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Fannie Mae, Freddie Mac Unveil New Mortgage Application Form

Fannie Mae and Freddie Mac this week unveiled the redesigned Uniform Residential Loan Application, following a directive from the Federal Housing Finance Agency to remove the language preference question and housing counseling information from the updated URLA form.

Earlier this year, the FHFA ordered the government-sponsored enterprises to remove the language preference question and housing counseling information from the new URLA form, which is the standardized form used by borrowers to apply for a mortgage.

The move was welcomed by the mortgage business, namely the Mortgage Bankers Association, claiming the language preference question may cause more problems than it solves.

But not everyone welcomed the changes.

Last week, a group of nearly 20 prominent Senate Democrats, including five who are currently running for president, called on the FHFA to undo the alterations to the URLA, claiming the changes could reduce access to credit for mortgage borrowers who are already underserved.

Under the changes proposed earlier this year by the FHFA, the language preference question and housing counseling information are being moved to separate voluntary forms, a change that concerns the Democrats.

The senators believe the decision to move those sections to a separate form “could reduce access to mortgage financing for limited-English proficient mortgage-ready homebuyers and lead to serious financial repercussions.”

The senators also stated that the revised URLA language preference section “clearly informed borrowers that selecting a non-English preference would not guarantee service in that language.”

Therefore, the senators viewed it as “surprising” to see the FHFA “arbitrarily” decided to make the changes to the form.

“Voluntary forms are not adequate disclosures,” the senators wrote. “Lenders will be under no obligation to use the new, voluntary form, and it is unclear how many will elect to do so. This will result in disparate treatment among borrowers who use different lenders.”

But despite those protestations, the GSEs rolled out the new mortgage application form this week without the language preference question and housing counseling information sections, as directed by the FHFA.

According to the GSEs, they are releasing a static version of the URLA form to give the mortgage industry time to “scope additional work needed to implement the redesigned form.”

Beyond removing the language preference question and housing counseling information, the GSEs also state that the new form contains changes to the Borrower Information, Additional Borrower Information, Lender Loan Information, Continuation Sheet, and Unmarried Addendum sections of the form.

Previously, the redesigned URLA, which was originally announced more than three years ago, was scheduled for mandatory use by the mortgage industry by Feb. 1, 2020.

But when the FHFA announced the changes in August, it delayed the implementation of the URLA form to an undetermined date in the future.

The GSEs now state that they are now on track to publish their respective updated automated underwriting system specifications and supporting documents next month and will announce the updated implementation timeline and mandate “before the end of the year.”

The GSEs also state that they will release an interactive PDF version of the redesigned URLA in early 2020.

Source: housingwire

Time To Take Another Look At Mortgage Lending And Borrowing

With rising unemployment and shrinking disposable income, Nigeria has reached a time when operators should take another look at mortgage lending and borrowing with a view to widening the net and increasing accessibility and affordability.

In other countries of the world where the mortgage system works, mortgage is readily available to people who need same and mortgage institutions give out loans for them to build, buy or renovate existing houses.

In Nigeria, the story is different. Many Nigerians, particularly those who need it, do not believe that there is anything mortgage in the financial system, not necessarily because of its relative newness in this environment, but more because of its unaffordability and inaccessibility.

Though affordability is a relative term, houses in Nigeria are generally unaffordable such that when experts talk about unaffordable housing, almost always, they trace the cause to mortgage which is only available to, and affordable by those who don’t need it—the rich.

Poverty level is high. It is so pervasive that it is almost synonymous with existence and so many people are so poor that those that are classed as the rich are just a small fraction of the society. Again, just a few people are on employment and within this group are so many that are under-employed.

For this reason and more, mortgage borrowing and lending is always a big issue for both the lender and the borrower, because here is a country where interest rate on mortgage loan is not in any way different from the rate on commercial loans given by deposit banks.

Mortgage lenders still anchor their loans on good jobs with fat pay, meaning that a mortgage loan seeker is expected to be somebody in a good job or private business with an assured and regular stream of income.

As against 6 percent interest rate and repayment tenor of between 25-30 years, depending on the borrower’s age, mortgage lenders charge 18- 22 percent interest rate with a repayment tenor as short as 12-24 months.

