MGCs: CBN pegs N6bn as minimum capital at N6bn

THE Central Bank of Nigeria (CBN), has said that companies seeking licenses as Mortgage Guarantee Companies (MGCs), shall maintain a N6 billion minimum capital in addition to N100,000 non-refundable application; non-refundable licensing fee of N1 million; and N50,000 change of name fee.

The CBN’s Director, Financial Policy and Regulation Department, Kevin Amugo, who revealed this recently said the exercise is meant to deepen the mortgage market in a bid to promote affordable financing, while ensuring a safe and sound financial system. The country’s apex bank while unveiling this said, it is an exposure draft to regulate the operations of MGCs as part of efforts to promote mortgage financing and advance home ownership in the country.

According to him, “Permissible activities of MGCs include: Full or partial guaranteeing of residential mortgage loans, investing in government securities, among others, in addition to assuming ownership of residential property in the event that a lender is unable to dispose of a foreclosed property”.

“If proposal is approved, MGCs can also issue bonds and notes to fund their operation; provide technical assistance to lenders on credit and business development related activities to increase pool of development expertise; in addition to other activities as may be prescribed by the CBN from time to time. MGCs are allowed to invest in government securities, deposits with licensed banks, deposits held at the CBN; and other investment specifically allowed by the apex bank.

“They are however not allowed to take any type of deposits; grant loans, whether consumer, commercial or mortgage; or originate primary mortgages. They are also not permitted to finance real estate construction, estate agency or facilities management, project management relating to real estate development, or management of pension funds/schemes. They are also forbidden from transactions such as foreign exchange, commodity, financial derivatives (except hedging instruments), or equity trading; as well as other activity not expressly permitted by the CBN, “he said.

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Amugo noted that as part of good corporate governance practice, MGCs shall have a board comprising between seven and 11 members, with the number of non-executive members exceeding executive directors, including one independent director.

“The executive directors shall hold office for a five-year term (10 years), which may be renewed only once; while non-executives are limited to three terms of four year each (total of 12 year). An executive director who has served the maximum 10 years, may be appointed Managing Director, who shall serve two terms of five years each.

“No executive director is however allowed to transmute to non-executive director until after three years period. The CBN also proposed that an MGC cannot “declare or pay dividends out that will result in the capital adequacy ratio falling below 100 percent, “he concluded.

Source: Maduka Nweke

CBN Confirms 34 Primary Mortgage Banks

The Central Bank of Nigeria has listed only 34 firms as licensed primary mortgage banks in Nigeria.

According to the list released by the regulator on Monday, 50 per cent of the banks are operating in Lagos.

From its records as of the end of September,  the CBN said 17 of the PMBs were in Lagos; eight in Abuja; two in Akwa Ibom State; while Oyo, Delta, Ogun, Kebbi, Jigawa, Abia and Osun have one each.

In September, the CBN gave a notification to revoke the operating licences of 182 other financial institutions in the country, of which six PMBs were included.

One hundred and fifty four of the affected institutions are microfinance banks while the remaining 22 are finance companies.

The CBN said 62 of the microfinance banks had already closed shop; 74 became insolvent; 12 were terminally distressed; while six voluntarily liquidated.

The CBN listed the primary mortgage banks for revocation as Accord Savings and Loans Limited in Lagos that failed to recapitalise; and Ahocol Savings and Loans Limited in Anambra (state government-owned) that closed shop.

Other mortgage banks for revocation are Trans-Atlantic Savings and Loans Limited in Bayelsa (also state government-owned) that became insolvent; Royal Savings and Loans Limited in Delta State also closed shop; Amex Savings and Loans Limited in Lagos that failed to recapitalise; and Supreme Savings and Loans Limited in Lagos that closed shop.

The CBN disclosed that eight finance companies voluntary liquidated; 13 failed to recapitalise; while one became insolvent.

According to the apex bank, the affected institutions are from different states of the federation.

