- Collects N82.1bn from NHF subscribers in 3 years
Federal Mortgage Bank of Nigeria, FMBN yesterday rekindled the hope of many Nigerians to own their personal houses when its Managing Director and Chief Executive, Alhaji Gimba Ya’u Kumo, disclosed that everybody can own houses without much stress.
Speaking at the 31st edition of the Nigerian Pilot Newspaper/ Nigeria Newsworld Leadership Forum 2014 series, the development banker said FMBN has developed an innovative strategy that has ensured that many Nigerians now own houses even as the number is still counting.
Speaking at the 31st edition of the Nigerian Pilot Newspaper/ Nigeria Newsworld Leadership Forum 2014 series, the development banker said FMBN has developed an innovative strategy that has ensured that many Nigerians now own houses even as the number is still counting.
According to him, between December 2010 when his management team came on board and April 2014, the Bank recorded N82.1 billion as NHF collections, i.e. 61.2 percent of the cumulative NHF collections of N134.1 billion were collected in the last 41 months.
This means the recorded average monthly collection rose by 174 percent from N730 million to over N2 billion. Also, the Refund of NHF contributions grew by 173 percent from N990m to N2.70billion within 41 months. This is attributed to a 9,218 percent increase in the average rate of monthly refunds from initial N440, 000 to N41million.
The MD, who spoke on a topic: Delivering Affordable Housing Under the Transformation Agenda, said that the mandate of the housing finance institution include: link the mortgage finance market with the capital market and develop a viable secondary mortgage market in Nigeria; encourage the emergence and promote the growth of viable mortgage loan originators to serve the delivery of housing; Mobilize domestic and foreign funds into the housing finance sub-sector; and Collect and manage the National Housing Fund, NHF, in accordance with the NHF law.
He added that as a Government-sponsored Enterprise GSE, FMBN’s focus is expanding from only social lending based on the resources of the NHF into increasing the stock of mortgage-ready housing units nationwide. According to him, “The stock of mortgage-ready housing units is extremely limited with only 21 million housing units available to a population of 170 million people.”
He also stated that going by the National Bureau of Statistics, NBS data, the Current national housing deficit of 17 million units would grow to 23 million by Year 2020 and “that is why the organization is integrating and expanding mortgage services to the Informal Sector”.
Currently, the informal sector represents 85 percent of the national working population and represents those with the highest need for affordable housing. The housing bank chief said that FMBN is improving housing finance resources by attracting investments both locally and internationally.
FMBN’s Potential
Kumo argued that FMBN has huge potentials to attract resources from local and international capital markets. For instance, it can open up new classes of financial instruments for housing finance e.g. Mortgage-backed bonds, covered bonds, REITS, MBS, etc, aiding investments in housing through providing guarantees to PMBs and developers, creating a viable mortgage/construction finance lending platform and bridging the funding gap for housing construction. He said that the organisation is funding estate construction by public and private sector developers that is driving the Mass Housing Strategy of Government nationwide.
He said that FMBN helped to finance the acquisition of FG Non-Essential Residential Houses in the FCT by Nigerians under the N100 billion Mortgage-Backed Bond programme.
Whereas as at December 2010, only one transaction was recorded in the capital market with Mortgage-Backed Bond MBB, N26 billion was issued in May 2006 for 9,575 mortgages. However, between December 2010 and April 2013, he said 2 additional issuances under the MBB transaction totaling N32 billion were successfully concluded: MBB N6 billion issued in April 2013 for 4,175 mortgages and MBB N26 billion issued in April 2013 to refinance Series one respectively.
Housing Delivery
Speaking on FMBN impact in housing delivery, he said it has made the following: Estate Development Loan – N39,425bn, NHF Mortgage Loan N23,396bn and Mortgages financed via MBB – 13,750 total = N76,571bn.
Kumo said that they have made impacts in the area of loan recovery. For instance, the Bank commenced aggressive loan recovery to improve its loan portfolio quality with impressive results. In this regard, Since embarking on loan recovery, the total sum of N6, 907,362,104.49bn was recovered from debtors on classified facilities.
However, the Bank intends to improve its loan origination and sustain the loan recovery drive for better performance. In addition to recovery of bad loans, the Bank realised the sum of N67.8 million from its funds trapped in Afex Bank Plc, now in liquidation.
Loans Performance
On disbursed loan performance, he said that in recent 41 months under review, N33.4 billion and N23.8 billion were disbursed as estate development (construction) and mortgage loans respectively. This translates to 47.8 percent and 48.3 percent respectively of the cumulative loans of N69.8 billion and N49.3billion recorded since commencement of the NHF Scheme.
According to him, “By aggregation, the total disbursement of N57.2 billion recorded in the past 41 months constitutes 48 percent of the N119.1 billion to date. EDLs have cumulatively delivered 39,425 housing units, of which 12,420 (31.5 percent) were in the last 41 months.” Approved NHF loans delivered 23,396 mortgages, of which 8,222 (35percent) were in the last 41 months.
Innovations/Strategies
Speaking on the innovations and strategies, he said that they have developed an IT-driven collection platform to capture NHF contributions as well as leveraged on IT infrastructure of commercial banks for seamless remittance of NHF deductions to FMBN. The platform according to him provides historical and up-to-date record of contributions and Instant SMS alerts to contributors.
Other innovations Kumo said are: NHF e-card has been issued as ID card and access to contribution account balances; deployment of the e-collection platform commenced with a pilot scheme covering MDAs in the FCT. The e-collection card which was formally launched by His Excellency; President Goodluck Jonathan in February 2014 is an IT-driven collection platform to capture NHF contributions.