The ever widening housing demand-supply gap easily finds explanation in commercial interest rate charged on mortgage loans which makes such loans unaffordable to home-seekers. “Though the ability of banks to provide money for mortgage has changed on account of credit challenges in the financial system, mortgage affordability or the fundamentals for lending has not changed”, said Adeniyi Akinlusi, MD/CEO,Trusbond Mortgage Bank.

“The mortgage industry does not operate in isolation of the economy. Certainly, as an integral part of the economy, it has to be affected by the economic crisis. Nevertheless, the fundamentals for lending have not changed, which means that if somebody has a good job with a financial institution or a multinational company, and the pay package is high enough for him to afford a mortgage, the present crisis has not changed that affordability”, he informed.

The past few years have seen quite a number of mortgage products aimed at enabling subscribers own their own homes, but these products are yet to help reduce existing housing gap by increasing housing stock.

But experts say mortgage products offered by some mortgage banks offer are not the type that will make any impact on housing. Such products are commercial mortgages from which the investor wants to recover his money. It is just like someone else who has invested in any other venture. He has to recover his money because he borrows from the same place like any other person.

Mortgage products can make impact on housing only when there is government intervention and, in other jurisdictions, there is government intervention to make mortgage affordable to everybody, no matter the income level.

In developed economies, mortgage has been used to move the economy from being import-dependent to a producing and exporting one. Akinlusi says mortgage institutions need long term funds for housing finance, insisting that when there are enough funds to lend to property developers and to home seekers, the entire economy would be stimulated.

Housing Development

It is expected that by the time there are enough funds in the hands of mortgage institutions for long term loans to property developers, there will be a lot of property development activities and when this happens, a lot of other activities will be generated and the economy would be better for it.

“You can imagine when there are many developments going on at various parts of the country. The long term effect would be the development of industries and factories that produce building materials such as cement, rods, roofing materials, wooden materials, etc”, Akinlusi posits.

This will ultimately impact on the wider economy and your guess is as good as mine as to what follows when people have enough capital at their disposal. Definitely, investment is the next line of thought and, depending on the prevailing business environment and government policies, people will invest in anything including taking up mortgage loans.

Source: Businessdayng

Lower Mortgage Rates Are Causing An Epic Housing Shortage


  • National housing inventory fell 2.5% annually in September, a sharper decline than August’s 1.8% decrease, according to realtor.com
  • An unseasonably strong surge in demand at the end of summer and into this fall now has the supply of homes priced below $200,000 down 10% compared with a year ago.
  • The supply of homes priced between $200,000 and $750,000, which make up 60% of the market, flatlined in September, after 18 months of strong inventory growth. Supply is now expected to decline in the months ahead.

Anyone out hunting for an affordable home today knows that the pickings are slim – and they are about to get slimmer.

Housing inventory hit a record low about two years ago, but a lull in home sales over the past year helped build back much-needed supply, especially in the mid-priced range. Then a sharp drop in rates this summer brought demand back and depleted that supply dramatically.

National housing inventory fell 2.5% annually in September, a sharper decline than August’s 1.8% decrease, according to realtor.com

Supply has always been leanest on the low end, as investors have been very active in that price range since the foreclosure crisis.

Roughly 5 million mostly entry-level homes have been turned into single-family rentals, and strong demand for those rentals means investors are unlikely to put the homes up for sale anytime soon.

In addition, an unseasonably strong surge in demand at the end of summer and into this fall now has the supply of homes priced below $200,000 down 10% compared with a year ago.

The demand is being fueled by lower mortgage rates. The average rate on the 30-year fixed surged over 5% last November and stayed above 4.5% through March, according to Mortgage News Daily. That made for a lackluster spring housing market, traditionally the busiest time for buying.

Rates then began falling in May and particularly sharply in July and August. By the start of September the average rate was around 3.5%, and sales of both new and existing homes were surging back. Clearly there was substantial pent-up demand from the spring.

Demand also surged in the move-up market, causing supplies there to fall as well. The supply of homes priced between $200,000 and $750,000, which make up 60% of the market, flatlined in September, after 18 months of strong inventory growth. Supply is now expected to decline in the months ahead.

Dwindling options

“If, or better yet, when inventory in this segment begins to take a downturn, the vast majority of homebuyers are going to feel its effects as their options rapidly dwindle,” said George Ratiu, senior economist at realtor.com. “September inventory trends, especially in the mid-market, may be the canary in the coal mine that we could be headed for even lower levels of inventory in early 2020.”