The CBN described a PMB as any company that is licensed to carry out primary mortgage banking business in Nigeria. They are permitted to engage in mortgage finance, real estate construction finance within the permitted limits, acceptance of savings and time/term deposits and acceptance of mortgage-focused demand deposits.

The PMBs also engage in financial advisory services for mortgage customers and other activities the CBN may approve from time to time.

Source: Nike Popoola.

CBN Proposes Mortgage Guarantee Companies In Nigeria

In an effort to promote mortgage financing and advance home ownership, the Central Bank of Nigeria (CBN) is proposing the introduction of Mortgage Guarantee Companies (MGCs) in Nigeria.

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MGCs are designed to deepen the mortgage market through increased access to mortgage finance and enhancing credit risk with mortgage lending institutions. This is in furtherance of the CBN’s objective of promoting affordable financing and a safe and sound financial system.

The Exposure Draft on the Regulation for the Operations of Mortgage Guarantee Companies MGCs in Nigeria is hereby issued for comments and observations.

We would be pleased to receive comments on the draft guidelines through the Director, Financial Policy and Regulation Department, Central Bank of Nigeria, Abuja

Source: Nkechi Naeche

CBN Moves to Reduce Credit Risk in Mortgage Financing

THE Central Bank of Nigeria (CBN) has announced the introduction of Mortgage Guarantee Companies (MGCs), aimed at reducing credit risk in the mortgage finance sector as well as increase access to mortgage loans.

The new firms, according to the CBN will operate with minimum capital base of N6 billion and authority to provide full or partial guarantee for residential mortgage loans.

This is contained in the exposure draft on the regulations for the operations of MGCs released through a letter to all banks, Federal Mortgage Bank of Nigeria (FMBN), Nigeria Mortgage Refinance Company (NMRC) and Mortgage Bank Association of Nigeria(MBAN). Signed by the Director, Financial Policy and Regulations Department, CBN, Kevin Amugo, the letter stated: “In an effort to promote mortgage financing and advanced home ownership, the CBN is proposing the introduction of MGCs in Nigeria”.

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According to the apex bank, the objectives of the MGCs are to support mortgage originators such as Primary Mortgage Banks (PMBs) and commercial banks to increase mortgage lending by guaranteeing against losses resulting from borrower defaults on their mortgage loan portfolios. On the scope of activities permitted for MGCs, the exposure draft stated:

“The MGC shall engage in full or partial guaranteeing of residential mortgage loans; Invest in government securities and other investments; Assume ownership of residential property in the event that a lender is unable to dispose of a fore closed property, provided that such holding shall not exceed 20 percent of its shareholders’ fund unimpaired by losses without the bank’s prior written approval; Issue bonds and notes to fund its operations; Provide technical assistance to lenders on credit and business development related activities to increase pool of development expertise and other activities as may be prescribed by the CBN from time to time”.

On the non permissible activities, exposure draft stated: “The MGC shall not engage in acceptance of demand, savings and time deposits, or any type of deposits; Grant consumer, commercial or mortgage loans; Originate primary mortgages; Finance real estate construction; Estate agency or facilities management, Project management relating to real estate development; Management of pension funds/schemes; Foreign exchange, commodity and equity trading; and any other activity not expressly permitted by the CBN”.

Source: Elizabeth Adegbesan, Vanguard

Court Dismisses Mortgage Bank’s Bid to Regain Forfeited Property

A federal High Court in Lagos has dismissed an application by Safetrust Mortgage Bank to regain its high-rise property, Safetower Estate, located in Ikate Lekki, Lagos.In an application filed before Justice Sule Hassan, the developer had urged the court to vacate its earlier order of forfeiture of Safetower to EFCC, pending the completion of investigation by the Economic and Financial Crimes Commission (EFCC).

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The bank had alleged that EFCC obtained the judgment by fraudulent facts presented to the court.But Justice Hassan, in his ruling dismissed the application of Safetrust on the ground that the applicant’s counsel, Mr. James Oyetunde, did not provide any proof to show that EFCC deceived the court to obtain the forfeiture order.

