Federal Government inaugurates committee to establish a Mortgage Credit Rating

“The Federal Government on Thursday inaugurated a committee to establish a Mortgage Credit Rating to improve citizen’s access to affordable housing in the country.”- World Stage

The Director, Financial System Strategy Department of the Central Bank of Nigeria, Mr Mohammed Suleiman, inaugurated the nine member committee in Abuja.

He charged members to come up with ideas that would see the mortgage markets competing with international markets.

The News Agency of Nigeria reports that in advanced countries, Credit Ratings contain reports of track record of borrowings and repaying banks, credit card companies, and any other lenders.

When you apply to borrow money, the lender uses the credit report to decide if you are a safe bet, or a risk. They also base whatever interest rate they offer on that report and the resulting credit score.

Suleiman said that improving the mortgage sector was an important aspect to achieving the department’s ultimate goal of making Nigeria one of the top 20 economies of the world by year 2020.

To this end, he said that the committee had been tasked to set up minimum standards and guidelines of credit worthiness of mortgage and financing institutions.

“They have also been tasked to compile the list of all mortgage operators and categorise them according to their level of compliance to operating guidelines.

“They will also identify the challenges of effective and robust low cost funding through debt obligation from both external and domestic capital markets for construction finance and mortgage creation.

“They are expected to also proffer solutions aimed at mitigating the challenges identified in the sector and secure the buy in of relevant market regulators and supervisors.

Suleiman also encouraged the committee to come up with other measures that would boost investment in the mortgage sector.

Also, the Chairman of the Mortgage Credit Rating Committee, Dr Beni Goka, said that the mortgage credit ratings would encourage financial institutions to give out longer term loans.

Goka, who is also the Executive Director, of the National Assembly’s Parliamentary Staff Association Housing Scheme, said that credit rating standards would go a long way to determine the integrity and credibility of creditors.

“The country is about to go through a new phase of financial system. A lot of people buy homes in this country and pay cash. They don’t have mortgages, but some do.

“For those who do, it is a difficult task because there are not enough regulations guiding the sector.

“The major problem is how does a bank know that you can pay the loans they give you? How do they identify if you are a good person?

How do they identify that you have a job that will pay for 30 years? How do they identify that they will now give you the money and you won’t burn down the house or sold it.

“There are so many things involved in trying to find out and ascertain how credit worthy you are before a bank gives you credit to buy a house,” he said.

On the directive to compile a list of mortgage companies currently operating in the country, Goka said that the committee would take a systemic approach.

“We will start by going to Corporate Affairs Commission (CAC) and collecting the data. We want to know all the banks in the country.

“All the banks issuing credit no matter the kind of bank; it could be Commercial banks, Microfinance banks or Mortgage banks.

“We will also talk to our friends overseas, in England, America and take their model. We will partner with them and learn how they got started,’ ‘ he said.

Meanwhile, Mr Patrick Aririguzo, Head of Mortgage Department, CBN, in his speech, highlighted some of the key challenges in the mortgage industry.

Aririguzo said that lack of long term mortgage financing, affordable mortgage ready assets and inefficient and management system among others, were facing the mortgage industry in the country.

The News Agency of Nigeria reports that members of the committee were drawn from the Federal Mortgage Bank of Nigeria, Nigeria Mortgage Refinance Company and the Nigeria Sovereign Investment Authority.

Others came from the Nigeria Housing Finance Programme, the Central Bank of Nigeria (CBN), Brenton Rating Agency, Global Credit Rating Company, and Augusto and Co Rating Agency. (NAN)

Source: World Stage