The nation’s homebuilders are not helping the situation much either. Single-family housing starts have been rising very slowly, but mostly in the move-up and luxury segments of the market.

“It’s not just the overall supply of new construction that’s gone down, but the supply of starter homes, so it’s the affordability challenge at the entry level that’s been a particular challenge,” said Robert Dietz, chief economist of the National Association of Home Builders. “Right now only about 10% of newly-built home sales are priced under $200,000. Five years ago that share was 1 in 5, and 10 years ago it was 40% of new home sales were priced under $200,000.”

Builders are unlikely to catch up with demand, according to Dietz, who said the market is now undersupplied by about 1 million housing units. Builders may want to build more at the entry level, but they are not able to given the current costs.

Housing Deficit

“We’ve faced what has been called a perfect storm of supply side challenges,” noted Dietz. “There has been an ongoing labor shortage, we lack the necessary land and lots to build homes, we’ve had building material cost concerns, and then probably the most important factor has been higher regulatory costs since the great recession.”

Builders are therefore putting up pricier homes, but that’s the category with the most supply. In fact, the supply of homes price above $750,000 was 4.7% higher in September compared with September 2018.

Higher demand for homes and lower supply will likely reignite the gains in home prices. Price gains had been shrinking throughout much of this year, but they have now stabilized, and in some markets the increases are widening again.

If mortgage rates should turn higher, then demand could fall back and price gains ease, but if they stay in the current low range, it is very likely that the housing shortage will only get worse, setting the nation up for an incredibly competitive and expensive spring 2020 market.

Source: cnbc

Lessons From Kaduna For Other Nigerian States on Mortgages, land Titling

…state provides free land for housing projects …processes land titles promptly to attract private investors

The intervention and determination by the Kaduna State government to address its housing deficit and enable ordinary people in the state to access decent housing has placed it ahead of other states of the federation in the area of housing.

The state holds out lessons for other states and the Federal Capital Territory (FCT) with its giant strides in creating mortgages and making property registration easy for buyers.

The state has strengthened its mortgage system by passing the Mortgage and Foreclosure Law and followed it up with the creation of the Kaduna State Mortgage and Foreclosure Authority.

“This makes Kaduna the first state in Nigeria to create a mechanism to facilitate resolution of default issues in this important sector,” said Nasir El Rufai, the state governor, who spoke at a real estate forum in Lagos recently.

The governor explained that by Executive Order in June 2019, the state established the Ministry of Housing and Urban Development to drive its vision for expanding the housing stock in the state.

The state is digitising land documentation and titling and, according to the governor, the Kaduna Geographic Information Service (KADGIS) is processing land titles promptly to attract private investors in the housing sector.

Kaduna is nearly 5 percent of Nigeria’s population but accounts for up to 1 million units of the country’s 17 million housing units deficit. This gap exists mainly at the lower end of the market, which is not particularly attractive to the private sector.

This is why, as a government, the state is confronting housing delivery frontally. It is doing its best to widen and broaden the mortgage system that it has created to support the sale of government houses.

This initiative is aimed to enable Kaduna citizens to buy houses and pay over 15-20 years, paying at single-digit interest rates.

Recently, Kaduna partnered with Sterling Bank to provide single-interest mortgages in the state. It has also signed an MoU with Nigerian Mortgage Refinance Company (NMRC) and the FHA Mortgage Bank to jointly commit N3 billion to providing affordable mortgages.

As part of a framework to support investors and buyers in the real estate sector, El Rufai said the state was providing free land for housing projects in the state and also addressing the demand side of housing by expanding access to mortgage.

“There is also the urgent need to advance the ongoing partnership between Mortgage Banking Association of Nigeria (MBAN) and the Central Bank of Nigeria (CBN) with regard to underwriting standards. This will, no doubt, increase housing and mortgage affordability for the masses and ultimately provide additional security for the country,” the governor said.

He advised that given the pressing need to inject dynamism into the housing sector, there might be a case for a national framework to support housing research, policy development and implementation.

Such a framework, he said, should also promote the development of suitable housing models that fit into local contexts and cater for different segments of the market.