EFCC through its counsel, Mr. Nkereuwem Anana, had earlier in a deposed affidavit presented before the court stated that the property in question is a subject of grand fraud.He said the matter was under investigation by the commission and should therefore remain forfeited until investigation is completed.He reminded the court that Safetrust had fraudulently obtained funds that run into millions of naira from one Mr. Kunle Ogunmefun, which it diverted for other

The counsel held that going by the law governing mortgage institutions, the bank is not supposed to engage in property development or energy business. Safetrust Bank was also said in the affidavit to have failed to honor an agreement the bank had on the property with Ogunmefun in July 2017.

The court also dismissed a second application filed by former Managing Director of the bank, Mr. Yinka Adeola. The property is located on a parcel of land measuring 50027, 147 square meters, and particularly described as Block 116, Plot III, Ikate Ancient City in Etiosa Local Council Area.

The EFCC investigated the disputed asset, with Survey Plan No BAS258/2013/130-1.The estate, promoted by Safetrust Mortgage Bank Limited and Macbosh Properties Limited ran into controversy, following contractual disagreements between the developers and an investor.


Seven-Year Wait for Mortgage Crushes Nigerian’s Dream for a Home

Pius Okebe has waited so long for a loan to build a house in Nigeria’s commercial hub of Lagos that he’s worried he may be getting too old to qualify for the amount needed to finance it.

Seven years after applying, the used-tire trader is now banking on the latest government attempt to kick-start the Nigerian mortgage market: President Muhammadu Buhari’s plan to inject $1.4 billion into a state-backed lender. The measure is part of efforts to boost home ownership in a country where only 50,000 people out of almost 200 million have housing finance.

“I’m hoping I will get the loan,” Okebe, 42, said as he packed up his supplies on a rainy afternoon in the commercial capital, Lagos. “Although I know as I mature in age, the amount they can give me reduces.”

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The challenges the government faces in addressing a shortage of 17 million houses are daunting. Gripped by poverty, Nigeria has no formalized title-deeds registry and most homes consist of informal structures on land passed down from one generation to the next. Rapid urbanization is also causing a proliferation of slums and shanty towns.

Not the First

Buhari’s drive to provide more affordable homes and clear a backlog of applications for mortgages comes as he faces a tough race in his re-election bid next year and contends with an economy struggling to recover from 2016’s contraction. The 75-year-old is counting on lawmakers to approve a proposal by the end of this year to pump 500 billion naira ($1.4 billion) into Federal Mortgage Bank of Nigeria, or FMBN, to increase its capacity to fund mortgage providers.

He won’t be the first president to try rejuvenate Nigeria’s mortgage market since the country first started a building society in the mid-1950s. In the 1970s, the lender was renamed as FMBN as part of indigenization policy aimed at ending foreign dominance in the economy — a decade after gaining independence from Britain. But years of under-funding has seen FMBN achieve little success in its attempt to grow mortgages.

FMBN has recently stepped up its game after a meeting with mortgage lenders two months ago, according to Olayemi Rabiu, managing director of Lagos-based Resort Savings and Loans Plc, a mortgage lender started in 1993 and which is in talks over a recapitalization. The state-backed lender has stopped funding property developers after debts went unpaid and is dealing only with individual customers through mortgage lenders, he said.

Quicker Turnaround

“They are disbursing heavily now and regularly,” he said. “The time is now faster. Unlike before when you can wait for 5 to 10 years, now within 8 months you will know whether you can get it or not.”

FMBN, which has more than 18,200 mortgages, is confident the legislation needed for the lender’s recapitalization will be put in place before the next administration takes office in May, said Chief Executive Officer Ahmed Musa Dangiwa.

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The company also started a rent-to-own project that will eventually result in the development of 20,000 new homes, FMBN’s CEO said. A pilot program kicked off in August with 3,000 houses. The state-owned funder can lend at interest rates of as low as 4 percent, compared with the central bank’s benchmark rate of 14 percent.

