Retail mortgage and dearth of wealth-building products

The dawn of each day heightens the fear among mortgage industry stakeholders that the Nigerian Mortgage Refinance Company (NMRC) may end up another great expectations after Charles Dickens’.

Increase in liquidity in the mortgage system which is part of the mission of the refinance company was expected to enable the primary mortgage banks (PMBs) whose mortgages are being refinanced to activate their retail bank units and start churning out wealth-building products for consumers.

A number of these PMBs have their mortgages refinanced and expectation is that they should be originating products, especially consumer products, that can enable home ownership or ownership of house-hold items, or products that can help subscribers raise equity from their homes.

Activities in the mortgage market before the banking sector reform was quite interesting. The foray of many commercial banks into retail mortgage after the banking consolidation and recapitalisation led to the evolution of a competitive business environment, and a culture of efficiency and innovation among the operators.

Institutions had to develop competitive spirit not only to remain in business, but also to increase and make good returns on shareholders’ investment such that innovative ideas, especially in product origination, became the norm.

The market was awash with products, especially those that would enable consumers have easy access to homeownership. Some of the mortgage institutions took it a step higher with the creation of products that would enable property owners build wealth from their property and yet enjoy the comfort of such property.

Consumers look back to those days in the market and are asking where these products from which they could build wealth and make a difference in their investment or assets. They have not forgotten such products as First City Monument Bank’s (FCMB) ‘Unlock your Cash’ and former Bank PHB’s ‘Home Owner’s Advantage’ which are the kind of products that they need today in the face of the downturn in the economy.

FCMB’s Unlock your Cash, a variant of the bank’s flagship mortgage product, ‘MyHome’ is one of the most popular refinance products in Nigerian mortgage market. This gave opportunity to people who had worked hard to build or buy their homes to let those homes work for them by releasing the funds comparative to the value of the property towards meeting other life needs.

Some customers who had been forced, in the past, to borrow short tenured loans of 3 to 5 years now have the opportunity, through this refinancing option, to access the product where the bank pays off the loan owed the financial institution and provides more manageable repayment amounts that ease the customer’s cash flow through the bank’s longer tenors.

For existing home owners, the bank allowed them to unlock up to 70 percent of the value of the property if they lived in it and 60 percent if they didn’t. It also provided home owners the opportunity of registering their titles making their properties mobile and ensuring that they were working for them just like share certificates made stocks fluid.

Ladi Balogun, then group managing director and chief executive officer of the bank, remarked then that they had been able to impact positively on tenured loans in the market by providing longer tenure.

“We have been able to offer long tenured loans to the Nigerian mortgage market. Our observation before we entered the market was that only short term loans were available, making mortgages very unaffordable to the average salary earner.

“Now, with a longer pay back period, repayments are more manageable, with the option of reducing one’s principal outstanding when his economy improves or even leveraging more funds as the property value appreciates”, he said. This kind of statement is rare in the mortgage market of today.

The Home Owners Advantage floated by the defunct Bank PHB was another wealth building product that, by its name, gave advantage to homeowners to build wealth on such homes.

The product was different from traditional mortgage financing in the sense that it allowed those who own their homes and had valid legal titles to them to raise finance out of their property for a fixed period. The finance they have raised could be used to buy new assets or create new investments, grow their wealth and live better life.

Over all, these are the kind of products that both home owners and those who want to own one are longing for. According to them, mortgage products should be able to meet the needs of its consumers. What obtains in the market presently are generally unaffordable and do not give any advantage to existing or prospective homeowners.

Mortgage operators, however, insist that they have ‘something for somebody’ in the market.

In all these, Resort Savings and Loans’ RIMPLAN, an acronym for Resort Investment Plan, and Trustbond Mortgage Bank’s HomePlan stand out. According to the authorities of these banks, subscribers to the

RIMPLAN, the explain, is a well thought out product aimed to encourage savings towards homeownership and it facilitates timely and favourably priced mortgage delivery to the subscriber.

Chuka Uroko