Between December 2013 and January 2014, three major developments happened in the Nigerian mortgage industry that were indicative of a major shift, signaling a new beginning in housing finance sector the country’s economy.
It all started from December 31, 2013, when the processes leading to the recapitalization of the primary mortgage banks (PMBs) were concluded with the hope of creating a strong and viable primary mortgage industry. This was followed on January 16, 2014 by the launching of the Nigerian Mortgage Refinance Corporation (NMRC), setting the stage for the operations of a secondary mortgage market that, in the opinion of mortgage industry watchers, is the messiah that this industry had been waiting for.
On Monday, February 3, 2014, the Lagos State government flagged off its pace-setting Home Ownership Mortgage Scheme (HOMS) which is the only housing finance arrangement in the country today that has the semblance of a mortgage with its 10-year tenor and 9.5 percent interest rate.
With these three mortgage arrangements coming into the housing finance system, almost at the same time, it is easy to imagine that the future is here, not just for the economy of this country, but also for its people majority of whom can neither buy nor build homes they can call their own due to lack of finance.
Since these developments, analysts have been speaking with tongues-in-check, giving opinions that differ in logic and reasoning. Whereas some see these developments as a new dawn for the mortgage industry, others see a painting on canvass that over-stretches the imagination.
We can’t agree more with the former. We are however, not bereft of a sense of history, especially with regards to the operations of Federal Mortgage Bank of Nigeria (FMBN) and the National Housing Fund (NHF) both of which are housing finance interventions that have over-stayed their welcome.
Nigerians are still at a loss why FMBN has continued to function as a mortgage bank, albeit a secondary mortgage bank, when neither its operations are known, nor its impact felt by low income earners whose interest in housing finance it was set up to serve.
According to them, the NHF scheme is just a sham in spite of recent innovations in its operations and this is because contributors to the scheme are not only frustrated with the cumbersome processes leading to accessing its loans, but also disgusted with the time it takes to do so.
For us, the recent developments in the industry marks a new beginning because we see hope and repose our confidence in their promoters. For the fact that the NMRC is private sector-led, we are of the strong belief that it won’t go the way of FMBN and NHF.
With its formidable share-holding structure and the level of interests it has received so far from both local and international investors including the World Bank which is to provide a 40-year, interest-free grant of $300 million, the Sovereign Wealth Fund which unconfirmed report says is to invest N1.6 billion in the corporation, primary mortgage banks (PMBs), commercial banks etc, we see every reason to believe that liquidity issues and corporate governance problems would be solved.
In LagosHOMS, we also a new beginning, not just because of its long repayment tenor and low interest rate offer, but also because the state government has demonstrated preparedness to do real mortgage by providing houses on which the mortgage is being created. The reality of the scheme would be laid bare on March 4 when the first batch of 200 applicants would take possession of their homes. For us, no mortgage could be truer and more focused than this.
The recapitalization of the PMBs means more liquidity in the industry and from this, coupled with the mortgages they would be originating for refinancing by the NMRC, we see long term, low rate housing finance creeping into the housing market to boost homeownership.
We however, caution that care must be taken to ensure that there are checks and balances in the operations of these institutions. Most importantly, we urge CBN to be thorough with the on-going verification of submissions by the PMBs to ensure that the mistakes made with recapitalization of the commercial banks are not repeated. Furthermore, we enjoin all stakeholders to play by the rules.