Covid-19: Time for fresh initiatives and new mortgage products

As the global health emergency, Covid-19, continues to take toll on global economy, contracting economic activities and shrinking individual and household income, operators in Nigerian mortgage market need, more than ever before, to think of fresh initiatives and new products that can help both lenders and borrowers.

Already, the operators are edgy with repayment defaults arising from reduced income of borrowers many of whom are workers that have either lost their jobs or have their salaries cut.

Both existing and intending borrowers need new products, especially consumer products, and fresh initiatives or full implementation of existing ones that can cushion the impact of coronavirus on them.

When the Federal Government established the Federal Mortgage Bank of Nigeria (FMBN) as a secondary mortgage institution that would function like the Fanne Mae in the United States of America, it did not stop there. The National Housing Fund (NHF) followed almost immediately after.

There has also been the recapitalisation and consolidation of the primary mortgage banks (PMBs) coupled with a revision of their operational guidelines which confined them to their core business of providing mortgage services including housing loans for homeownership.

The establishment of the Nigerian Mortgage Refinance Company (NMRC) is the latest attempt by the government to, not only grow the market by increasing liquidity in the mortgage system, but also facilitate homeownership through affordable housing delivery.

Though these two institutions are doing their best, that best is not yet good enough for them. This is creating inequality in terms of lack of affordable housing. This inequality has placed moral obligation on all housing stakeholders to use every tool at their disposal to find solution to the problem of sustainable and affordable housing finance.

NMRC has however raised some hope and it is this hope that industry experts want the company to give more push to in this Covid-19 era. As a secondary mortgage institution that is private sector-driven with the public purpose of developing the primary and secondary mortgage markets by raising long‐term funds from the domestic capital market as well as foreign markets for providing accessible and affordable housing in Nigeria, the company is addressing this problem.

Before now, there has been spirited efforts by the refinance company to, not only reposition the country’s mortgage sector, but also to break down barriers to home ownership by providing liquidity, affordability, accessibility and stability to the housing market.

The company has the vision to be the dominant housing partner in Nigeria by providing liquidity and access to affordable housing finance and, in line with that, it has come out with initiatives aimed to improve mortgage market transactions and also fast-track affordable housing delivery.

When the company was established, the mandate given to it was to promote wider spread of home ownership, accessibility and affordability which explains the setting up of what the company calls ‘Housing/Mortgage Market Information Portal (MMIP)’ aimed to enable it to gather data for intelligence and profiling of federal, states civil servants and informal sectors (off-takers) for affordable housing.

This is an effective policy and decision making tool on land allocation, infrastructure and concessions and, according to sources close to the company, MMIP enables decision on creating polycentric cities in order to decongest major urban centres. The pilot implementation of this initiative is already taking place in some cities including Abuja, Lagos, Kano, Bauchi, Enugu, Port Harcourt.

Another initiative the company has come up with is the Mortgage Market System (MMS) which is a transformational change that integrates the entire housing market, covering construction finance, primary and secondary mortgage.

The system which is available to all players in the housing industry has the benefit of removing duplications of efforts in gathering data and documents; improving the turnaround time, reducing the cycle time of transactions and helping in making homes more affordable.

Described as a world class system that aims to bring all players in the mortgage and housing market into a centralised technology ecosystem, MMS allows a systematic market to operate and concentration of activities to take place.

What the system seeks to achieve, besides bringing credibility and attracting investors to the mortgage market, is also to let players and sundry individuals know what is going on in the market. People often ask about the mortgage market but they cannot get verifiable and dependable information, but this system creates a marketplace where there is information flow and people can see what is going on.

The system is a national market that is not only about mortgage but also the entire housing finance and so it allows the company to see the pipeline projects and know who is bringing what to the market. As a refinancer, it also allows the company to time and determine when to go to the market to raise bonds.

MMS also allows market operators to track all the activities within the construction industry. With it they can see which developer is doing what and in which location. It also allows them to begin to compare prices and know which property is being sold and in which location. This way, the developers will begin to be more competitive in the way they do their developments.

For the mortgage banks, the new system allows them to begin to manage their own systems by themselves, using the uniform underwriting standards which NMRC has produced and, with that, they can evaluate their applications based on the underwriting standard.

It is hoped that the use of these systems, especially the MMIP, for federal and state governments’ mortgage asset registry, will reduce cost of homeownership; eliminate breaks in the chain of title; improve hard naira savings on each loan for homeowners and lenders, and reveal identity of servicer and investor available to homeowners via phone or internet.