While the government’s renewed push is seeing some progress, more needs to be done to entice commercial banks, said Abiola Rasaq, head of investor relations at United Bank for Africa Plc, Nigeria’s third-largest lender by revenue.

Funding Mismatch

Most Nigerian banks raise their funding from short-term deposits, when mortgages require long-term financing. Delays with getting building plans approved or title deeds finalized also adds to the cost of the loan that most developers can’t afford, he said.

“We’re optimistic about the Nigerian mortgage sector and we’ve seen a few good things evolving particularly in some states such as Lagos and Ogun, which are making it easier to obtain title documents,” Rasaq said. “There is a mortgage gap and banks are willing to bridge that. We need to De-risk the segment and put incentives to encourage banks to properly lend to the sector.”

Buhari’s administration is trying to reduce the risk of non-payment by next year starting the Nigerian Mortgage Guarantee Co., which will cover up to 50 percent of any losses in the event of a default, to improve lending to low-income earners.

At the same time, Nigeria Mortgage Refinance Co., which mimics Fannie Mae in the U.S., is helping some of the country’s 35 real estate lenders to reorganize about 30,000 mortgages to free up capital with the goal of doubling its 40 billion naira in assets.

For a country that vies with South Africa as the continent’s biggest economy, Nigeria’s mortgage industry is small, with the equivalent of $260 million in loans, compared with more than $90 billion for its more industrialized southern peer.

Okebe needs the programs to turn into reality if he is ever to build a home. Otherwise, it will be impossible without government support because he hasn’t been able to save enough.

“I still need the loan — if I have to take money from my business, the business will collapse,” he said. “The mortgage bank has told me that government is doing something about the situation and that I might smile next year. I’m praying for that to happen.”

Source: Elisha Bala-Gbogbo and Emele Onu

New mortgage law to push interest rates below 20% – Atta Akyea

Government has announced a new mortgage regime which will enable more people take up mortgage facilities with interest rate below 20 percent.

According to Works and Housing Minister, Samuel Atta-Akyea government is currently drafting a Legislative Instrument to allow it use part of the pensions fund to support banks in the sale of affordable housing units to Ghanaians.

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The country currently faces a housing deficit of 1.7millon, a figure government is trying to reduce. Commercial banks are charging between 25 and 35 percent interests on mortgage loans a figure analysts say is too high for the ordinary Ghanaian.

Speaking to Citi Business News, after the launch of Eden Heights Apartments, Works and Housing Minister, Samuel Atta-Akyea Akyea said the new mortgage regime will ease the financial burden on Ghanaians.

“Some people have executive houses, but when you have a government of conscience and you want to minister to those who are handicapped in terms of low income levels then you have to make things easier for everyone. We owe it to Ghana to roll out different forms of houses for the people. Houses that they can buy. So that the housing deficit of 1.7 million will be a thing of the past”.

Experts in the housing industry have estimated that government would have to build 190,000 to 200,000 units each year for the next 10 years to bridge the housing gap. Currently millions of Ghanaians do not stay in proper houses with basic facilities such as toilet and bathrooms.

Government again says it is in talks with some investors to develop container houses to accommodate the thousands of homeless Ghanaians.

“What kind of accommodation will you give people of that nature? Some countries have container housing and in that there are toilets that you can flash. There are investors who are ready to build such houses,” said Atta- Akyea.

Asked if government would complete the unfinished housing units started by previous governments, Mr. Atta Akyea said funds allocated for the construction of those facilities were diverted and therefore the Attorney General would be investigating those contracts.

Source:      Citinewsroom

United Wholesale CEO: Freddie Mac just made mortgage lending a better deal for borrowers

Also, PIWs are now called Appraisal Waivers

Both Freddie Mac and Fannie Mae are leading the charge to improve mortgage lending in the wake of the rising interest rate environment, according to the latest video “3 Points with Mat Ishbia,” the CEO of United Wholesale Mortgage.

Some of the latest updates are big (Freddie Mac) and some are small (Fannie Mae). But both mean more opportunity for mortgage brokers.