Source: Businessdayng

NMRC’s Push for Legislative Reform Towards Model Mortgage

To mortgage sector stakeholders in Nigeria, the need for a functional mortgage system cannot be over-emphasised. This is why the drive towards a model mortgage is receiving all the attention that it requires.

At the fore-front of this drive is the Nigerian Mortgage fews of years of its establishment and pushing for the adoption of a model mortgage and foreclosure law by the states.

As part of efforts at growing a mortgage system that will drive affordability, the company is presently driving a legislative reform in the mortgage sector by proposing a model mortgage and foreclosure law by key pilot states including Akwa Ibom, Anambra, Bayelsa, Delta, Edo, Enugu, Kano and Ogun states.

What the company is driving at, according to one its directors whose primary mortgage bank is a major shareholder in the company, is to get various states houses of assembly to pass foreclosure laws as a prelude to mortgage-backed affordable housing delivery.

This is good news for home seekers who may need mortgage facility because foreclosure law, upon adoption, aims to fast tract the process for creating legal mortgages, ensuring timely resolution of disputes and creating an efficient foreclosure process.

According to the authorities of the mortgage refinancing company, the model mortgage and foreclosure law is in its final form for engagement with 21 pilot states committing to the implementation of an enabling environment for the development of the mortgage market.

The company hinted that it would be focusing on building capacity and completing outstanding operational activities. “We will be embarking on an aggressive drive towards the procurement of an ICT infrastructure for the mortgage industry, the completion of our second tranche equity capital raise, and most importantly the completion of our first round of mortgage refinancing; we will work hard to meet our mandate to revolutionise the Nigerian mortgage landscape”, an official of the company hinted.

The company has demonstrated uncommon resolve to live out its mandate with refinancing of some mortgage banks. Mortgage operators have described this refinancing as a milestone.

Ben Akaneme, former Imperial Mortgage’s managing director, says “this is an outstanding achievement in the march towards the realisation of affordable and single-digit interest rates for mortgages in Nigeria. He assured that his bank would continue to strive to achieve its mission of enabling easily accessible and affordable mortgages to Nigerians in order to ensure housing for all.

NMRC seems to be conscious of the demands and obligations inherent in the Nigerian business environment as it assures that it will continue to anchor all its services on global best practices, good corporate governance and strict risk management practices.

By now, the company might have got from its shareholders the approval to, among other things, increase their capital base for three main reasons including capital adequacy, mortgage refinancing and procurement of necessary infrastructure.

As at the time when this request was made, the shareholders who saw the need for capital adequacy for the company, especially for its mortgage refinancing function, could not, however, come to terms with the management‘s explanation on the issue of infrastructure and, therefore, insisted that the capital raise be put on hold until the management was able to spell out those items of infrastructure that made the capital raise necessary.

NMRC came into the Nigerian mortgage market on a very high pedestal, promising a major shift in the interest rate regime in the market. But the authorities of the company have said that, though it is a partnership between the government and the private sector, the company operates as a private sector-led institution, relying on the market to determine interest rate on mortgage loans, meaning that the rate that applies to commercial loans also applies to its mortgage.

“The desire of NMRC, the Primary Mortgage Banks (PMBs) and the Central Bank of Nigeria (CBN) is to achieve single digit interest rate, but we are not there yet because the market does not allow single digit interest rate”, the official said, adding, “as it is today, we cannot meet the single digit interest rate until we are able to reach that point where the market allows it”.

Right now, the company is working under market conditions hoping that, over time, as the market deepens and grows, the issue of single digit interest rate will be expected. Whatever the rate is today, the desire is to drive it down to single digit.

Source: Businessdayng

US Long-term Mortgage Rates Drop

US long-term mortgage rates fell this week amid continued uncertainty about the economy’s outlook.

Mortgage rates have been running near historic lows, a potential boon to home buyers.

Mortgage buyer Freddie Mac says the average rate on the 30-year fixed-rate mortgage dipped to 3.57 percent from 3.65 percent last week. A year ago, the average rate stood at 4.90 percent.

The average rate for 15-year fixed-rate home loans declined this week to 3.05 percent from 3.14 percent last week.

Source – Boston Globe Media Partners, LLC

UAE Central Bank Removes 3% Early Settlement Fee For Mortgages

UAE banks can only charge borrowers a 1% early settlement fee or AED 10,000

The early settlement fee for mortgages has been reduced to just 1 percent on the outstanding mortgage amount or AED10,000 – whichever is less.

