Mortgage is among the many sectors of regional and global economy at the receiving end of the crippling impact of coronavirus pandemic. The virus has affected nations’ economies significantly.
The main concern of everybody now is how to survive COVID- 19 and so, nobody is minding his or her indebtedness to either individuals or institutions or both. This explains the fear of mortgage default among operators everywhere.
In Nigeria, the fear of default is also palpable. The few mortgagors in the country are mostly people in the formal sector. These are people whose work places have been shut down for months, meaning that there is no income. Salaries have been put on hold and, where they are paid, they have been cut.
But operators have to remain in business, hence the need for their umbrella body to revisit an earlier initiative which it set out to explore a couple of years ago. It serves the moment.
Mortgage Banking Association of Nigeria (MBAN) had announced that it was exploring a veritable funding source for the sub-sector, explaining that the move was aimed to find out the suitability, applicability and the possibility of adopting non-interest mortgages to unlock the potential of the Sukuk model.
The economic situation in the country occasioned by coronavirus means that MBAN has to return to the drawing table to re-activate all process necessary for that initiative to leave the ground
“That was a very good move that brought excitement to a sector that has been dull and unexciting for years now. One thought some sort of life was coming into the sector, but it does seem that it is still all motion without movement,” said Modupe Ogundana, a mortgage market analyst.
Ogundana described the move as “inspiring and forward-looking”, urging the operators to forge ahead with the idea given the expected gains and impact it will make on housing and home-ownership.
Mortgage banks had agreed to un-bundle the subsector in the main areas of mortgage guarantee and insurance as well as collaborate with the mortgage brokerage companies to deepen mortgage financing, thereby devolving some of their functions to the mortgage brokerage firms to ensure more vibrancy.
They advocated that MBAN should explore collaboration with building materials manufacturers to reduce the cost of houses and make housing affordable as well as resolved to explore viable options for cheaper sources of funds with a view to reducing the interest rate on mortgages to single digit.
Consequently, they plan a tripartite advocacy for intervention fund for the sub-sector in partnership with Central Bank of Nigeria (CBN), National Pension Commission (PENCOM) through the proposed interest rate matching fund scheme and a home-grown initiative for tying mortgage to pensions, which will encourage homeownership and lower interest rate on mortgage.
The document, issued in respect of this move, was signed by MBAN president, Adeniyi Akinlusi and the Executive Secretary, Kayode Omotoso. The document notes that since infrastructure constitutes over 30 per cent of the cost of housing delivery, federal, state and local governments should strive to provide support to estate developers by stepping up provision of infrastructure to enhance delivery of affordable housing in the country.
MBAN said it was planning to start a constructive engagement/advocacy with the governments for improved infrastructure development to drive down the cost of housing delivery, especially for the low and mid-income earners.
The operators recommended that Federal Mortgage Bank of Nigeria (FMBN) and MBAN should take necessary steps to fast track the evolution of new business models that would include strategies to streamline on-line processes for access to the NHF scheme.
This, they explained, was to mitigate the challenges of response time to secure approval from FMBN on National Housing Fund (NHF) loan applications. It was also agreed that both FMBN and MBAN should collaborate to create public awareness on the NHF scheme, and its critical imperative to mortgage for home ownership in Nigeria.
The mortgage firms prescribed further that MBAN and other stakeholders should explore how data gathering and extraction strategies can be incorporated in the operational strategies of each mortgage bank, to make mortgage process quick, smart and efficient and to enhance decision making and efficiency in the sub-sector.
They agreed that MBAN should collaborate with other stakeholders such as the CBN, Nigeria Mortgage Refinance Company (NMRC), FMBN and Real Estate Developers Association of Nigeria (REDAN) for the purpose of approaching the National Assembly (NASS).
They want the NASS to expedite action on amendments to the various laws affecting the mortgage/housing sub-sector; especially those related to foreclosure and improving the operations of the NHF scheme viz-a-viz collection, enhanced coverage and reducing the housing deficit.
The operators are concerned about the slow growth of their sector in an otherwise robust economy where its contribution is very critical. This is why they have come out with strategic initiatives aimed at growing the sector and making it unlock its potential.
They are, therefore, plotting and pushing for the unbundling of mortgage origination process, further reduction in loan origination period, introduction of computerised land titling registration, land title insurance, introduction of uniform mortgage underwriting standards (UUS) for informal sector, enactment of foreclosure law, and wider public awareness for the sector.
The sector’s slow growth is reflected in its low contribution to GDP which stands at 1 percent, hence the drive by the operators to push this contribution to, at least, 5 percent in the short term, 30 percent in the medium term, and about 65 percent in the long run.
The sector is challenged in several ways which Femi Johnson, CEO, Homebase Mortgage Bank Limited, blames on low mortgage penetration. He said that this low penetration is why less than 5 percent of about 13.7 million housing units in the country has formal title registration.
