NMRC sets uniform underwriting standards for mortgage loans

The Nigerian Mortgage Refinance Corporation (NMRC) has announced criteria for providing facility to mortgage operators in the country. This was the fallout of a two-day workshop on ‘Uniform Underwriting Standards’ organised by the company in conjunction with International Finance Corporation (IFC).

The company says it has got N13.2 billion to begin operation having taken delivery of the first tranche of $20 million from the International Finance Corporation (IFC), an arm of the World Bank, and has also raised N7 billion and N3 billion tier1 fund.

Sonnie Ayere, the NMRC CEO, who disclosed this to journalists in an interview at the sideline of the workshop, said the company was working very hard to create an enabling environment for its smooth operations, adding, “in the next six months, we will be working on providing the enabling environment for mortgage refinancing. We are putting so many things together and mortgage lenders can now begin to articulate steps towards creating mortgages for desirous Nigerians”.

Ayere explained that the aim of the workshop was to provide an overview of uniform underwriting standards which was one of the key drivers of the success of mortgage refinancing.

According to him, “basically, there are certain rules and guidelines that a mortgage lender has to meet. For instance, what is the remaining tenure for the property that you are financing, maybe 20 years? So, if we put that standard, they will know that anything less than 20 years (well they can do it), but they will not be able to finance it from NMRC. Another one is, what is the minimum equity contribution that somebody must bring, is it 20 percent or 25 percent? How do people pay their mortgages- can they use cheque or can they say we will pay today, tomorrow? No. We are looking at deduction at source, possibly both for public and even for the private sector. These are the kind of things we are putting in place as conditions under which we can now begin to underwrite or give out facility (mortgage loans) and to secure requisite long-term financing that will come from NMRC,” Ayere said.

On the essence of the workshop, Ayere said: “The goal of the NMRC Uniform Underwriting Standards Workshop is to provide support for the housing finance private sector in Nigeria by promulgating mortgage lending standards and procedures within the Nigerian mortgage market, thereby facilitating improved access to housing finance; developing and promulgating 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”.

Ayere further explained that “lending standards promote efficiency and mitigate the 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 process for up to 20 or 30 years. Such standards balance the requirements of responsible finance with the lenders’ needs to enforce their contract.”

Femi Johnson, a non-executive director of the company and president of the Mortgage Banking Association of Nigeria (MBAN), said with the success of the workshop, the company would soon begin financing loans that had been originated by mortgage lenders and that to this effect, the company had started work and “underwriting will begin in earnest”.