Banks will no longer be able to charge a 3 percent early settlement fee for borrowers who want to exit their mortgage early, under a new directive from the UAE Central Bank.

Instead, the fee has been reduced to just 1 percent on the outstanding mortgage amount or AED10,000 – whichever is less.

And those who have already paid the 3 percent settlement fee have been instructed they can get a refund from their banks within 30 days.

A circular sent out by the UAE Central Bank said: “Early settlement or partial settlement fee for applying to home loans has been reverted to maximum one per cent of the outstanding balance or AED10,000, whichever is less. Banks and finance companies that arbitrarily changed the stated terms of the fees in existing customer agreements are required to respect the original terms of the agreement and refund all overcharges for all customers based on their original fee within 30 days of this notice.”

Chris Schutrups, managing director, Mortgage Finder, welcomed the decision and said it was a great boost for borrowers, particularly in the current economic climate.

He believed the news will encourage borrowers to switch their mortgage to lenders offering better interest rates and will result in an increase in buyout and remortgaging activity.

“The news from the Central Bank is positive as it now opens up opportunities for those borrowers who were paying a higher rate of interest on their mortgage to find a better deal and save money.

“The recent interest rate cuts that we have seen are pushing banks to be more competitive with their products. We have seen a decrease in mortgage rates since the beginning of the year. All of this is great news for those borrowers who were stuck with mortgage products that did not reflect the changing market.”

In 2018, the UAE Central Bank had announced that lenders could charge up to 3 percent of the outstanding home loan amount on clients who exit their mortgage early. The banks had to prove financial loss in order to charge the full 3 percent.

 

Source: arabianbusiness

How to Get a Lower Mortgage Interest Rate on Your Home

Getting approved for a mortgage can be complex, but if you do things right, you may be able to get a lower mortgage interest rate.

  • Your credit score and credit report are vital for mortgage approval. Work on improving your credit score to get the best rate.
  • Your income and income compared to your debt obligations are other important parts of getting a mortgage, so don’t ignore that key part of the approval process.
  • Shopping around and working with your lender can save you even more compared to published interest rates.

If you are looking to buy a home, you are likely preparing for the biggest purchase of your life. To finance a home purchase, many households look to a mortgage loan from a trusted lender. Mortgages make sense for millions of people.

To get the best deal, you can follow these steps to get a lower mortgage interest rate.

 

How to get a lower mortgage interest rate

1. Improve your credit

There are two main places a lender looks when approving a mortgage. The first stop is usually your credit report. If you are applying for the loan jointly with a spouse or other partner, it’s a team effort, so you should work with them on their credit, too.

The two biggest factors in your credit score are your payment history and account balances. Make sure to always pay on time and work to pay off any credit card and line-of-credit balances before applying for a new mortgage. It’s a good idea to take at least a six-month moratorium from applying for new accounts as well.

2. Optimize your debt-to-income ratio

As part of the loan approval process, also known as underwriting, the bank will look at all of your current debt payments. They will use your credit report to gather your minimum payments on every credit card, student loan, car loan, and other debt under your name on your credit report.

To decide if you can afford the mortgage, the bank will compare your monthly income to your monthly debt obligations. This is known as your debt-to-income ratio (DTI). If you have any way to increase your income and pay down outstanding debts, you’ll have the best possible DTI when applying for your mortgage.

3. Shop around for the best deals

In addition to qualifying for the best rate on your own, you should pick a lender with the lowest interest rates. Just because you have your checking account at a bank down the road doesn’t mean they offer the best rates. The internet makes it easy to quickly compare the best rates.

 

When I bought my home in Portland, Oregon, I talked to two local lenders and one nationwide credit union. I found the best rate given my income and credit came from PenFed Credit Union, so that’s where I got my mortgage.

For my current home, I shopped around again and found that a California-based lender, New American Funding, had the lowest rate for my finances.

You have to shop around to get the answer for your unique situation.

4. Consider points and promotions

Some lenders offer discounts when you qualify or promotions for lower rates. Also, look at federal or state programs and loan programs from the VA, FHA, and other government loans if you are eligible. If you’re not sure, talk to a prospective lender or mortgage expert to learn more.

