Heralding FG’s new mortgage reform initiative

The aim is to strengthen and create liquidity in the sector but more action is needed to improve the legal and regulatory frameworks in order to achieve effective creation of mortgages in Nigeria.With the national housing deficit presently estimated at 16 million units, the private sector has a significant role to play in bridging the […]

The aim is to strengthen and create liquidity in the sector but more action is needed to improve the legal and regulatory frameworks in order to achieve effective creation of mortgages in Nigeria.
With the national housing deficit presently estimated at 16 million units, the private sector has a significant role to play in bridging the gap and is well placed to meet the housing needs of the zero-income, lower medium income and the informal sector workers and by so doing facilitate job creation.
Indeed, challenges of housing in terms of quality and quantity appear to be the same all over the world. The needy have less access to housing while the less needy have greater chances of accessing housing. In Nigeria, housing is generally inadequate in the rural areas in terms of quality, while the major problem in urban areas is more of quantity, although quality is also an issue. In 1991, the national housing policy was promulgated in order to propose possible solutions to the housing problems in Nigeria. Twenty-two years on, millions of Nigerians are still homeless while many others are living in indecent houses.
One of the foremost challenges of the nation’s economy was that of developing a sustainable housing and mortgage finance system that would compare favourably with what obtains in other climes.
The contribution of mortgage banking sector to the nation’s GDP was currently negligible at about 0.5 per cent, compared to 77 per cent in the US, 80 per cent in the UK, 50 per cent in Hong Kong, 33 per cent in Malaysia and about 45 per cent in South Africa.
Access to housing is very readily available through mortgages in developed countries, it had continued to remain a major challenge in some emerging economies like Nigeria’s, due to the poor legal and regulatory framework, high costs of titling, dearth of long term finance and absence of foreclosure laws.
Thus a speedy passage of the Foreclosure Bill into law will encourage infusion of capital to the mortgage banking/housing finance sector, but also needed is a window to guarantee free entry and free exit for existing and potential investors in the sector.
Concerted efforts need to be made by the Federal Mortgage Bank of Nigeria (FMBN), Primary Mortgage Banks (PMBs) and Mortgage Banking Association of Nigeria (MBAN) to enhance collection of monthly contributions from more Nigerians to deepen the National Housing Fund (NHF) Scheme in order to create more mortgages towards provision of affordable housing for Nigerians.
Efforts to create 500,000 housing units through mortgages by Year 2016 would require long-term funding/ liquidity in the mortgage sector. The various deposits currently in the portfolios of Primary Mortgage Banks (PMBs) are mostly on short-term basis thereby creating dearth of long-term funds that could stimulate housing finance delivery, through primary mortgage arrangements.
There was need, he said for PMBs and other mortgage originators in the sector to work together to share risks and expand the scope of project execution for large scale housing estate projects for affordable housing that the mortgage originators would otherwise not finance on their own.
Promoters of the Primary Mortgage Banks (PMBs) have lauded the Central Bank of Nigeria (CBN) for dousing the tension that  engulfed the housing sector by effecting a change in the deadline for compliance with new minimum capital requirements.
Under the fresh guidelines, mortgage firms have been categorized into National and State mortgage firms, while the National PMIs are allowed to operate in any or all parts of the federation after the payment of a new N5 billion minimum paid up capital, the State PMIs are restricted to only one state at the payment of N2.5 billion.
According to CBN, the shift in date is meant, “to afford all affected PMBs sufficient time to exercise any of the options for capital raising, business combination and downscaling.”
Federal government should fund mass housing schemes, using the huge funds lying in bank vaults in the form of unclaimed dividends, dormant accounts, and accumulated premiums from pension schemes, among others.
Government should also institute appropriate policies and laws to accelerate the provision of mass housing, including policies to reduce the cost of construction. In this regard, the Land Use Act, amongst other relevant legislations, should be reviewed to address the bottlenecks it creates in title registration.