To capture the non-formal sector of the economy, the MD/CEO said the Bank has introduced the Informal Sector Housing Cooperative Scheme,which was Launched 5th December 2011 in Lagos and began operations in April 2012 to integrate informal sector (low-income) earners artisans, mechanics, traders, taxi drivers, farmers, etc.
The non-salaried informal sector is coordinated through housing cooperatives, trade unions & cooperative societies. In this vein, individuals contribute and access loans through housing cooperatives for estate construction and mortgage loans. The status of the scheme as at March 2014 is a cumulative Collection of N133.70 million.
Kumo said the bank introduced the Internal Records Office (IRO) to mitigate the severe legal challenges hampering documentation of loan security. The IRO domiciles original documents for properties financed by the Bank to secure mortgage loans to NHF contributors. The successful implementation and smooth operation of this platform he explained, has impacted positively to ease mortgage lending which may have delayed by lack of title documents and perfection consents since inception, the IRO has facilitated conclusion of transactions to 11 developers to the tune of over N5.85 billion.
Ministerial Pilot Housing
Also speaking at the event, the Executive Director Loans and Security Issuance, & Market Development, Mr Bola Ogunsola said that on the Ministerial Pilot Housing Scheme, the Housing Scheme is done in collaboration with the FMLHUD which provides land, sites & services to reduce cost of delivery of the programme. To ensure housing delivery is fast-tracked, completion time is 12 months.
He also said the bank is in partnership with the Nigerian Employers Consultative Association NECA, Trade Union Congress TUC and Nigeria Labour Congress NLC for housing development for Nigerian workers . These stakeholder groups encapsulate the FORMAL SECTOR of the economy. The partnership is to formulate a strategy for delivering 4 million housing units for the Nigerian workers. Already there is a Joint Technical Committee in place to work out modalities for execution of the housing delivery strategy.
In furtherance of the above, a 962-unit model housing estate at Kagini, FCT a model project for estate development in Nigeria is funded by a commercial facility, it is projected to be delivered at affordable price to FMBN staffers and the general public by deploying modern building technologies and facilities.
Also, there is the Nigerians in Diaspora Housing Loan Scheme. The new product was developed by the bank to integrate Nigerians in Diaspora into the NHF. The window will leverage on the existing e-collection platform for remittances to ensure transparency and accountability. The Bank is currently working on perfecting the modalities and guidelines that would govern the operations of the product.
“The bank is also working towards the official launch of the product tentatively in the US in June 2014 and in the UK in July 2014.
Following the Briefing by the Federal Ministry of Lands, Housing & Urban Development on key performance indicators for major projects/programmes, Mr. President directed FMBN to source cheap funds for mortgage loans to Nigerians “the FMBN commenced discussions with prospective international investors with investment interests in making direct foreign investments in the Nigerian housing sector,” he said .
Interested in taking advantage of the private sector-driven affordable mass housing strategy of the Nigerian Government, the FMBN has partnered the Industrial and Commercial Bank of China (ICBC,) China Export and Credit Insurance Corporation (SINOSURE) and Shelter Afrique Globus Financial Services LLC (United States). Some of the discussions he said are in advanced stages stressing that FMBN requires FG guarantee and concessions to finalise the transactions.
Challenges
Speaking on the challenges facing the bank, the Executive Director, Organisational Resourcing, Mr Newman Ordia said that there is the need for the recapitalisation of FMBN. He said that Federal Government approved N5 billion as capital base for the FMBN in 2003/4. However, equity shareholding is distributed as follows: Federal Government 50 percent paid –up; Central Bank of Nigeria, CBN, 30 percent outstanding and Nigeria Social Insurance Trust Fund, NSITF, 20 percent outstanding. This means that only N2.5 billion is currently paid-up. He also said that FMBN requires a minimum capital base of N250 billion. Giving justifications for FMBN recapitalisation, he said that it is to keep pace with balance sheet exponential growth to accommodate estate financing projects and mortgage loans. For instance, FMBN balance sheet size of N30 billion as at 31stDecember 2012, with paid-up capital of only N2.5b. FMBN needs to have the financial strength to issue high-grade mortgage-backed instruments to attract low-cost investible funds for housing finance such as Fannie Mae & Freddie Mac (USA), Cagamas Berhad Malaysia, etc. ” he said.
Institutional Development
Speaking on the recapitalisation and institutional development of housing finance institutions in Nigeria and globally, the Executive Director Policy & Strategy, /Loan setup & pay off, Mr Mike Nwogbo said that CBN established new minimum recapitalisation requirements for PMBs: N5 billion national licenses and N2.5 billion (state licenses) “An in-house comparison of secondary mortgage institutions in other economies indicates that FMBN’s N2.5 billion(US$17m) paid-up capital base is dismally low compared to the average of US$132 million by similar institutions”, he said.
He therefore canvassed the review of legal and legislative framework, review of the Land Use Act, Enactment of new laws and the amendment/ replacement of existing laws . He said the bank has six bills currently waiting for passage at the National Assembly. These bills include: Bill to replace the Federal Mortgage Bank of Nigeria Act 1993; Bill to replace the Mortgage Institutions Act 1989; Bill to Amend the Insurance Act 2003; Bill to Amend the Trustee Investment Act; Bill to Enact the Residential Mortgages Act and; Bill to Enact the Residential Mortgages (Tax Relief) Act.
The banker also called for the review of Land Registry practices for timeliness and cost-effectiveness. He however assured the audience that the bank was working closely with the leadership of the National Assembly for the timely passage/amendments to the laws.
“The Internal Records Office has aided in circumventing the legal challenges in mortgage creation”, he said, adding that banks are required by law to invest 10 percent of loans in housing development while insurance companies are required to invest 20 percent of their non-life and 40 percent of life funds in that respect.
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