Points are a way to lower your interest rate by making a cash payment upfront. Points can save you money in some cases, but the math doesn’t always add up. Try out a mortgage calculator that supports points to decide if it’s a good deal for you.

Small savings on a big loan add up fast

For a savings account with a $1,000 balance, the difference of a 0.25% interest rate isn’t that big of a deal. But for a mortgage with a six-figure balance and 30-year payback period, a quarter of a percent is huge.

When it comes to the biggest purchase of your life, even a small interest rate savings can be worth tens of thousands of dollars. Using these steps, you can find the lowest possible interest rate for your finances.

Source: businessinsider

‘Pension Funds As Equity Will Boost Mortgage Finance, Housing, Others’

Industry regulator, the National Pension Commission (PenCom), has said there will be a significant development in Nigeria’s housing sector if contributors devoted a percentage of their Pension Fund Assets (PFA) under management as equity injections for residential mortgages.

According to the Commission, this will accelerate the development of both the mortgage finance and housing sectors, as well as make affordable housing accessible to registered contributors.

Recently, the Bankers’ Committee resolved that banks will support the pension industry to release up to 25 per cent of the pension funds to their contributors as equity injections towards owning houses, saying the funds can be used to stimulate demand for mortgage loans in Nigeria.

In her remarks, Chief Executive Officer, FSDH Merchant Bank, Hamda Ambah, explained that: “It was agreed that the Central Bank of Nigeria (CBN) would talk to fellow regulators, and also work with government of various states to make the process of land transfer and titling a lot easier so that many more people across the nation can access mortgage financing to stimulate demand in our economy.”

Speaking to The Guardian, Acting Director-General, PenCom, Aisha Dahir-Umar, said one of the major inclusions in the Pension Reform Act (PRA) 2014, was the introduction of Section 89 (2), which allows registered contributors under the Contributory Pension Scheme (CPS), to apply for a percentage of their pension assets as equity contribution for residential mortgages.

She noted that the initiative is significant, saying: “The Commission has drafted Guidelines, which are in line with the Framework of the Mortgage Guaranty Company (MGC), being proposed by the Central Bank of Nigeria.

“The objective of the MGC is to support mortgage originators such as Primary Mortgage Banks (PMBs), and commercial banks to increase mortgage lending by guaranteeing or partially guaranteeing equity contributions to secure a residential mortgage. The Commission is working with the CBN and the guidelines are to be disclosed before the end of the year.”

Meanwhile, Dahir-Umar said the total pension fund investment in infrastructure hit N150.71 billion as of June 30, 2019. Broken down, she said investment in Sukuk Bond took N86.10 billion, Infrastructure Funds N29.17 billion, Infrastructure Bond N11.49.92 billion, Green Bond N12.13 billion, while Agency Bond took N11.82 billion.

She explained that Sukuk was deployed for road infrastructure, while the Infrastructure Funds consist of Investments in ARM Harith Fund, which invested in the Azura-Edo independent power plant (IPP) project in Edo State, and Afri plus Fund that invested in the Constructions of 1,200 hostel rooms at the University of Calabar, Cross Rivers State.

Speaking further, she said the proceeds of the Infrastructure Bond (Vaithan Infrastructure Bond) were invested in the Akute Power Plant, Island Power Plant, Pipp Genco, and Gasco Marine Limited’s power projects in Lagos State.

However, she noted that pension assets in Nigeria, valued at N9.05 trillion as at April 30, 2019, are currently the largest available pool of capital, saying pension funds are adequately suited for investments in infrastructure, as it is a potential avenue to reap higher and consistent returns on investments if adequate policies, structures, and regulation are instituted.
“Several countries in Europe, Latin America, and Africa have successfully utilised part of the accumulated pension funds by investing in new infrastructure projects or renewing dilapidated ones. Globally, productive investments in infrastructure are majorly made possible by long-term funds and savings such as pension funds,” she added.

SOURCE:THE GUARDIAN

Need to Address Unemployment, Illiquidity to Increase Mortgage Access

The underlining principle of mortgage in Nigeria and any other country in the world states that a loan seeker must have a regular flow of income, which presupposes that such a person must be in paid employment or be self-employed.

Having a job is pertinent in accessing mortgage. But in Nigeria, many people, especially young Nigerians are not employed. Indeed, youth unemployment in the country is a major social challenge in the country and the level is quite high.