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According to Ishbia, Freddie Mac made 3 major changes to its mortgage lending landscape — that is its requirements for loans its willing to bundle into the secondary market. For example, regular student loan payments can now be considered as a credit to the borrower. Plus there are ways to get more cash back for your refinance clients.

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Second, Ishbia discusses briefly the latest updates to Fannie Mae’s Desktop Underwriter and Day One Certainty. Spoiler: the website is more user friendly and PIWs are now called Appraisal Waivers.

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Third, it’s true that mortgage rates are on the rise, and are expected to keep going that way for some time. But don’t despair.

Ishbia asks and answers: “Does that mean there will be no refinance opportunities for you?… no, there’s opportunity out there for you,” he says, citing several instances where the current mortgage environment can be effectively marketed by loan brokers.

Jacob Gaffney

Why most banks aren’t giving mortgage – Ubosi


High cost of money, nature of funds and short tenor of finance have been adduced, among reasons, why most commercial banks are not granting mortgage finance to enhance housing development and homeownership in Nigerian.
President, African Region of International Real Estate Federation (FIABCI), Mr. Chudi Ubosi, said this in a chat with news men in Lagos.

Specifically, he said banks were not giving mortgage due to the fact that less than 10 per cent of their funds come with less than 365 days tenor, which could not match real estate development that requires long-term capital.

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Long-term and capital intensive nature of real estate investment, he said, have made it difficult for banks to grant mortgage finance of 15 to 30 years with their short term money.

On how to unlock opportunities in housing finance, Ubosi said that banks were reluctant to give mortgage to real estate developers because 90 per cent of their funds were call (short term)monies.
“Call money is the one you just go to the bank, write a cheque and withdraw. Not less than 10 per cent of money in the bank is money that has less than 365 days tenure,” he said.

Apart from high cost of funds, he pointed out that exorbitant interest rate of 30 to 32 per cent being charged on loans by banks have made it difficult for mortgage financing.

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Ubosi said: “With this kind of set up, it is difficult for banks to give you a 30-year mortgage. They won’t even give you a 10-year mortgage because they have to be jobbing with people’s funds. So it is difficult for bank to give a 10 year mortgage.
“And because their own cost of money is high, there is no way you are going to get their money at lower than what they get it. It will come with a margin to cover their expenses, salaries and cost of running generators.”

The African FIABCI boss, who is also the principal partner, Ubosi Eleh and Company, warned that unless the government sorted out the economy, it would be difficult for banks to grant mortgage for home ownership

On the ways out of the woods, he canvassed for the restructuring of the nation’s economy and building of strong institutions to support mortgage finance.
He said: “Unless this economy is restructured and, at the same time, build strong institutions so that if I take money from the bank and refused to pay, I will not go to court and tie up the bank for the next 15 years trying to collect N1million back from you, it would be difficult for banks to finance mortgage.”

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According to him, there must be strong institutions, the legal system must be strong and the policing system must also be strong to support mortgage finance.

“If banks are even given mortgages at five per cent for 20 years, today I can tell you that people will collect that money and fix it in deposit account or on investment with 18 to 20 per cent per annum. And if we don’t have strong institutions, nothing will happen to them,” he said.
Ubosi also believes that investment of pension funds in mortgage finance would go a long way, urging the authority to work on this to reduce housing deficit of 17 million among Nigerians.

Nigeria needs to provide 740,000 houses yearly for next 20 years to bridge accommodation gap of 17 million.
For this to happen, he harped on the need to change some of the pension laws to enable pension funds and their administrators invest in real estate.

Dayo Ayeyemi

Need for active insurance industry in mortgage economy


Like action and reaction, insurance and mortgage are equal and opposite and this is why, in advanced economies of the world, an active insurance industry is highly needed for the mortgage economy. While mortgage lending is a risk, insurance, by its function, acts as a hedge against risk. It is a cover.

