PROPERTY NEWS

Faced with the challenge of developing sustainable housing and mortgage finance system, mortgage sector operatives are canvassing for reform that will alleviate some of the burdens of inadequate affordable housing supply and boost mortgage assets

AIMING to seize the opportunity of a fresh start to chart a new course for the mortgage sector, operatives are seeking comprehensive policy reform that will better integrate the housing and housing finance sectors into the larger national financial system, standardise loan instruments and underwriting methods, as well as make National Housing Fund (NHF) attractive to Primary Mortgage Institutions (PMIs).

The recommended reform is part of a memorandum submitted by the Mortgage Banking Association of Nigeria (MBAN) to the Vision 20:2020 Secretariat in the National Planning Commission, Abuja early this month.

MBAN's 15-page submission, signed by the President, Abimbola Olayinka and Executive Secretary, Kayode Omotoso is coming on the heels of independent tips expressed by the operators for the new Central Bank's Governor, Lamido Sanusi to fast track reforms in the sector.

Actions recommended by the association include creating a framework for mobilisation of private sector funding into the housing sector by providing necessary incentives pension and insurance funds companies to partner with the primary mortgage sector to develop market-based financial products with a view to jump-starting secondary mortgage operations, a reduction in transaction charges associated with the housing sector, which presently imposes a significant cost burden that is ultimately borne by homebuyers and setting-up of special administrative processes that will shorten the time required to obtain governors' consents to mortgage and to assign, as well as approved plans for buildings and estate developments within all the 36 states of the federation, and expedited passage of housing, housing finance and other legislation presently pending before the National Assembly so that they are signed into law in earnest.

Others are facilitate the issuance of a limited guarantee by the Federal Ministry of Finance under a scheme similar to the U.S. Home Loans Bank for providing liquidity to PMIs, thereby enabling them to increase their mortgage origination activities, achieve an expansion in housing supply by introducing relevant fiscal and other incentives to attract additional private sector funding to housing, and encourage the Federal Government to spearhead an initiative whereby states would commit to providing infrastructure and thus open up new districts/areas in their townships for the purpose of developing additional housing stock, and ensuring partial privatisation of the FMBN with a clearly defined charter that codifies a set of catalytic functions that it could perform as a second tier institution in the mortgage marketplace, to make it more efficient and developmental while facilitating greater competition amongst market players.

In the document, MBAN notes that the long-term development of sustainable institutional housing finance systems requires continued prudent roles for government to improve the policy environment and continue providing targeted subsidies and incentives to manage the short-term transition issues and challenges from the market-wide reforms of the sector.

"Urban infrastructure and rising cost of building materials among others, have been the main bane for estate development in our country, and these have stalled the supply of affordable mortgageable homes. While the country waits to develop the bond market to finance urban infrastructure, we urge for a temporary and targeted intervention fund that will provide infrastructure for serious private sector estate developers, and some measures that will bring down the cost of building materials in the country. This will help alleviate some of the burden of inadequate affordable housing supply for the primary market to originate mortgage assets."

The association said: "We believe that the current state of institutional development of primary mortgage markets in Nigeria compels the policy need to encourage the establishment of a wide range of specialised institutions from community based, state-based, regional-based and national-based that could collectively devote a focused attention to the essential task of mobilising vast amount of resources from the household sector, as well as develop mortgage products that suit the demand from the mass and affordable market that remain grossly under-served today.

According to MBAN, the development challenge before the primary mortgage sector in Nigeria is not therefore only that of strengthening the capitalisation requirements of PMIs, but also that of building the capacity and of nurturing the appropriate set of institutions that are likely to be more responsive to the variety of initial market conditions across the local primary mortgage markets throughout the country.

It further suggests that FMBN and regulators need to immediately address and develop some of the constraints of the PMI sector; namely, liquidity risk, lack of funding sources, poor credit information and collateral systems, lack of credit risk management tools and human resource capacity, lack of standardised loan products that will allow borrowing against mortgage assets or their securitisation and more.

Meanwhile, the Managing Director, FBN Mortgages Limited who doubles as MBAN's Vice President, Mohammed Santuraki urged the new CBN governor to reform NHF system and strengthen FMBN to enable it function effectively as a secondary market institution.

He believed that the new CBN governor had an opportunity to roll out the much-needed reform in this sector in view of the sector's potentially huge impact on national development.

"The PMI industry is still fragmented with preponderance of weak under capitalised institutions and there is a dire need for the creation of a liquidity facility to support the industry. Addressing these, along with the reformation of the National Housing Fund system," he said.

Union Homes Savings and Loans Plc, Managing Director, Mr. Soji Thomas has urged the CBN chief to create an enabling environment for the mortgage industry to boost housing delivery such as creating a special court for mortgage defaulters and standardisation of the primary mortgage market.