and better outcomes for borrowers and investors alike. Strengthening access for small lenders also helps secondary market institutions support their obligation to serve a broad range of markets and geographic areas.

The current system has several features that support a level playing field for all lenders and should be preserved in any reform proposal. First, small lenders can sell the mortgage loans they originate to larger financial institutions or directly to the GSEs through their “cash window.” Through their retained mortgage portfolios, the GSEs can pool loans from a number of small lenders into securities, thereby providing a key outlet and source of funds at competitive pricing to smaller financial institutions. In 2015, more than 40 percent of GSE acquisition volume came from small and very small lenders, much of it through this cash window. This delivery option is an important feature of the current system that supports more competition among lenders.

Second, the GSEs are not permitted by the Federal Housing Finance Agency (FHFA), in its capacity as conservator, to charge significantly higher fees to their smallest lender customers while giving discounts to their largest customers as they did prior to entering conservatorship. As a result, the difference in guarantee fees between the largest and smaller lenders has largely been eliminated. This intervention demonstrates the important role a regulator can play to enhance competition between small and large lenders, which in turn increases the choices available to borrowers in the mortgage market. Policymakers should ensure that a regulator is given sufficient authority to preserve reliable secondary market access for all lenders, irrespective of size.

Regulatory Oversight to Protect the Safety and Soundness of the Secondary Market

Our national housing system necessarily requires careful coordination between regulators that have separate responsibilities across the primary and secondary mortgage markets. This need for coordination will continue in a reformed housing finance system and should build on the important primary mortgage market consumer protections put in place since 2010. For secondary market institutions with access to a government guarantee, a single regulator should have two key mandates: (i) safeguarding broad access for consumers and financial institutions, discussed above, and (ii) managing the financial safety and soundness of secondary market institutions — referred to as prudential authority. As we articulated in our second brief, safeguarding broad access means, among other things, mitigating sharp contractions in the supply of mortgage credit during bad economic times. For a secondary market regulator, this means having authority to adjust certain industry requirements for the secondary market when economic conditions warrant.

For safeguarding broad access and prudential oversight, a secondary market regulator must have both supervisory and enforcement authority. Market participants subject to supervision should face penalties for the violation of rules designed to protect American families in their capacity as both consumers and as taxpayers.

The Administration has supported steps to further protect taxpayers by shifting the risks and rewards of mortgage lending to private actors rather than the taxpayer. In normal times, market-based incentives can guide private sector participants in the secondary market to provide borrowers access to mortgage credit at a reasonable rate. The private sector’s advantages in price discovery, risk diversification, and financial innovation could benefit consumers in the form of lower mortgage rates and better customer service. Market-based incentives, however, heighten the need for prudential supervision. Regulatory oversight must be in place to ensure that private capital is supporting fair and affordable housing opportunities for all American families and that taxpayers are adequately compensated for government support in times of stress.

Lenders, investors and housing advocates, among other participants, play an important role in a well-functioning secondary mortgage market, and a regulator should engage these stakeholders as a part of its rule-writing authority to implement statutory mandates. However, the regulator should be strong and independent enough to withstand pressure from the public and private sectors that may steer it toward relaxing requirements and undermining safety and soundness standards, such as loosening the standards mortgage loans must meet to qualify for the government guarantee. To preserve the ability to withstand this pressure, a future housing regulator should have an independent source of funding, as FHFA has today. Effective oversight and sensible rulemaking requires a high degree of technical sophistication, advanced data analysis, and experienced and expert staff — all of which require significant resources that must not be subject to undue outside influence.

Regulatory Oversight of a Stronger Secondary Market Infrastructure

Experts and policymakers continue to contemplate a range of possible models for a reformed secondary mortgage market. Whether these reform models propose a secondary market made up of private guarantors, lender-owned utilities, or a government corporation, there remain key elements of the secondary market infrastructure that should be implemented regardless of the specific institutional design. Moreover, a thoughtful regulatory framework is necessary to strengthen the secondary market infrastructure.

One piece of this infrastructure is the To-Be-Announced (TBA) market, a unique secondary market for MBS issued by the GSEs and Ginnie Mae. The TBA market facilitates the securitization of broadly-similar, fixed-rate mortgages by allowing lenders to pledge loans for securitization before those loans are made. These features of the TBA market ultimately allow potential homebuyers to “lock-in” a mortgage rate before their loan closes and shop around for better terms, enhancing competition in the mortgage market. Additionally, as securities delivered through the TBA market are highly liquid, they are broadly used throughout financial markets as collateral in a wide variety of transactions.

