A Pilot feasibility study for the establishment of a mortgage guarantee scheme which provides credit loss protection to lenders in case of borrower default is underway. Tentatively christened Nigeria Mortgage Guarantee Company (NMGC), Central Bank of Nigeria (CBN) is promoting the scheme in collaboration with World Bank and other stakeholder partners under the Nigeria Housing Finance Program (NHFP).
The scheme guarantee products by incentivising lenders to accept loans with lower down payments; thus increasing affordability; ensures robust primary mortgage market to affect affordability and access for intending buyers.
The products exist in various forms and are administered by different agencies.
In most cases, the national government of the host country is the driver of any successful mortgage guarantee programme, which they then administer either through a government agency, a private entity or a hybrid encompassing both types of entity.
CBN’s Director, Other Financial Institutions Supervision Department, Mrs. Tokunbo Martins explained “mortgage guarantee is a product of great value to any housing market because it is a tool of opportunity for both the supply and the demand sides of the mortgage market.
“It provides potential opportunity of lower down-payment for borrowers while opening up a larger market for lenders who make the decision to finance the target population for the programme.”
Martins said that the NHFP is working with its consultants to complete feasibility studies and generate a business plan, which will be used to encourage investor interest and preliminary tasks.
“The business plan is in finalization stages, and we expect to present it to the industry/public in the last quarter of 2018.”
She revealed that the consultants, while cautiously optimistic about the viability of the project, have identified multiple constraints to its success, several of which we are already familiar with.
The biggest constraint is, of course, the 1978 Land Use Act.
“While we all understand that it would take a constitutional amendment to update the Act, certain administrative options have been identified to soften its draconian impact, especially at state levels.
The benefits of passage far outweigh the constraints so it makes financial and administrative sense for the programme to be tested for suitability and viability.
On cultural biases towards mortgage loans, she believes cultural aversion to mortgage loans is actually one of our toughest battles in the housing sector.
“We have to continue to engage with the public and de-stigmatize mortgage finance, using the positive effects on employment, IGR and generational wealth enhancement.
Speaking on the mortgage adjudication processes, Martins said: “We are encouraged by the interest shown at state government levels, and expect to see significant progress in mortgage friendly legislation in future.
We are very encouraged by the recent surge in housing policy adjudication, led by the most housing-friendly states in Nigeria.
“ The Lagos High Court has delivered ground-breaking decisions positively impacting the industry, giving comfort to intending homebuyers as well as investors.
The decision by the Court of Appeal in the Thomas Wyatt & Ors matter is an arbiter of the increased sensitivity of the Judiciary to mortgage contract relationships, and we applaud their brilliance and clarity.”