Why com­mer­cial banks shy away from mort­gage – FMBN MD

Ar­chi­tect Ahmed Musa Dangiwa is the Manag­ing Direc­tor and Chief Ex­ec­u­tive Of­fi­cer (MD/CEO) of the Fed­eral Mort­gage Bank of Nige­ria (FMBN). In this in­ter­view he ex­pounds on the mort­gage sub-sec­tor and hap­pen­ings in the bank in the nearly six months he has

Daily Trust - - BUSINESS - By Zakariyya Adaramola

When you came on board in April you said you wanted to de­velop a mort­gage fi­nance change agenda that would serve as a com­pass and would fit in to the over­all hous­ing re­form agenda of govern­ment; how suc­cess­ful has this been?

It has been suc­cess­ful. The hous­ing sec­tor is ex­tremely linked to the eco­nomic per­for­mance of any na­tion, there­fore, in view of this; the bank has fo­cused at­ten­tion since its in­cep­tion on de­liv­ery of af­ford­able houses to all while ex­plor­ing other public pri­vate sec­tor part­ner­ship, as well as other means of im­prov­ing the hous­ing sec­tor.

We are also look­ing at im­prov­ing and strength­en­ing the mort­gage mar­ket in or­der to at­tract both lo­cal and for­eign in­vest­ments, hence the bank will be ex­plor­ing op­por­tu­ni­ties in both the do­mes­tic and in­ter­na­tional mar­kets.

The bank is more de­ter­mined now to work with rel­e­vant stake­hold­ers. We are more de­ter­mined to pro­vide an en­abling en­vi­ron­ment, as well as solid foun­da­tion for mort­gage fi­nanc­ing in Nige­ria.

An­other is­sue we in­tend to con­tin­u­ously seek in­no­va­tive so­lu­tion to is to meet the hous­ing de­mand of Nige­ria, as well as make them avail­able for the mid­dle and lower in­come earn­ers. Our fo­cus in this bank is ba­si­cally low and medium in­come af­ford­abil­ity. I am not say­ing we are not for the high in­come earn­ers be­cause most high level in­come earn­ers don’t even look for mort­gage. It is the low and medium in­come earn­ers that are look­ing for mort­gage. We have the min­is­te­rial hous­ing scheme which is pro­vid­ing houses for them in many states.

In the com­ing months the scheme is go­ing to be ex­tended and many states are go­ing to ben­e­fit from it. It’s un­der the mort­gage re­fi­nance scheme agenda which is on­go­ing. I as­sure you that its suc­cess will pos­i­tively im­pact on the hous­ing sec­tor of the econ­omy and the re­form agenda of this ad­min­is­tra­tion.

What is the role played by pri­mary mort­gage banks (PMBs) in the op­er­a­tions of the FMBN?

PMBs are presently play­ing a crit­i­cal role in the op­er­a­tions of the bank be­cause in line with the Na­tional Hous­ing Fund NHF Act we are not al­lowed or we can’t dis­burse funds to sub­scribers di­rectly, hence the role of the PMBs comes into play. They are the link be­tween us and loan ben­e­fi­cia­ries. We have had chal­lenges over the years in the op­er­a­tions of the PMBs such as de­lays in pro­cess­ing the loan ap­pli­ca­tions. You find that ap­pli­ca­tions take longer time, and mostly, the blame will come to FMBN.

Oth­ers are loan dis­burse­ment or late dis­burse­ment. Some­times we dis­burse the loans to PMBs for them to pay ben­e­fi­cia­ries or de­vel­op­ers, but they will de­lay the loan for their own self­ish gains; like get­ting in­ter­est from banks. So late doc­u­men­ta­tion and de­lay in the PMBs to com­ply with ad­e­quate se­cu­rity for the loans are some of the prob­lems, but we are be­gin­ning to get much bet­ter ser­vices. We got a tri­par­tite ar­range­ment with the Mort­gage Bank­ing As­so­ci­a­tion of Nige­ria (MBAN), where is­sues that fac­tor on the op­er­a­tions and roles of the PMBs are al­ways dis­cussed; we used to have the meet­ings with our­selves and PMBs, Real Es­tate De­vel­op­ers As­so­ci­a­tion of Nige­ria REDAN and even the Build­ing Ma­te­ri­als Pro­duc­ers As­so­ci­a­tion of Nige­ria (BUMPAN).