An explicit government guarantee is critical for the TBA market to provide liquidity, hedging and price discovery to the mortgage market in all economic environments. These, in turn, help lower mortgage rates for consumers. A securitization system that lacks a government guarantee could dramatically reduce liquidity in the TBA market by, for example, undermining the substitutability of MBS, as investors may not be able to separate the risk profile of the issuer from the riskiness of the loans in the MBS. Reducing the substitutability of TBA securities would make it costlier for lenders to originate mortgage loans. Additionally, absent a TBA market, lenders, and, by extension, borrowers would be exposed to interest rate changes between loan financing and loan closing. Reduced liquidity, standardization and certainty would mean higher costs for borrowers and potentially less home buying.

Moreover, the liquidity of the TBA market should be further enhanced through the creation of a uniform secondary market security. Historically, Fannie Mae mortgage securities that are eligible for TBA contracts are more liquid than comparable Freddie Mac securities, despite the fact that the underlying mortgages backing these securities are virtually indistinguishable. As a result, Fannie Mae securities are able to trade at a higher price. This pricing disparity leads to a segmented TBA market, whereas a truly unified TBA market could deliver additional efficiencies for the benefit of consumers. To eliminate this pricing disparity, the FHFA has directed the GSEs to undertake activities toward the creation of a single, uniform GSE mortgage security. The Treasury Department supports this initiative and believes any future secondary market regulator in a reformed system should be responsible for setting standards for a single security that benefits from a government guarantee.

As we explained in our first issue brief, Fannie Mae and Freddie Mac act as “credit guarantors” by charging a fee to guarantee the timely payment of principal and interest on their MBS. However, historically, they also have acted as “securitizers,” by carrying out the complex operation of converting, or “securitizing,” groups of mortgages into MBS to be sold to financial market investors. When Fannie Mae and Freddie Mac became insolvent, the entire secondary market system itself was put at risk because the two GSEs also managed much of the securitization infrastructure. The federal government had to rescue the GSEs when they began to take heavy losses in order to preserve the secondary market securitization system. Failure to do so would have closed the principal channels for mortgage credit for the housing market.

Thus, in a reformed housing finance system, a regulator must keep these two functions, guaranteeing credit risk and securitization, separate from each other. This separation would insulate one function from the other in periods of economic crisis and would allow for the resolution of any credit-risk-bearing institution that becomes insolvent without threating the infrastructure on which the market depends.


Regulatory oversight should support the secondary market in serving consumers and financial institutions of all sizes, as well as safeguarding the safety and soundness of the housing finance system. A reformed system must be carefully supervised by an independent regulator with sufficient resources and enforcement authority to oversee the institutions that benefit from an explicit government guarantee. In turn, these institutions have responsibilities to serve the American families that provide the critical taxpayer support underpinning the market in which they operate.

As we have articulated in numerous forums over the past eight years, maintaining the status quo of the housing finance system is not a viable solution, as it does nothing to resolve the structural weaknesses of a system that resulted in millions of families losing their homes during the Great Recession and erased trillions of dollars in household wealth. Through this series of issue briefs, we have sought to highlight fundamental questions any future system must answer: Are American households gaining greater and more sustainable access to affordable homes to rent or own? Are these households, who are also taxpayers, adequately protected from bearing the costs of another housing downturn? Comprehensive housing finance reform presents the only path to a better and more sustainable system that meets the needs of American families.

Source: By Jane Dokko , Medium

CBN raises capital requirements for Primary Mortgage Banks by 73.3%

The Central Bank of Nigeria (CBN) on Friday raised the capital requirements of the Primary Mortgage Banks (PMBs) by 73.3 percent to a total of N13 billion as a whole, from N7.5 billion in 2013.

A breakdown of the financial requirements of the sub-sector shows that operators of national category of the PMBs are required to shore up their capital base to N8 billion, which is an increase of 60 percent compared to N5 billion it stood in 2013.

For regional licence (formerly state), operators are expected to increase their financial base by 100 percent to N5 billion from N2.5 billion six years ago.

Kola Abdul, managing director/CEO, Brent Mortgage Bank, could not give his opinion on this when contacted by BusinessDay as he said he was busy.

The PMBs are required to pay non-refundable application fee of N1 million, non-refundable licensing fee of N2 million, and change of name fee of N100,000.

These were contained in the exposure draft for revised PMB guidelines released by the CBN on Friday. The last time the regulator issued revised guidelines for Primary Mortgage Banks in Nigeria was in November 2011.

