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CBN removes restrictions on refinancing of non-member mortgage lenders by refinancing companies

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The Central Bank of Nigeria (CBN) has removed the restriction on refinancing of mortgages of non-member mortgage lenders by the Mortgage Refinancing Companies (MRCs) with immediate effect.

This was stated in a circular to all banks and other financial institutions, dated October 21, 2020, and signed by Ibrahim Tukur, for director, financial policy and regulation department.

Consequently, MRCs are permitted to refinance the qualifying mortgages of mortgage lenders that do not hold their equity subject to compliance with all other relevant provisions specified in the framework.

The extant regulatory and supervisory framework for the operation of a mortgage refinance company provides in section 7.3.1 5 that a mortgage refinance company (MRC) shall not, without prior approval of the CBN, extend total outstanding credit to any single borrower, which is equal to or more than 20 times the value of the borrower’s shares with the MRC or 25 percent of its shareholders’ funds unimpaired by losses.

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The CBN said this provision negatively impacts the mortgages sub-sector as it constraints the MRCs from refinancing the mortgages of non-shareholder banks.

Accordingly, the circular said the provision of section 7.3.1 5 is hereby revised as follows: “The MRC shall not, without prior approval of the CBN, extend total outstanding credit to any single borrower, which is equal to or more than 25 percent of its shareholders’ funds unimpaired by losses.”