The Nigerian Mortgage Refinancing Company (NMRC) has done about N35 billion in refinancing of mortgages from primary mortgage banks (PMBs), an amount considered inadequate in over seven years.
NMRC is Nigeria’s secondary mortgage institution which is private sector-led but has the public purpose of breaking barriers to homeownership. It provides liquidity, affordability, accessibility and stability to the housing market, and is out to provide liquidity by refinancing mortgages originated by the PMBs for on-lending to mortgage applicants.
Kehinde Ogundimu, the company’s CEO, explained to BusnessDay in an interview recently that, essentially, what is delaying them from doing more mortgage refinancing is their efforts at getting cheaper sources of funding that they can blend with the market rates.
This, he explained further, will help them to arrive at something much cheaper because “if we go to the capital market now, the pension funds they’ll give to us will be at market rate which is quite high.”
“The PMBs have done a lot; it might not be the number. I mean, in terms of the number of banks, the few active ones are doing it. Maybe you have 20 or 30 of them. Some of them are still trying to get their acts together, but the ones working with us are very active,” the CEO disclosed.
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He said that why the number that is active in originating mortgages is small because there are standards which, sometimes, people think are very high, which are also meant to protect the banks themselves.
“For instance, we require the banks to make sure that they have a good risk management process in place; that they have audited accounts, or have creditor or servicer rating. Those are things that ensure that they themselves are very efficient in their risk management practice,” he noted.
He disclosed that the company has been preoccupied with trying to see if there is a way they can get some other funding so that when the banks take what they get from the capital market and blend it into the one that is a little bit cheaper, they can get something.
According to Ogundimu, NMRC has done several thousands of mortgages for banks and also with state governments and individuals across the country, pointing out, however, that the model that works best, especially when there is a high interest rate, is where state governments or local governments, for instance, come up to subsidise the rates or the cost of housing to make them more affordable.
“What Ogun State did was to come to us to work together with them for their civil servants. They built some yellow top houses but made sure they bought things in bulk which reduced the cost.
So, the cost of the houses came down and then they came to us and we agreed with a bank on refinancing because we want the civil servants to benefit from it and that just worked well,” he said.
He added that they were trying to replicate the Ogun State model, but that would be if there’s mass housing. This is because when the project is just one, two or three houses, there is economy of scale which is why the builder needs to do something bigger which reduces the cost of housing.
In its 10 years of opening for business, NMRC has lived reasonably to its mandate even though experts in the mortgage industry say there is still room for improvement in its operation and offerings.
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