The new guidelines introduced enhanced requirements for capital, risk management, internal control, and corporate governance, according to a circular signed by Ibrahim Tukur, director, financial policy and regulation department, CBN.

According to Tukur, notwithstanding the measures put in place, the mortgage sub-sector continued to struggle against the headwinds occasioned by unfavourable macroeconomic and other developments.

The CBN’s draft half-year 2018 report indicated that there were 34 licensed PMBs in operation at end-June 2018, comprising 11 national and 23 state PMBs, same as at the end of December 2017.

Total assets of the PMBs decreased marginally by 1.0 percent to N384.37 billion at the end of June 2018, from N388.58 billion at the end of December 2017, due largely to losses from loan impairments in the review period.

Shareholders’ funds amounted to N109.74 billion at end-June 2018, compared with N132.35 billion at the end of December 2017, indicating 17.1 percent decrease due mainly to operating losses.

Total loans and advances, placement with banks and deposit liabilities decreased by 0.4 percent, 0.4 percent and 0.8 percent, respectively, to N177.17 billion, N36.52 billion and N108.83 billion at the end of June 2018, while other liabilities rose by 10.6 percent to N98.17 billion.

Investible funds available to the sub-sector amounted to N31.49 billion at the end of June 2018.

The funds were sourced mainly from mobilisation of other liabilities (N9.44 billion); long-term loans (N4.33 billion); and increased paid-up capital (N1.03 billion). Additional funds were also sourced from reduction in placement with banks (N5.73 billion), disposal of non-current asset held for sale (N7.63 billion) and sale of quoted investment in equities (N2.67 billion).
The funds were utilised for accretion to reserves (N23.6 billion), increase in bank balances (N3.60 billion) and acquisition of other assets (N2.65 billion).

Tukur said the guidelines have been reviewed to strengthen the PMBs as well as complement other on-going reforms in the mortgage sub-sector.

Source: By Hope Moses-Ashike

NMRC Partners Group to Host Diaspora Mortgage

Key stakeholders in the real estate and housing finance sector of the Nigerian economy are set to hold a two-day conference/exhibition in London.Tagged “Home Ownership and Property Investment in Nigeria Made Easy” for Nigerians in the United Kingdom and the Europe, the event is scheduled to hold next month at the Crowne Plaza Hotel, Battersea, London. it is designed to show Nigerians the safe and credible steps towards owning their own homes or buying a property for investment income purposes in Nigeria.
The conference is meant to reverse the many sad stories of Nigerians in UK and the EU trying to buy properties back home that they can return to for vacations or for rental income and of having been swindled out of their hard-earned remittances, by either unscrupulous agents or worse still, family members and friends; and by so doing incentivize investment in the real sector in Nigeria.It is being jointly hosted by major stakeholders in the sector including the Mortgage Banking Association of Nigeria (MBAN), Nigeria Mortgage Refinance Company Plc (NMRC), the Central Bank of Nigeria, the Federal Mortgage Bank of Nigeria (FMBN), the Real Estate Developers Association of Nigeria (REDAN), Urban Shelter Limited, Dunn Loren Merrifield, Amiable Financial Services UK, Diaspora Realty UK, among others.The Executive Secretary, Mortgage Banking Association of Nigeria (MBAN), Kayode Omotoso, and lead conference host explained that the conference/exhibition will among other things “showcase the deployment of the uniform underwriting standards for diaspora mortgages recently approved by the Central Bank of Nigeria as new guidelines for long-term diaspora mortgages.According to the Conference Coordinator, Dr. Chii Akporji, Founder/ Chief Executive Officer of Alphacities Africa, the conference will also “focus on addressing all issues and concerns along the housing value chain that potential buyers in the Diaspora often come across: from accessing land for off-plan development; issues of title and C of O duplication; associated legal and regulatory issues around home purchase and ownership.

Aside the organisers, several leading Nigerian developers as well as mortgage banks will be exhibiting at the event, in addition to senior level experts on the policy and regulatory issues pertaining to the housing market in Nigeria.

Ijeoma Thomas Odia

FMBN grants N58billion housing loan in 24 months

The Federal Mortgage Bank of Nigeria (FMBN) has between April 2017 and March 2019, disbursed mortgage loans totaling N58 billion.

A statement signed by Mrs. Zubaida Umar Group Head, Corporate Communications, FMBN said the amount covers the provision of National Housing Fund (NHF) Mortgage Loans to 3,171 Nigerian workers valued at N22.3bn, Home Renovation Loans valued at N16.9 billion to 20,429 Nigerian workers, Estate Development Loans valued at N13.6 billion, Cooperative Development Loans totaling N2.7 billion and Ministerial Pilot Housing Scheme Project at N2.5 billion.