At 23.1 per cent in the third quarter (Q3) of 2018, up from 18.8 per cent in Q3 2017, Nigeria has one of the highest unemployment rates in the world and the figures put out by Nigeria Bureau of Statistics (NBS) in its Q3 2018 report confirm this.

The report explains that “Of the 20.9 million persons classified as unemployed as at Q3 2018, 11.1 million did some form of work but for too few hours a week (under 20 hours) to be officially classified as employed while 9.7 million did absolutely nothing.

“Of the 9.7 million unemployed that did absolutely nothing as at Q3 2018, 90.1 percent of them or 8.77 million were reported to be unemployed and doing nothing because they were first time job seekers and have never worked before”.

Apart from clarity of process, accessibility and affordability are major constraints that have denied many aspiring young and old Nigerians the opportunity of either building or buying homes. Mortgage is not accessible because many people, as pointed out above, are out of job.

Adeniyi Akinlusi, CEO, Trustbond Mortgage Bank, puts it straight that, though the ability of the banks to provide money for mortgage has changed on account of credit challenges in the financial system, mortgage affordability or the fundamentals for lending have not changed.

Technically speaking, there is no mortgage of any form in Nigeria. This is because the interest rate charged is no different from the commercial rate. Mortgage lenders still anchor their loans on good jobs that attract fat monthly salary, meaning that a mortgage loan seeker is still expected to be somebody in a good job or private business with an assured, fat and regular income stream.

Though there is a new mortgage law otherwise called uniform underwriting standard for the informal sector, it is left to evaluate how impacting the new law has been on mortgage lending and home-ownership. The income of some of these informal sector operators can hardly be measured and, so, can hardly be controlled in a formal way.

As against the six percent interest rate and repayment tenor of between 25 and 30 years, depending on the borrower’s age, mortgage lenders in this country charge between 17 percent and 22 percent interest rate on mortgage loans with a repayment tenor as short as 12-24 months. The tenor also depends on the level of risk associated with either the loan or the borrower or both.

Because of this, the ever widening housing demand supply gap can easily be blamed on the commercial interest rate charged on mortgage loans which makes such loans hardly affordable to home loan seekers.

The mortgage industry does not operate in isolation of the economy. Certainly, as an integral part of the economy, it has to be affected by the economic crisis in the country today. A good number of people who were in employment before now do not have jobs again because of the downturn in the economy.

In spite of this, mortgage operators insist that the fundamentals for lending have not changed, which means that if somebody has a good job with a financial institution or a multinational company, and the pay package is high enough for him to afford a mortgage, the economic crisis has not changed that affordability.

The past few years have seen quite a number of mortgage products aimed at enabling subscribers own their own homes, but these products are yet to help reduce existing housing gap by increasing housing stock. The reason is simple. The products, like the mortgage loans, are hardly accessed by those who need them and, according to mortgage operators, those mortgage products are not the ones that will make any impact on housing.

“The mortgage products that we have today are commercial mortgages which the investor wants to recover his money from. It is just like someone else who has invested in any other venture. He has to recover his money because he borrows from the same place like you”, an operator who did not want to be named, noted.

Mortgage products can make impact on housing only when there is government intervention and, anywhere else in the world, there is government intervention to make mortgage affordable to everybody, no matter the income level.

As obtains in other societies, mortgage could be used to move the economy from being import- dependent to a producing and exporting country and Akinlusi says mortgage institutions need long term loans for housing finance. When there are enough funds to lend to property developers and to home seekers, the entire economy will be stimulated.

By the time there are enough funds in the hands of mortgage institutions for long term loans to property developers, there will be a lot of property construction activities and when these happen, a lot of other activities will be generated and the economy will be better for it.

Engineers, architects, bricklayers, casual labourers and even food vendors will be automatically engaged by a single development in one corner of the city, and it is unimaginable what is possible when there are many of such developments going on at various parts of the country. The long term effect is the development of industries and factories that produce building materials such as cement, rods, roofing materials, wooden materials etc.

Ultimately, this will impact on the wider economy and your guess is as good as mine as to what follows when people have enough capital at their disposal. Definitely, investment is the next line of thought and, depending on the prevailing business environment and government policies, people will invest in many asset classes including real estate.

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