February 13, 2012
FOLLOWING entreaties from mortgage operators to review the new guidelines for the sector, the apex mortgage authority, Central Bank of Nigeria has altered the deadline for the recapitalisation of Primary Mortgage Institutions (PMIs) in the country.
The Guardian learnt that the moratorium to mortgage firms to recapitalise or shore up their shareholders’ funds has been extended by six months by CBN’s Other Financial Institutions Department (OFID). The umbrella body for all PMIs, Mortgage Banking Association of Nigeria (MBAN) received a memo to that effect last week.
Initially, CBN granted the mortgage firms a 12-month deadline from November 1, 2011, which would have terminated by December 12, 2012, but now extended to 18 months, by April 30, 2013. Under the fresh guidelines, mortgage firms have been categorised into National and State mortgage firms, while the National PMIs are allowed to operate in any or all parts of the federation after the payment of a new N5 billion minimum paid up capital, the State PMIs are restricted to only one state at the payment of N2.5 billion.
Sources further disclosed that the mortgage firms had sought three key changes in the guidelines: Extension of the deadline, the State PMIs to become regional and covering six contiguous states and Federal Capital Territory (FCT) to be included as a universal territory.
The Guardian learnt that another change made by CBN is the renaming of the Committee of the Mortgage Institutions of Nigeria (COMIN) to Mortgage Bankers Committee, a consultation meeting between regulators and operators, which may likely hold in March to thrash out issues relating to consolidation of the mortgage sector.
The policy thrust of the latest document is to rejig the housing finance market, where the ratio of mortgage finance as a percentage of GDP stands at 0. 5 per cent and lags behind emerging markets like compared to South Africa 29 per cent, Mexico 10 per cent and Malaysia 29 per cent.
The wide differences stem from lack of affordable houses, unavailability of mortgagees to finance purchases, including lack of long term funding for mortgage lenders, difficulties faced by buyers in registering a mortgage or title transfer and difficulties in foreclosing on a property when a borrower defaults.
Statistics released by the bank shows that loan and advances in the sector between 2008, 2009 and 2010 are N108, 531,488, N121, 290, 217 and N124,165,992 respectively; deposits for the same period are N166,234,932, N151,112, 301 and N168, 577, 083 respectively while shareholders are N70,345,140, N86, 614,813 and N80.341, 095 respectively.
CBN explained that its rationale for the State PMIs is to promote the spread of mortgage firms across the six geo-political zones to further embed the objective of financial inclusion and national PMBs will provide options for operators to remain in business at different authorisation levels, and similar to other banking segments.
Currently, the minimum capital requirement for mortgage firms stands at N100 million, which is contained in the 2003 guidelines that allows granting of loans or advances for the purchase or building, improvement or extension of a dwelling/commercial house, acceptance of savings and deposits, management of pension funds/schemes, performing estate management duties as well as offering of project consultancy services for estate development and engaging in estate development through loan syndication.
Specifically, under new guidelines, PMIs would only be allowed to perform duties such as mortgage finance, real estate construction finance acceptance of savings and time/term deposits, acceptance of mortgage-focused demand deposits. It clearly streamlines the activities of a PMB to the provision of mortgage finance and exclude other related activities e.g. the provision of estate management duties, etc.
MBAN Executive Secretary, Mr. Kayode Omotoso who confirmed the development, told The Guardian that MBAN has been in the forefront of driving reforms in the mortgage banking sector in order to strengthen its operations as a component of the financial services industry and catalyst for housing delivery.
He said:“Its only when we have a strong and robust primary mortgage market that we can stimulate the evolution and development of the secondary mortgage market in the country, which is a veritable platform for sourcing long term funds at the single digit interest rate.”