NMRC: A paradigm shift in Nigeria’s secondary mortgage market

By the first quarter of 2014, the Nigerian Mortgage Refinance Company (NMRC) shall have opened for business to provide secondary mortgage market services for primary mortgage lenders for on-lending to teeming Nigerian housing loan applicants.

NMRC, according to its promoters, has gone beyond the level of an idea having been registered; the Central Bank of Nigeria (CBN) has granted its approval in principle; the board of the company has just been set up, and the World Bank, which is providing a 40-year loan of $300 million for the company, is expected to disburse the money this month. So, the company is a reality.

Concerns are, however, mounting as to what would be the fate of the Federal Mortgage Bank of Nigeria (FMBN) as a secondary mortgage service provider when NMRC becomes fully operational, more so when the Federal Government, which owns FMBN 100 percent, is fully involved in promoting NMRC.

The question frequently asked is whether Federal Government’s support for the floating of NMRC by private sector operators is its tacit way of passing a vote-of-no-confidence in FMBN with its civil service-oriented, tardy and cumbersome operational model.

Femi Johnson, president, Mortgage Banking Association of Nigeria (MBAN), explained to BusinessDay in an interview that there are no reasons for people to raise concerns over the setting up of NMRC to operate side by side with FMBN, saying that each would not be a threat or pose any risk to the other.

According to Johnson, the two companies, even in their similarities as secondary mortgage markets, differ significantly in their ownership and organisational structure, stressing that they would exist and operate side by side as is done in other climes such as Mexico and the USA.

“NMRC is a strictly private sector-led company that will be supervised by the International Finance Corporation (IFC), the World Bank, Shelter Afrique, etc. So, it is going to be run more like a commercial bank. The FMBN has a different charter. It gets its funds from contributions by workers in the formal sector. The bank will still continue operation. Government appoints its board while the NMRC will appoint its own CEO and members of the board from the subscribers,” he said.

“In places like the USA, Mexico and other places, there are similar institutions that run parallel like what we are going to see with FMBN and NMRC. In those places, some of these institutions are funded by the private sector, some by the government, and others from workers’ salary,” he added.

Johnson, who is also the managing director and chief executive officer of Homebase Mortgage Limited, pointed out that the fundamental difference between the two companies is that in FMBN, for him as a primary mortgage lender to get money from the bank, he must know who his customer is.

“I will appraise the customer based on the parameter the FMBN has set; if he meets the criteria, I will check the property for which the loan is to be given, evaluate it and, based on that, package an application on behalf of the customer to FMBN and on the basis of this, FMBN will release the money that I will lend to the customer. The problem here is that even though I have done my due diligence and every other thing, the FMBN will still do it again, a second time, and if they are okay with that, they will disburse to me and where they are not, they will not, and until I get the money, I will not disburse to the customer. This is a long process that will be there for as long as two years,” he stated.

In NMRC, he said, it is a different ball game. The procedures are short and sharp, giving the customer both ease and convenience of transacting business. “It is my money that I will lend to the customer directly; so it is my normal course of business. After lending, I go back to NMRC to refinance it for the company to reimburse me so that I can lend to other customers. In this case, I don’t have to wait for anybody before lending; it is my money and so I can lend easily and directly to whoever applies,” he explained.

By: Chuka Uroko