PROPERTY NEWS

UNDER fresh efforts to reform the housing finance sub-sector and revitalize the operations of mortgage institutions in the country, the Federal Government may soon establish a Mortgage Refinance/Liquidity Company (MRC), as a Special Purpose Vehicle (SPV) to serve specialized second-tier institutions and provide both short-term liquidity and long term funding to mortgage originators and housing finance lenders in the country.

The proposed MRC, when established, would be private-sector driven, while its seed capital would be sourced mainly from deposit money banks and Primary Mortgage Institutions (PMIs), with the CBN providing necessary support and not more than 10 per cent of the capital.

Central Bank Governor, Mallam Sanusi Lamido disclosed during a retreat organized by the International Finance Corporation in collaboration with Mortgage Bankers Association of Nigeria (MBAN) that the dearth of long term deposits coupled with low level of capitalization of the Primary Mortgage Institutions (PMIs) in the country are factors militating against the drive to consistently finance long term loans on a sustainable basis.

The CBN governor noted during the retreat, which had as theme 'Liquidity Facility as Strategic Tool For a Viable Housing Finance Sector in Nigeria,' that Primary Mortgage Institutions in the country have had serious challenges in fulfilling their mandate of providing housing finance due to the dearth of long-term funds, the poorly designed National Housing Fund, inadequate capitalization of the Federal Mortgage Bank of Nigeria (FMBN), weak legal and land registration systems leading to difficulties in accessing lands, absence of a Mortgage Refinance/Liquidity facility or secondary mortgage market, and weak capital/inadequate branch network of PMIs for easy mobilization of deposits and disbursement of loans from the National Housing Fund to contributors.

He disclosed that a review of Primary Mortgage Institutions shows that all the active PMIs had a consolidated balance sheet size of N336.5 billion by the end of September, 2009, adding that only 33 PMIs met the Mortgage to Total Assets ratio of 30 percent, while 53 met the Mortgage to Loanable Funds ratio of 60 percent.

Sanusi stressed the need to safeguard the mortgage sector to enable it play its role as an engine for equitable economic growth, particularly in view of recent challenges from the global financial meltdown.

He noted that a stable and vibrant housing finance system has enormous potential for stimulating economic development, hence its inclusion as one of the key component of the reform proposal for the housing finance sector.

The Deputy Senate President, Senator Ike Ekweremadu said at the event that the National Assembly would put soon put in place necessary legislative frameworks to facilitate the provision of decent housing for Nigerians and mobilize the much needed liquidity for the housing sector.

He noted that housing development policies and laws have virtually been reduced to paper tigers, adding that the leadership has not demonstrated the needed political and administrative will to comply with or implement the existing laws to the later.

"We have not shown adequate foresight in setting targets and in putting an effective legal and institutional framework in place For instance, Allegations are rife about gross defaulting of the provisions of extant policies and laws aimed at making finance s available for housing development," he said.

The Deputy Senate President, who noted that 98 per cent of the estimated 11 million existing housing units in the country were self-built, stated that Nigeria is operating a "cash and carry" home-ownership tradition, against mortgage and housing financing obtainable in other parts of the world.

He stressed that the nation's housing deficit has continued to soar over the years because of inadequate financial backing and lack of radical political intervention.

His words, "This is very injurious to the growth of mortgage culture and financing as a critical instrument for translating government housing development policies into reality. Everyday, most of us leave our homes to go about our businesses and we return to their cool comforts at the end of the day. We do not worry about the next card the landlord will deal or where the next rent would come from.

"But we all know that for each of us that is privileged to own houses, there are millions out there grappling with housing challenges of varying degrees. The crux of these challenges boil down to unavailability of financial instrument that effectively facilitate easy access to affordable housing in Nigeria."

Speaking on 'Contemporary Issues in Corporate Governance for the Mortgage Banking Sector in Nigeria,' the Managing Director, Excel Professional Services Limited, Dr Oladimeji Alo said that recent developments in the global financial system and in Nigeria's financial environment call for concern, hence the need to ensure good corporate governance system in the various PMIs in the country.

President of MBAN, Mr. Olayinka Abimbola said blamed the difficulty in accessing mortgage in the country on the dearth of land that have adequate security in terms of collateral, as most lands don't have Certificate of Ownership.

He said, "There is lack of long-term funds for the mortgage sector, which is why we want to create a liquidity window which we can use to offload existing mortgages and create a depth in the market. Every Nigerian should have a home, we need to provide affordable housing to enable Nigerians have a decent home while government should provide social housing scheme to take care of those who are not economical buoyant."

Olayinka observed that the association, in its presentation on the proposed Land reform by government, had recommended that the Land Use Act be removed from the Constitution to be left on its own, while all inhibiting laws that affect the creation of mortgages should be reviewed.

In a communiqu? at the end of the retreat, participants stressed the urgent need for a liquidity facility in Nigeria to source long term funds from the capital market which would enable PMIs extend mortgage loan maturities, thereby increasing affordability of mortgages and homeownership for as many Nigerians as possible.