Hope for residential mortgage coming for pension contributors (2)

The Pension Reform Act 2014 has expanded the benefits of the Contributory Pension Scheme (CPS), providing opportunity for contributors (workers) in the scheme to withdraw from their retirement savings (RSA) towards equity contribution for payment of residential mortgage.

Here, the industry regulator, the National Pension Commission (PenCom) releases a draft guideline to enable take-off of the scheme, while stakeholders make contributions that would result in final guidelines.

5.0 Eligibility criteria for the property and mortgage

5.1 An eligible RSA holder shall use the proceeds of the mortgage loan to purchase either a single-family home or an apartment in a multi-unit building, which must be owner-occupied.

5.2 The title to the property must have a fully perfected title and free from any encumbrance.

5.3 The property shall have comprehensive insurance policy in the name of the borrower, to cover the replacement or reinstatement cost of the property. The insurance policy must note the RSA Fund as one of the first loss payees, to cover the equity contribution released by the PFA.

5.4 The valuation of the property to be purchased with the mortgage loan shall be carried out by a licensed, independent valuer who is a member in good standing with the Nigerian Institution of Estate Surveyors & Valuers (NIESV) and must carry Professional Indemnity Insurance with an insurance company licensed and in good standing with National Insurance Commission (NAICOM).

5.5 The mortgage loan amount shall be a minimum of N1.5 million and a maximum of N50 million.

5.6 The tenor of the mortgage loan shall be for a minimum of 5years and a maximum of 20years.

5.7 The interest rate on the mortgage loan shall be at a fixed rate for its whole duration.

6.0 Eligibility criteria for primary mortgage banks (pmbs) and deposit money banks (dmbs)

6.1 The eligible PMB and DMB shall be a NMRC Member Mortgage Lending Bank, as published and updated from time to time on the NMRC website (www.nmrc.com.ng).

6.2 An eligible PMB shall have a minimum paid up share capital of N2.5Billion or as stipulated under CBN Guidelines for PMBs. whilst, a DMB shall have a minimum paid up share capital of N25Billion or as stipulated by CBN.

6.3 The PMB or DMB shall maintain a credit report from 2 independent Credit Bureau Agencies licensed by the Central Bank of Nigeria (CBN), indicating a minimum credit score of “Satisfactory”.

6.4 The PMB or DMB shall have good and stable financial standing at all times, and satisfy the minimum requirements of the CBN and NMRC, in terms of credit policy, asset/liability management policy, arrears management and repossession policy, Basel 2, IFRS financial statements, liquidity, leverage, capital adequacy, overall asset quality, profitability etc., as may be prescribed from time to time.

6.5 The NMRC and/or CBN shall confirm:

i. The good and stable financial standing of the PMB or DMB.

ii. That the PMB or DMB has satisfied the minimum requirements in terms of credit policy, asset/liability management policy, arrears management and repossession policy, Basel II, IFRS financial statements, liquidity, leverage, capital adequacy, overall asset quality, profitability and other requirements as may be prescribed from time to time.

7.0 Drawdown procedures and documentation requirements

7.1 A RSA holder on obtaining a confirmed Offer of Mortgage Loan Facility from a PMB or DMB, shall forward an application to the PFA requesting to access his/her RSA balance, and attaching the following relevant documents:

i. Application Letter to access RSA balance signed by the RSA holder

ii. Mortgage Loan Offer Letter issued by a licensed PMB or DMB

iii. Copies of valid documents to property on which mortgage loan was granted

iv. Draft Mortgage Loan Agreement

v. Letter of Confirmation issued by the PMB or DMB to the PFA, attesting to the genuiness and authenticity of the mortgage transaction with the RSA holder. The Letter of Confirmation shall be signed by, at least, two Directors of the PMB or DMB, in addition to the Official Stamp or Seal of the PMB or DMB (standard format of Letter to be issued by the Commission)

vi. Other relevant documentation requirements

7.2 Notwithstanding the provisions of Section 7.1(v), the NMRC and/or CBN shall verify the authenticity of the Mortgage Loan granted by the PMB or DMB, prior to submission to the PFA.

7.3 PFA shall review the application to ascertain that it meets the minimum eligibility requirements as outlined in these Guidelines, validate the authenticity of all documents submitted in support of the application and forward the documents to the Commission for approval of the remittance of the equity contribution from the RSA.

7.4 The Commission shall review and approve the application where documents forwarded in 7.1 above meet the minimum stipulated requirements.

7.5 However, where the documents do not meet the requirements, the application shall be rejected, with the PFA clearly stating the deficiencies in the stipulated requirements.

7.6 The PFA shall upon receipt of approval from the Commission, authorize the PFC to release approved funds to the PMB or DMB.

7.7 The PFC shall then remit the approved amount to the designated PMB or DMB based on advice from the PFA and approvals received from the Commission.

7.8 The PMB or DMB shall notify the PFA once the mortgage loan transaction is successfully concluded.

7.9 However, where there are any unresolved issues or challenges, which may render the transaction to be inconclusive, the PMB or DMB shall immediately notify the Commission/PFA in writing and provide detailed information on the issues.

7.10 A RSA holder shall notify the PFA / Commission in writing, of any breach of contractual obligation by the PMB or DMB.

7.11 Upon receipt of any compliant from the RSA Holder, the PFA shall immediately forward such complaints to the Commission.

7.12 The Commission shall subsequently notify the CBN on complaints received from RSA holders and follows up on resolution of the breach, in order to safeguard the pension assets of RSA holders.

8.0 Sanctions for violation of these guidelines

8.1 The provisions of Sections 99 to 105 of the Pension Reform Act (PRA) 2014 shall apply to violations of these Guidelines.

8.2 Specifically, any RSA Holder or PMB or DMB that misappropriates pension fund assets or with intend to defraud, produces any document or gives any information or explanation, which is false or misleading, in respect of these mortgage transactions, commits an offence and shall upon conviction be liable to a fine or imprisonment or both.

8.3 Where the violation of these Guidelines is committed by a body corporate, the body corporate or every director, manager, secretary or other officers of the body corporate; person who was purporting to act in such capacity of the body corporate, who had knowledge or believed to have had knowledge of the commission of the offence and who did not exercise due diligence to ensure compliance with the Guidelines shall be deemed to have committed an offence and shall be proceeded against in accordance with the PRA 2014.

9.0 Reporting requirements

9.1 All PFAs and PFCs shall submit to the Commission, quarterly reports on withdrawals from RSA ‘Active’ Funds in respect of payments to PMBs and DMBs…