The high level of loan disbursements, averaging N29 billion per annum she said “represents a significant increase in performance in comparison to the N152 billion, which the bank had given out over a 24-year period at an average of N6.3 billion per annum (1992 – April 2017).”

Additionally, the FMBN also posted strong performance in the processing of applications for refund of contributions to the National Housing Fund (NHF) by workers who have retired from service. “The company successfully processed 120,759 NHF refund cases and paid out a total of N16.5 billion between April 2017 and March 2019.  The amount, which the Management has recorded in terms of NHF refunds in about 24 months, exceeds the total of N10.8 billion recorded between 1992 and April 2017, when the current Management took office” the statement read.

Furthermore, the FMBN within the period funded the construction of 6,538 housing units across the country.

Speaking on the development, the MD/CE FMBN, Arc. Ahmed M. Dangiwa stated that the results reflect the passion of Management to reposition the FMBN on the path of greater impact, responsiveness, and professionalism.

In his words “the remarkable results that we have been able to achieve in about two years since we were appointed to run the affairs of the Bank. They demonstrate our determination to justify the confidence of President Muhammadu Buhari in our capacity to reform the FMBN as an effective tool in the hands of government to tackle the lingering housing deficit. The FMBN remains the best route to affordable homeownership for the Nigerian worker and we seek the support of all housing industry stakeholders in our bid to transform and reposition it to deliver on its mandate of providing affordable social housing”

Nduka Chiejina

Affordable Homes Plan a Boost to Mortgages

High cost of housing units and limited access to affordable long-term finance are the leading hindrances to mortgage market growth in Kenya, according to a recent Central Bank survey.In a country with more than 46 million people, there were only 26,187 mortgage loans as of December 2017, up from 24,059 as of December 2016

.More worrying was that the number of institutions offering mortgages dropped from 35 in 2016 to 31 in 2017. Two of the banks were acquired while the other two just stopped offering mortgages.

This is not a good trend and an urgent intervention is needed to change the narrative. That is why the government’s plan to provide 500,000 affordable units under the Big Four Agenda is welcome.

The move will not only lead to increased mortgage uptake, but also bring about social impact by contributing to the Sustainable Development Goals through sustainable human settlements.

But how did we get here? The biggest reason is high property prices and developers’ obsession with the high-end market segment. In Nairobi, for instance, developers have mostly concentrated on high-end areas like Lavington, Kilimani and Westlands, to the exclusion of the affordable segment.

Demand and supply In mortgage financing, we are guided by demand and supply. Over the years, however, it has become clear that the supply side of the equation is where the challenge lies, primarily because there have often not been enough units, or the ones available were far too expensive.

Conservative government estimates indicate that Kenya is dealing with a backlog of two million housing units, with the deficit growing by 150,000 units every year due to several factors, including the limited availability of mortgage finance and developer finance.As a bank, our mortgage offering is based on a customer qualifying for certain limits, but the challenge has always been that while most customers across the industry qualify for houses costing under Sh5 million, there are no such houses available.

These would be ideal for the average working Kenyans paying rent of up to Sh30,000 per month.The industry has grappled with this dilemma for years and the government’s focus on affordable housing therefore presents a much-needed breakthrough, with the winds now shifting downwards to the untapped bottom of the pyramid.

Through the Kenya Mortgage Refinance Company (KMRC), an initiative of the National Treasury and World Bank, the government will support the affordable housing agenda by providing secure, long-term funding to mortgage lenders, thereby increasing the availability and affordability of mortgage loans to Kenyans.KMRC will boost demand whereas on the supply side, we have the government through the Ministry of Housing, the National Housing Corporation and the private sector developers who will put up the houses. As financial institutions, we are plugging into the demand side to provide long-term mortgages to Kenyans who qualify to buy these houses.

Interest capping Since the introduction of interest rate cap in September 2016, there has been an increased demand for mortgage loans due to perceived affordability. Under KMRC, mortgage loans will be priced at below 10 per cent, down from the current averages of 13 per cent.

This is expected to drive demand to unprecedented levels.Currently, the main funding source for banks is customer deposits, which are short-term in nature, restricting banks’ capacity to lend long-term. KMRC is going to remove this liquidity mismatch by providing long-term funding at attractive rates while ensuring sound lending habits, resulting in greater availability of fixed rate mortgages and longer available loan terms.

 George Laboso 

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