PMBs and difficulty in creating mortgages

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From the N18 billion it has raised from the capital market between 2015 and 2019, the Nigerian Mortgage Refinance Company (NMRC) is said to have refinance mortgages originated by its 12-member primary mortgage banks PMBs and three commercial banks, leading to the creation of 900 mortgages.

But it remains to be seen where those mortgages so created are being used as their impact is not felt in both the housing and mortgage sector. After the consolidation and recapitalization of the primary mortgage institutions (PMIs), leading to their name change, reduction in their number from 83 to 40, at the time, and increase in capital base, expectation was that their impact would be felt considerably in the housing sector.

However, even though the capital base of the PMIs which became primary mortgage banks (PMBs) was moved from the statutory N100 million to N2.5 billion for those licenced to operate at regional level and N5billion for those with national operating licence, Nigeria’s housing problem still persists.

When the NMRC was set up by the federal government, part of its mandate was to increase liquidity in the mortgage market as a critical step towards increasing housing affordability.

With its N18 billion, only a few of PMBs had mortgages for refinancing because, according to Kehinde Ogundimu, NMRC’s CEO, the PMBs that did not get refinanced were not viable. “We don’t refinance any PMB that is not doing well”, he said.

From the consolidation and recapitalization time to this moment, many of the PMBs have been struggling, unable to originate mortgages or give housing loans. Not even the revised operational guidelines by the Central Bank of Nigeria (CBN) which stripped them of other business concerns and compelled them to focus on their core business of providing mortgages and housing finance for home ownership and other forms of property acquisition, has helped matters.

“The problems of mortgage banks revolve around their small capital base and so there isn’t much they can do. For all the money I have, unless I raise additional capital, I don’t think I can do 1,000 mortgages”, Ayodele Olowookere, the CEO, Omoluabi Mortgage Bank, explained.

“I think mortgage banks need to do self-enlightenment and education to grow the industry,” Olowookere added and explained further that, over time, there has been wrong perception of the mortgage industry which is understandable because a lot of mortgage banks have also done what is not right like collecting money from people and not giving back.

A lot of people say they will never go near mortgage banks because of some unethical conducts like this. Though Rose Okwechime, CEO, Abbey Mortgage Bank Plc, attributes some people’s apathy to mortgage banks to the “newness” of the mortgage system, Olowookere insists that it is as a result of lack of self-education by the operators.

Besides these reasons, analysts observe that some of these PMBs are not doing well because the Nigerian business environment is both hostile and risky. So, if these banks are not originating mortgages or giving housing loans, it could be for either of two factors or both.

One is that a lot of people who would have taken mortgage or subscribed to mortgage products are unemployed. Many of those who are employed are either not mortgageable or suffering from job insecurity. The second point is that the money that many of these PMBs is short-term deposits and, therefore, cannot be given out to borrowers on long term basis.

Paul Onwuanibe, CEO, Landmark Group, adds what he calls “the big issue” which is that there is clear absence of mortgage-viable properties out there in the market on which mortgage could be created.

“The basic principle of a mortgage is that you must have steady income and be in gainful employment. You must be able to provide income in multiples for the property that will be built for your use. If your income is N4 million per annum, for instance, and the cost of the property is N30 million, unless you want to steal, you cannot afford that property and there is no mortgage for you at that rate given your income”, he explains.

In other economies, the mortgage sector is a huge contributor to economic growth, but in Nigeria, the sector’s contribution to GDP is less than 1 percent which is why the industry operators are canvassing government’s intervention as has been done in the agric sector.

According to them, government needs to know that if the mortgage industry is well run and there is a good policy thrust to support its operations, it will diversify the economy with job creation. “The focus on other non-oil sectors, especially agriculture, is good because Nigerians need to feed themselves, but everybody also needs shelter and this can only be possible if the mortgage sector is made functional”, Olowookere said.

“The mortgage industry has to improve, and developers have to be encouraged to build mortgage-viable and ready properties; mortgage interest rates have to be reduced to single digit and made available; the whole process of securing mortgage has to be made clearer and more transparent, and the mortgage has to be available on the ‘retail high street’ such that every time you go out looking for it, you see it,” Onwuanibe affirms.

 

Chuka Uroko

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