New initiatives for increased liquidity in mortgage market
Recognising or identifying an existing problem, it is believed, is half way into solving the problem and this exactly is what is happening in the mortgage market in Nigeria where liquidity is a big issue.
From different fronts, initiatives are being brought up as means to solving the liquidity problem that has held the market down for ages. The driving force, perhaps, is the understanding that the inequality created by lack of affordable housing in Nigeria places a moral obligation on all housing stakeholders to use every tool at their disposal to find solution to providing access to sustainable affordable housing finance.
Nigeria has heavy housing burden with a ‘constant’ housing deficit estimated at 17 million units and low home-ownership level put at a little above 10 percent. All these easily find explanation in the country’s mortgage system that has remained a fledgling, unable to fund even low cost housing.
The coming of the Nigerian Mortgage Refinance Company (NMRC), a secondary mortgage institution that is private sector-driven with the public purpose of developing the primary and secondary mortgage markets by raising long‐term funds from the domestic capital market as well as foreign markets for providing accessible and affordable housing in Nigeria, was aimed to address this problem.
Government’s attempts at addressing the country’s housing problem with the establishment of both the Federal Mortgage Bank (FMBN) and National Housing Fund (NHF) to provide low interest rate on mortgage loan for people to build or buy houses, have been anything but successful.
But the last couple of years have seen spirited efforts by the ‘new’ refinance company to not only reposition the country’s mortgage sector, but also to break down barriers to home ownership by providing liquidity, affordability, accessibility and stability to the housing market.
The company has the vision to be the dominant housing partner in Nigeria by providing liquidity and access to affordable housing finance and, in line with that, it has come out with ambitious and innovative initiatives aimed to improve mortgage market transactions and also fast-track affordable housing delivery.
When the company was established, the mandate given to it was to promote wider spread of home ownership, accessibility and affordability which explains the setting up of what the company calls ‘Housing/Mortgage Market Information Portal (MMIP)’ aimed to enable it to gather data for intelligence and profiling of federal, states civil servants and informal sectors (off-takers) for affordable housing.
This is an effective policy and decision making tool on land allocation, infrastructure and concessions and, according to the officials of the company, “MMIP enables decision on creating polycentric cities in order to decongest major urban centres”. The pilot implementation of this initiative is already taking place in six cities including Abuja, Lagos, Kano, Bauchi, Enugu, Port Harcourt.
Another initiative the company has come up with is the NMRC Mortgage Market System (MMS) which is a transformational change that integrates the entire housing market, covering construction finance, primary and secondary mortgage.
The system which is available to all players in the housing industry has the benefit of removing duplications of effort in gathering data and documents; improving the turnaround time, reducing the cycle time of transactions and helping in making homes more affordable.
Described as a world class system that aims to bring all players in the mortgage and housing market into a centralised technology ecosystem, MMS allows a systematic market to operate and concentration of activities to take place.
What the system seeks to achieve, besides bringing credibility and attracting investors to the mortgage market, is also to let players and sundry individuals know what is going on in the market. “People come here asking about the market but they cannot get verifiable and dependable information”, said Inyangete, noting that the system creates a marketplace where there is information flow and people can see what is going on.
The system is a national market that is not only about mortgage but also the entire housing finance and so the new system allows NMRC to see the pipeline projects and know who is bringing what to the market, and as refinancers, it also allows the company to time and determine when to go to the market to raise bonds.
MMS also allows market operators to track all the activities within the construction industry. With it they can see which developer is doing what and in which location. It also allows them to begin to compare prices and know which property is being sold and in which location. This way, the developers will begin to be more competitive in the way they do their thing.
For the mortgage banks, the new system allows them to begin to manage their own systems by themselves using the uniform underwriting standards which NMRC has produced and, with that, they can evaluate their applications based on the underwriting standard.
It is hoped that the use of these systems, especially the MMIP, for federal and state governments, mortgage asset registry will reduce cost of homeownership; eliminate breaks in the chain of title; improve hard naira savings on each loan for homeowners and lenders, and reveal identity of servicer and investor available to homeowners via phone or internet.
Chuka Uroko