What about non­per­form­ing loans, what is the prob­lem?

The loans are in two cat­e­gories: we have the es­tate devel­op­ment loan which is a loan given to es­tate de­vel­op­ers to de­velop the houses for us to mort­gage. The other one is the Na­tional Hous­ing Fund (NHF) which is given to work­ers which con­sti­tutes the largest, and the ab­sence of ef­fi­cient man­age­ment could spell risk to the banks. The banks’ non-per­form­ing loans is not en­tirely re­garded as a loss be­cause of the houses that are al­ready built by the de­vel­op­ers, but the NHF loans are where we have prob­lems be­cause once the mort­gage is cre­ated and re­pay­ment starts the banks are able to re­coup their funds. That is the rea­son why we placed ad­verts re­cently. Hon­estly it is to en­sure that de­fault­ers meet up with the re­quire­ments be­fore our own side will take the law. It is in com­pli­ance with the law, be­fore we do that we have to give them no­tice that we are tak­ing mea­sures to mit­i­gate the risk on how to man­age the crises.

FMBN is threat­en­ing to pub­lish the names and to take loan de­fault­ers to ICPC.

Yes; we did that de­lib­er­ately and we in­tend to do it in as much as we find that most of the loan de­faults are de­lib­er­ate. The com­ing of this IT so­lu­tion, like the NIBSS In­stant Pay­ment, which we are hav­ing, we in­tend to col­lab­o­rate with the NDIC so that the NIBSS can search through all your ac­counts and ex­pose same whether it’s a com­pany or an in­di­vid­ual be­cause all these loans are signed by in­di­vid­u­als, even if it’s a com­pany.

What re­sponse? has been the

There is a lot of re­sponse hon­estly be­cause at the mo­ment we have re­couped amounts run­ning to bil­lions naira. Cor­po­rate or­gan­i­sa­tions, in­di­vid­u­als and pri­vate de­vel­op­ers are re­spond­ing and there has been tremen­dous in­crease in the pay­ment of loans.

Some of the PMBs have col­lapsed

On most of the PMBs that col­lapsed, we li­aised with the NDIC, that is the rule, even NDIC last week, came here on cour­tesy call and the re­sponse from them is very en­cour­ag­ing. In fact, some pay­ments from two of the banks that have been liq­ui­dated, oth­ers too, we have eight of them, have been rec­on­ciled and I think within the next few days our staff and their staff will fin­ish the rec­on­cil­i­a­tion.

Are the funds from the Nige­ria Mort­gage Re­fi­nanc­ing Com­pany (NMRC) sup­ple­ment­ing that of the Na­tional Hous­ing Fund (NHF)?

They are not. The NHF’s pool of funds, es­tab­lished by an Act, are used in cre­at­ing these mort­gages for NHF at an af­ford­able rate of six per cent over a long ten­ure of up to 30 years.

So this is a so­cial re­spon­si­bil­ity sort of to which the low and medium in­come earn­ers can own their houses through NHF, while the NMRC was cre­ated as a pri­vate en­ter­prise meant to re­fi­nance these mort­gages at com­mer­cial rates. How­ever, ours is at six per cent rate. In fact, we give our rates at four per cent to PMBs and then they give it out at six per cent. There is a dif­fer­ence, but they do mort­gage re­fi­nanc­ing at sec­ondary mort­gage mar­ket at com­mer­cial rate.

There have been sev­eral calls for the bank’s re­cap­i­tal­i­sa­tion, do you have enough fund­ing to ad­dress this chal­lenge?

