NMRC: Still waiting for impact on housing

Gradually, the optimism raised by the estab­lishment of the Nigerian Mortgage Refinancing Company (NMRC) on its expected impact on low income (affordable) housing is dying after two years of operation with little of zero impact.

The NMRC was launched into the Nige­rian mortgage market as a secondary mortgage institution aimed to raise liquidity in the mortgage system and drag down interest rate on mortgage loan to upper single digit or a spread of double dig­its. Its operation was also expected to catalyze the development and deliv­ery of affordable housing to Nigerians within the low income bracket.

As a matter of defini­tion, NMRC is a private sector-driven company 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.

The company whose mandate is mainly to increase liquidity in the mortgage system by refinancing mortgages originated by the primary mortgage banks (PMBs) came on a very high pedestal of providing cheap and long term funds, reducing interest rate to single digit, increasing the country’s housing stock by 75,000 annually, and creating 300,000 indirect jobs.

To many Nigerians and particularly the mortgage operators, this was a new dawn and, according to Anthony Owuye, a banker and economist, “as a secondary mortgage institution intermediating between long term deposits and short term funds, NMRC will be providing long term funds to mortgage lenders”.

Owuye continued: “The company will issue long term bonds in the capital market as efficiently as possible and channel the proceeds to refinance member-institutions at a competitive rate; this will bring to end, or reduce to the barest minimum, the huddles posed to mortgage lending to real estate; the new refinancing company acting as a secondary mortgage institution will buy off mortgages originated by the PMBs”, he hoped.

True to this expectation, NMRC has visited the capital market from where it raised N8 billion with which it has refinanced mortgages originated by six mortgage institutions including Stanbic IBTC, Imperial Homes, Sterling Bank, Sun Trust Mortgage Bank, Trustbond Mortgage Bank, and Homebase Mortgage Bank which got N1.8 billion, N1.7 billion, N1.6 billion, N1.3 billion, N700 million and N500 million respectively.

But it remains to be seen what purpose this refinancing function has served Nigerians, two years after. The effect of the refinancing of the six mortgage institutions is yet to be felt in the housing sector as there is no news anywhere of any mortgage loan applicant, especially National Housing Fund (NHF) contributors, that have been given loans to buy, build or renovate houses.

Recently, Charles Inyagete, the company’s CEO, disclosed at a forum in Lagos that the company was perfecting plans to return to the capital market to issue fresh bonds to enable it raise N20 billion to continue its refinancing function.

Once again, expectation is high that when the company raises the N20 billion by the first quarter of 2017, more mortgage institutions, especially the PMBs, will be refinanced and more mortgage applicants will be able to access mortgage to buy or build their homes.

“We are hoping that when NMRC raises another capital, it will come at lower interest rate and PMBs will be able to access the funds at lower interest rate, if not at single digit, at least, at lower double digit”, said Femi Johnson, MD/CEO, Homebase Mortgage in an interview.

Johnson who is also a director at NMRC and the President of Mortgage Banking Association of Nigeria (MBAN) explained that it is taking the company this long to return to the capital market because the Securities and Exchange Commission (SEC) requires it to have expended about 70 percent of the earlier capital before returning to raise more capital.

High interest rate has been the bane of mortgage access for home ownership in Nigeria as many mortgage applicants and home seekers cannot afford the commercial interest rate of between 20 percent and 25 percent charged on mortgage loans with very short repayment period.

The role NMRC is expected to play in this direction is to provide liquidity for the mortgage market and, consistent with its mandate to promote wider spread of home ownership, accessibility and affordability, the company has set up what the CEO called ‘Housing/Mortgage Market Information Portal (MMIP)’ to enable it to gather data for intelligence and profiling of federal, states civil servants and informal sectors (off-takers) for affordable housing.

Another initiative the company has come up with is the 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.

The only hope here is that all this will lead to increased liquidity in the mortgage market and increase loan applicants; access to loans which will ultimately lead to increased home ownership level in the country.