To develop a healthy mortgage industry, therefore, there is need for a mortgage insurance functioning as  a policy that protects a mortgage lender or title holder in the event that the borrower defaults on payments, dies, or is otherwise unable to meet the contractual obligations of the mortgage.

This is why the new the Mortgage Guarantee programme, a new initiative by the Central Bank of Nigeria (CBN), is quite instructive. This is a kind of mortgage given to a borrower by a lender, where an identified third party will take responsibility for the loan if the borrower defaults. The programme is structured in such a way that once the borrower defaults, the third party receives a claim from the lender, pays the lender off, and assumes responsibility for the mortgage.

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Besides incentivizing mortgage lenders, a quality mortgage guarantee programme is also used to provide credit loss protection to lenders in case of borrower’s default and, according to CBN officials,  a robust primary mortgage market is a synergy of several components, all working together to effect affordability and access for intending buyers.

Investopedia, an encyclopedia of investment initiatives, identifies three aspects of mortgage insurance. These are private mortgage insurance (PMI), mortgage life insurance, or mortgage title insurance. What these have in common is an obligation to make the lender or property holder whole in the event of specific cases of loss. Private mortgage insurance may be called ‘lender’s mortgage insurance’ (LMI) if the premium on a PMI policy is paid by the lender and not the borrower.

For these reasons and more, an active insurance industry is needed for the growth and development of a functional mortgage industry. The mortgage industry in Nigeria is still a fledgling and fingers are frequently pointed to an insurance industry that is not as active participant as it should be.

For some reasons, in this country,  in spite of  everything the people have learnt, policy is still shaping the industry whereas, in advanced economies, it is the other way round—industry shapes policy because people in the industry are the ones implementing the policy every day.

The mortgage industry in United States, for instance, has been robust for decades and it is with continued activity. One is not however, saying that Nigeria should replicate what happens in the US here, because Nigeria has its own unique characteristics which must be recognized and respected.

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What the mortgage players in Nigeria should do however, is to make the US system a base-line because that system represents the global standard.  Adenike Fasanya-Osilaja, a mortgage and finance consultant advises that “we have to start learning that system and adapt it to meet our own unique cultural system and unique needs”.

Nigeria needs to lay a very good foundation for mortgage industry growth to ensure that what happened in America in 2006 with sub-prime mortgage crisis does not repeat itself here. The Nigerian Mortgage Refinance Company (NMRC) is a big possibility that can change and shape the mortgage system in this country and could also be an umbrella for the industry.

One of the high points of NMRC, as a secondary mortgage institution, is its long term, low rate global funds and, because the mortgage industry here is not yet buoyant, NMRC, whether it is succeeding now or not, can be a significant tool for achieving these attributes of a working mortgage industry.

Fasanya-Osilaja believes that the mortgage industry should be shaping NMRC and not NMRC shaping the industry, advising that the Central Bank of Nigeria (CBN), through the NMRC, should be listening to the voice of the industry.  “Experience has proved to me that the CBN is quite ready to listen and learn. The problem here, however, is that the industry has been rather passive”, she noted.

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This industry has to be standardized so that global players, from global perspectives, could view the local industry from the perspective of NMRC and mortgage banking association of Nigeria (MBAN) and see something to hold on to in their investment decisions. Despite the current challenges, the Nigerian economy could conveniently support the growth of the mortgage industry as the country is one of the fastest growing economies in the world where talent resource is amazing.

The mortgage consultant advises further that Nigeria needs to understand there is time for competition and also time for association and each is as critical as the other. “The only thing that will stop this industry from growing is over-regulation by people who are not in the industry and therefore will not understand the effect of their policy on the actual market”, she said, emphasizing the urgency of an active insurance industry to drive the needed growth in the mortgage industry.

As a step forward, mortgage insurance could come with a typical ‘pay-as-you-go’ premium payment, or may be capitalized into a lump sum payment at the time the mortgage is originated. For homeowners who are required to have PMI because of the 80 percent loan-to-value ratio rule, they can request that the insurance policy be canceled once 20 percent of the principal balance has been paid off.

Chuka Uroko 

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