Mr Kehinde Ogundimu is the Managing Director, Nigeria Mortgage Refinance Company. He tells MAUREEN IHUA-MADUENYI that affordability is still a major hindrance to housing provision in the country, among other issues
Between 2013 and now, there have been a lot of initiatives in the mortgage sector including the establishment of the Nigeria Mortgage Refinance Company. How successful have these been?
The Nigerian Mortgage Refinance Company has had many transformational impacts on the Nigerian mortgage sector. Among these is an increase in the average tenor of mortgages from seven years to a minimum of 15 years.
The NMRC has also streamlined and de-risked the mortgage origination process by working with other stakeholders to develop and adopt the Uniform Underwriting Standards for the formal, informal, non-interest and diaspora segments of the market.
The Uniform Underwriting Standard aims to promote efficiency and mitigate the legal and operational risks inherent in mortgage lending by ensuring quality collateral, adequate property title, proper registration, enforcement of legal mortgages, and maintenance of efficient collection process.
Such standards will balance the requirements of responsible finance with lenders’ needs to enforce loan contracts as well as enhance consumer confidence in the mortgage products.
As part of the initiatives to strengthen the industry, the NMRC has developed and drafted the legal framework for title registration, mortgage administration and foreclosure which had been signed into law in two states, and many states are currently in the process of making it a law.
We have also created attractive long-term assets for pension funds to invest in the real estate sector and we are working on the setup of the Nigeria Mortgage Guarantee Company, a public-private partnership that will guarantee products by incentivising lenders to accept loans with lower down payments, thus increasing affordability and ensuring robust primary mortgage market.
The establishment of a guarantee product will help improve housing finance affordability issue as the product will bear some of the credit risk for lower-income borrowers. The guarantee will provide credit default loss protection to mortgage lenders. Apart from the NMGC, we are working on the setup of the Electronic Mortgage Asset Registry System.
Looking back at these initiatives, how would you rate the mortgage industry in Nigeria and what are its prospects?
Affordability remains a big challenge in the industry because of the high cost of construction, high interest rate and low income of the average Nigerian worker.
However, there has been a significant improvement in interest rates; rates have dropped by at least five per cent, and tenors have been extended up to 20 years as a result of the NMRC coming on board.
Concomitantly, there has been a marked improvement in the services and offerings in the mortgage industry, with individuals having faster access to mortgage loans.
As part of its mandate, the NMRC issues bonds in the capital market to raise funds for refinancing mortgage.
What is the current total bond issuance by the company in the capital market, and is the NMRC planning another bond issuance this year?
We have raised a total of N19bn through two bond issuances from the debt capital market and both issues were significantly over-subscribed, which is a mark of confidence in the NMRC as an issuer.
The first series were issued in 2015 for N8bn while the second series were issued in 2018 for N11bn. Both bonds were guaranteed by the Federal Government and were fully deployed towards refinancing legacy mortgage loan portfolios of the eligible member primary mortgage banks.
In addition to the N19bn raised from the capital market, we have also used our funds to refinance the mortgage portfolio of banks.
Since inception, the NMRC has refinanced eligible mortgage loans of four commercial banks and eight primary mortgage banks. We are also planning to issue another bond this year in furtherance of our mandate to promote homeownership in the country.
There have been efforts to get state governments to adopt and pass the Model Mortgage Foreclosure Law, which will improve access to homeownership. How many states have keyed into this initiative?
So far, two states have passed the Model Mortgage Foreclosure into law; four states are in the process of passing it into law and we have active engagements with another four states on the law.
Apart from the housing deficit, Nigeria also has the problem of substandard buildings. What is being done to tackle this?
Until we vigorously enforce our building codes and standardise and industrialise the building process and materials, we will not solve the problem of substandard buildings.
As an organisation, our role in this has been mostly advocacy; on the other hand, we have adopted the training of artisans and technicians in the built sector as our corporate social responsibility.
Each year, we train internally displaced persons and people that have been rescued from human traffickers as masons, plumbers, electricians, etc. At the end of the training, we provide them with tools to start their careers and monitor their progress.
The training programme is part of NMRC’s ongoing strategic community outreach programme. The NMRC’s goal is to impact lives, empower unemployed and vulnerable persons as well contribute to ongoing efforts to redress the skills gap in the building industry in Nigeria often cited as one of the key constraints to the growth of robust housing market growth.
Despite the efforts to improve access to mortgage, low awareness and lack of trust in the system are still major issues among Nigerians who should be beneficiaries of all the initiatives in the industry. What is being done about this?
As an organisation, we are engaging the general public at all levels through workshops, seminars, participation in housing programmes and having continuous engagements with state governments as well as the private sector.
Stakeholders in the housing sector still see Land Use Act and other regulatory issues, especially titling, as setbacks; how do you think the problems can be tackled?
Pending the amendment of the Land Use Act, the setbacks associated with titling can be addressed in two ways: industry-wide adoption of the security trustee model, where if a property is likely to be acquired through financing, the title to the property should be transferred to a security trustee who holds same for all parties across the value chain.
This system will circumvent the need for registration of transfers from mortgagor to bank to refinancing company. However, this requires the concerted voice of all stakeholders in the industry.
The second system is the adoption of the Model Mortgage Foreclosure Law. The MMFL contains administrative provisions, which if implemented will detangle the bureaucratic bottlenecks currently experienced in many states across the country.
The Model Mortgage Foreclosure Law is intended to help strengthen the regulatory framework for mortgage finance by fast-tracking the process for creating legal mortgages including reducing the cost and processes for obtaining the relevant consents and registration, timely resolution of disputes arising out of mortgage transactions, consumer protection and creating an efficient foreclosure process.
Through this initiative, states can lower the cost of land and mortgage transfers from about 30 per cent to five per cent; set a standard for completion of foreclosures within 180 days; and courts can set up specialised mortgage courts to handle these transactions.
The systems will help to create a specialised registry for mortgages and set out timelines for the perfection process. This will decongest the lands registry, thus making title perfection faster, while also easing the registration of mortgages. It will also help in specifying a time within which a governor’s consent to mortgages is to be issued, for instance 40 business days, else consent is deemed to be in place. Beyond mortgages, this should be extended to registration of title to property.
The MMFL, when adopted, will help in simplifying the procedure for mortgage registration and providing a statutory mortgage form, which, if filled and registered, is sufficient to create a legal mortgage rather than having large volume-agreements.
Are there other benefits it could offer?
It will also provide a management entity that can help with legal title property with a plurality of interests, such as multi-storey floors, where each flat may have a different owner. This will remove the need for registering the transfer of such owner’s interest.
Lastly, the adoption of the MMFL using modern Information and Communication Technology will speed up land administration and titling processes. Each state should establish a Geographical Information System to facilitate timely title registration; this will ease difficulties in land transaction and create an efficient land and mortgage market through a reliable online information system.
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