Recently, maybe and just maybe, the National Housing Fund (NHF) scheme has improved according to the management of the Federal Mortgage Bank of Nigeria (FMBN) which oversees its operations and disburses its loan applications through applicant’s preferred primary mortgage bank (PMB).
Until now, NHF was mere drudgery and getting mortgage through the scheme, even as a subscriber, was a long trek to “Jordan and the outermost parts of the earth.” Although FMBN management says it is no longer business as usual, subscribers and loan applicants are yet see the impact.
For them, it is still the same old story that is not different, in any significant way, from the story of Phillip Pirrip (Pip) and his long awaited benefactor in Charles Dickens Great Expectations—a long fictional narrative mirroring the frustrating living conditions in the 19th Century English society in which Pip lived.
This is the story of Edward Okon, a middle-aged man who left higher school 26 years ago at the age of 24. Okon’s immediate plans on leaving school was to work for six years and marry at the age of 30. Thereafter, he would start processes leading to owning a home before his 40th birthday.
That was a long term plan because he reasoned that the only easy, simple and convenient way for him to own a home from his not-too-big salary was to take a mortgage loan and pay back by installments.
Because of its low interest rate and long repayment period of 6 percent and 20-30 years respectively, Okon decided for the National Housing Fund (NHF). He approached one of the primary mortgage banks (PMBs) to subscribe for the fund. His experience there was anything but cheering.
After subscribing and contributing for one year instead of the statutory six months requirement, Okon’s long trek to obtaining a loan via his contribution began. His PMB made impossible demands from him, leading to his anger and decision to suspend his application for the elusive loan.
That was how Okon’s faith in his country’s mortgage system almost died and his dream of owning a home through mortgage was deferred.
Although through frugal living and co-operatives, Okon has been able to build his housing, a modest three bedroom bungalow in a Lagos suburb, his interest and hope in the Nigerian mortgage system came alife again when the Federal Government, in another round of intervention, set up the Nigerian mortgage refinance company (NMRC) in 2014.
NMRC was launched into the Nigerian mortgage market as a secondary mortgage institution aimed to raise liquidity in the mortgage system and drag down interest rate on mortgage loan to upper single digit or a spread of double digits. Its operation was also expected to catalyse the development and delivery of affordable housing to Nigerians within the low income bracket.
It is a private sector-driven company 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 whose mandate is mainly to increase liquidity in the mortgage system by refinancing mortgages originated by the primary mortgage banks (PMBs) came on a very high pedestal of providing cheap and long term funds, reducing interest rate to single digit, increasing the country’s housing stock by 720,000 annually, and creating 300,000 indirect jobs.
To Okon and many other Nigerians, particularly the mortgage operators, this was a new dawn because the company would issue long term bonds in the capital market as efficiently as possible and channel the proceeds to refinance member-institutions at a competitive rate, bringing to an end, or reducing to the barest minimum, the huddles posed to mortgage lending to real estate.
True to this expectation, NMRC has visited the capital market twice and raised about N19 billion. In the visit, it raised N8 billion with which it refinanced mortgages originated by six mortgage institutions including Stanbic IBTC, Imperial Homes, Sterling Bank, Sun Trust Mortgage Bank, Trustbond Mortgage Bank, and Homebase Mortgage Bank which got N1.8 billion, N1.7 billion, N1.6 billion, N1.3 billion, N700 million and N500 million respectively.
It remains to be seen by Okon and other Nigerians what purpose this refinancing function has served Nigerians. The effect of the refinancing of the six mortgage institutions is yet to be felt in the housing sector as there is no news anywhere of any mortgage loan applicant, especially NHF contributors, that have been given loans to buy, build or renovate houses as a result of this.
The second capital raise by the company has added to the number of PMBs whose loans have been refinanced, raising expectations that more mortgage applicants will be able to access mortgage to buy or build their homes.
Officials of the company assured that when they raised another capital, it would come at lower interest rate and PMBs will be able to access the funds at lower interest rate, if not at single digit, at least, at lower double digit.
High interest rate has been the bane of mortgage access for home ownership in Nigeria as many mortgage applicants and home seekers cannot afford the commercial interest rate of between 20 percent and 25 percent charged on mortgage loans with very short repayment period.
The role NMRC is expected to play in this direction is to provide liquidity for the mortgage market and, consistent with its mandate to promote wider spread of home ownership, accessibility and affordability, the company has come with some initiatives that have also failed to show impact.
The ‘Housing/Mortgage Market Information Portal (MMIP)’ is one of such initiatives aimed to enable it to gather data for intelligence and profiling of federal, states civil servants and informal sectors (off-takers) for affordable housing.
Another initiative 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 duplication of effort in gathering data and documents; improving the turnaround time, reducing the cycle time of transactions and helping in making homes more affordable.
But, affordable housing is made possible more by affordable mortgage which is not available at the moment . And like Pip, it is still great expectations for Okon and others who want mortgage facility in Nigeria as it is done in other countries of the world.