Hon­estly we don’t, that is the essence of seek­ing for re­cap­i­tal­i­sa­tion, so peo­ple are even in­sin­u­at­ing that we have al­ready been re­cap­i­talised, but in the real sense we are in the process; we are hav­ing dis­cus­sion in our min­istry, to which pro­cesses are on­go­ing to­wards re­cap­i­tal­is­ing the bank. Even dur­ing the last re­treat of the Coun­cil of Works in 2016, and even this last month, the re­cap­i­tal­i­sa­tion was dis­cussed, agreed and even ap­proved. So we are do­ing the nitty gritty.

With the re­cap­i­tal­i­sa­tion we can meet most of the needs we re­quire be­cause mort­gage mar­kets are cap­i­tal in­ten­sive that re­quire lots of fund­ing, and mostly, when you go to com­mer­cial banks they shy away from the mort­gage mar­ket be­cause of the fact that it’s a long time ten­ure, and they avoid giv­ing long term loans like up to 00 year pe­riod, that’s why we are seek­ing the re­cap­i­tal­i­sion of the bank.

An­other area is that we are see­ing what we can do; part­ner­ing with pri­vate in­vestors through PPP at low in­ter­est rate, like one-digit, and for long ten­ure.

Talk­ing about sin­gle digit in­ter­est for loans, how re­ally fea­si­ble is this?

It is fea­si­ble in as much as a re­spon­si­ble govern­ment would like to house its own cit­i­zens. So­cial hous­ing is en­shrined in the con­sti­tu­tion and it is a se­ri­ous re­spon­si­bil­ity of the govern­ment. So in that way it is not meant to make profit be­cause we are not profit-ori­ented but of­fer so­cial ser­vices in as much as we can re­coup our funds and then re­cir­cu­late them so that other Nige­ri­ans can ben­e­fit from it; that is the essence of cre­at­ing the NHF in 1992.

How much loan in­di­vid­ual en­ti­tled to? is an

The max­i­mum loan we dis­burse here to the PMBs, to an in­di­vid­ual, is N15m, and in other to ac­cess that we try to stag­ger it, but any­body that needs a loan of less than N5m, there is no eq­uity for him to pay. It used to be that from N5 to N10m it’s 20 per cent, but now we are try­ing to en­sure that it’s re­duced to 10 per cent. For N10m to 15m it used to be 30 per cent eq­uity but we want to make it 20 per cent, just for fur­ther avail­abil­ity be­cause we found out there are gen­eral masses, es­pe­cially the work­ers, that eq­uity con­tri­bu­tion will hin­der them from even get­ting the loans. For a civil ser­vant to get 30 per­cent of N15m, that’s N1.5m or 20 per­cent of N10m, that’s N2m, it hin­ders them, that’s why when we came on board we tried to re­duce it so that work­ers can ac­cess mort­gages.

What about the loan it­self, is N15m ac­tu­ally ad­e­quate?

It’s ad­e­quate, the min­i­mum re­quire­ment un­der the World Bank is that a house, a twobed­room house can cost noth­ing less than N3.5m, that’s $10,000, that’s the min­i­mum, so a house is a house de­pend­ing on the fin­ish­ing; that is what makes it ex­pen­sive. The same N3.5m three-bed­room, if you bring an­other per­son that can put the fin­ish­ing of his choice, it could be worth N10m.

What about those ask­ing for re­fund, how long will it take them to get them?

When we came there were lots of com­plaints about re­funds and de­lays about re­fund­ing, so we try as much as pos­si­ble to process any re­fund that comes to our of­fice and within 40 days you get re­funded.

So from the day the re­fund orig­i­nates, within 90 days you get re­funded after re­tire­ment or at about 60 years. So we are ef­fi­cient.

I can as­sure you that if you go to 90 per cent of our branches all over the coun­try you won’t find any back­log of re­funds. And here we don’t have any back­log.

Arc. Ahmed Musa Dangiwa, Manag­ing Chief Ex­ec­u­tive Direc­tor and

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