NMRC and growth prospect for mortgage sector

Events of the last couple of months emanating from the operations of the Nigerian Mortgage Refinance Corporation (NMRC) are not only encouraging but also raising prospects that the Nigerian mortgage sector is on growth path.  Set out as a secondary mortgage institutions with the aim of providing liquidity, cheap and long term funds in the mortgage system, NMRC also has the statutory function of  refinancing the mortgages to be originated by the primary mortgage banks (PMBs) and other mortgage institutions. Consistent with this, the corporation has launched 10,000 mortgages which, in the opinion of close watchers of the mortgage system in Nigeria, is an ambitious move that will set the tone and direction of the sector in the months and years to come.

 By this move, the corporation has raised hope for affordable housing delivery and home ownership for low income earners who will, through this, be able to access mortgages at lower, affordable interest rate and at longer repayment tenor. The Federal Government had, at the launching of the scheme early this year, announced that the number of mortgages in the country would be increased to 200,000 from its present 20,000, assuring that with the full operation of NMRC, a substantial building block would be put in place to pull down interest rate on mortgage loans from the current spread of 20 to 23 percent to low double digits or high single digit.

 Also, recently, the corporation in conjunction with the International Finance Corporation (IFC) developed uniform underwriting standards for primary lending institutions (PLIs) and other stakeholders with the aim of promulgating mortgage lending standards and procedures within the mortgage market. Apart from facilitating improved access to housing finance, the uniform underwriting standards also seeks to institutionalise criteria for acceptable mortgage loans for refinancing by NMRC, including payment performance, financial terms, legal contract terms, mortgage loan product designs, mortgage loan underwriting criteria, and the contents of mortgage loan documents.

 These are very positive developments in a sector that has, all these years, remained a fledgling in a country like Nigeria with intimidating demographics, a super-active rental market and staggering housing deficit. We see hope in this sector and, by extension, for the economy bearing in mind that some advanced economies like America and Britain had, at one time in their economic development leveraged their mortgage industry, and the sub-prime mortgage crisis of the last few years lends credence to this.

 The bane of growth of the Nigerian mortgage sector had been high interest rate and discretionary writing standards that created a disjointed market where everyone differed from everyone else. We agree with Sonnie Ayere, NMRC CEO, that lending standards promote efficiency and mitigate legal and operational risks inherent in mortgage lending by ensuring quality collateral, adequate property title, proper registration and enforcement of mortgage liens, and maintenance of efficient collection processes.

We however, have our fears premised on the availability and affordability of housing for this mortgage operation. This is because mortgages only make sense where there are houses on which mortgages could be created. The minister of Lands, Housing and Urban Development, Akon Eyakenyi, has said that her ministry was committed to providing the first 10,000 housing units required to kick-off the NMRC project in collaboration with key stakeholders in the building industry, adding that they have an obligation to develop a medley of house-types that are affordable, of good quality, excellent standards, and located in viable and aesthetic communities, serviced with the requisite infrastructure and services. This, for us is just a matter of promise and we join the rest of Nigerians in waiting to see how all these play out for our collective good and also for the interest and growth of the economy.