Wednesday, February 25, 2009


The attitude of the mortgage bank operators was further informed by the neglect of the CBN for the Committee of Mortgage Institutions (COMINT) meeting.

The COMINT comprised of Chief executives of mortgage banks and the CBN management. The meeting which was supposed to be quarterly is chaired by the Deputy Governor, Financial Sector Surveillance, Mr. Tunde Lemo. Investigations revealed that the meeting was held only twice in 2006 and has not been held since then. This according to operator creates the impression that the apex bank has neglected the sub_sector and care less about the health of its operators.

However, the CBN has failed to respond to the inquiry of the association. "We have not heard from the CBN, not even a line of reply", an MBAN executive stated.

Meanwhile, investigations reveal that most of the mortgage banks have began to subtly rationalize their staff strength to reduce cost. While there is no formal announcement of such exercise but staff are now fired for any flimsy mistake. Business is tough these days and most mortgagee firms are experiencing scarcity of funds. Even those that are subsidiaries of the universal banks are feeling the hit, according to an operator.

The silence of the apex bank is not helping matters at all as it makes it difficult to attract patronage and even plan.

One the delay in the unveiling of a reform package for the sub_sector, a senior CBN staff had confirmed to Vanguard in 2007 that the apex bank wants to complete the take off of the microfinance banking system vis_à_vis the transformation of community banks. Once we are through with microfinance banks, mortgage banks would be the next. Yet more than a year since the December 31st 2007 deadline for community banks to translate to microfinance banks, the CBN is yet to unveil a reform package for mortgage banks.

In fact in 2007, the CBN governor, Professor Chukwuma Soludo disclosed that the apex bank would soon announce a package of reforms for the sub_sector, which includes phased recapitalisation of mortgage banks s, establishment of secondary mortgage companies and drastic overhaul of the National Housing Fund.

In a paper titled

"The Mortgage Banking Sector Reforms: Role of Government in The Development of and effective Mortgage Market, delivered at the 6th annual Chief Executive Retreat of the Mortgage Banking Association of Nigeria (MBAN), Soludo noted that, "The level of capitalization, scope of operations, and volume of core mortgage activities as well as the capacity of their management and staff have remained low. As at December 2005, out of ninety [90] PMIs in operation, only forty_three (43) were confirmed to have met the current statutory minimum paid_up capital of N100 million.

The aggregate shareholders' funds in the sub_sector stood at N18.1 billion, while total deposit liabilities and Loans and advances were N47.5 billion and N28.5 billion, respectively. More alarming is the fact that only 15 out of the 70 PMI5 that rendered returns in December 2005, met the prescribed minimum mortgage assets to total assets ratio of 30 per cent, which reveals the sub_sector's unsatisfactory performance in their core mortgage operations. Part of the reasons that could be attributed to this poor performance is largely due to paucity of long term fund available to these institutions, with which they could create mortgage assets.

As at December 2005, only a paltry sum of 419 billion has so far been mobilized through the National Housing Fund (NHF) which was established in 1992 under the management of the Federal Mortgage Bank of Nigeria, as a contributory scheme to address the observed gaps in housing delivery in the country.

The purpose of the NHF is to provide cheaper. Source of fund for mortgage loans to the Nigerian workers particularly those in the 'lower middle income group to become home owners. Also as at December, 2005, a total of 5,250 mortgage loans beneficiaries were originated through the PMIs and 11,216 housing units were financed through estate developers with a combined disbursement of N13.2 billion or 69 per cent of the N19 billion mobilised under the NHF scheme. Consequently, the fund has failed to make the desired impact in housing delivery.

Also, the inability of the existing PMIs to meet the required minimum capitalization has been attributed to the age_long phenomenon of hold_tight attitude of the Nigerian investors, even in the face of obvious inadequacies. In such circumstances, mergers and acquisitions or the introduction of core­investors is seldom embraced as an option."

Soludo thereafter listed the policy measures and instruments for the reform of the PMI sub-sector to include: Phased recapitalization of PMIs between January 2007 and December 2010 with emphasis on the actual injection of fresh funds to provide the needed liquidity for the sub_sector; Promotion of professionalism in PMI operation through the institution of professional training and certification process; Encouragement of mergers and acquisition in the PMI sub-sector; Promotion of professionalism in PMI operation through the institution of professional training and certification process.

Enforcement of good corporate governance in the sub_sector and the evolvement of a level playing field for all operators especially by mobilizing requisite resources suitable for commitment into mortgages such as participation in pension fund administration; Drastic overhauling of the administration of the NHF in the realms of registration, mobilization and disbursement as well as transforming it to a trust - NH Trust Fund (NHTF).Broader definition of mortgage business to include areas like tourism, hospitality business, furniture and fittings, construction, estate management and development, consumer leading and all house_providing or related industries.

Other reforms measures Soludo disclosed are: Promoting the development of efficient secondary mortgage market appropriately linked with capital market to make housing finance accessible to larger population as means of economic empowerment; Establishment of a framework for the emergence of specialized Institutions or instruments such as mortgage and asset backed securities (MABS) and mortgage insurance to enhance the securitization of mortgage loans and allocation of risks; Establishment of Secondary Mortgage Companies (SMCs) to promote secondary mortgage market facilities for residential mortgage loans.

The SMCs will purchase pools of residential mortgage loans from primary market lending institutions and holding the loans in its own portfolio. It will fund its mortgage purchases through its initial capital and the issuance of bonds or other unsecured debt securities. The SMCs will package the mortgage loans from its own portfolio or from loan originators, and structure them into mortgage_backed securities (MBS) for sale to investors in the capital market; and Promotion of mortgage insurance as public_private partnership ventures as a financial product that offers risk coverage/mitigation to the owners of mortgage loans.

He disclosed further that in order to implement these reforms the CBN would among other things, "Promote the establishment of Secondary Mortgage Companys (SMCs) with relevant government agencies, multilateral agencies and estate developers whose main purpose is to run businesses that promote secondary mortgage market facilities for residential mortgage loans; Promote the establishment of mortgage insurance companies as public_private sector partnership ventures; Promote an efficient secondary mortgage market properly linked with capital market; and Promote an efficient

secondary mortgage market properly linked with capital market

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