Federal Mortgage Bank of Nigeria leading crusade towards simplifying housing finance

Several efforts have been made by the Federal Mortgage Bank of Nigeria (FMBN) towards making funds available to Nigerians in the past, but recent moves by the bank seem to be charting a new way forward for the nation’s housing and mortgage financing sectors. Notable primary mortgage institutions in the country too are not left out. Correspondent, Bamidele Ogunwusi examines the FMBN residential bond and its impacts on housing deficit.

When the Federal Mortgage Bank of Nigeria (FMBN), the only secondary mortgage institution in the country, recently completed the refinancing of the N26 billion Series1 mortgage bond in Lagos many experts and stakeholders in the country applauded the move; describing it as a giant step towards reducing the nation’s housing deficit put at 16 million.

They claimed that the move will go a long way at redirecting the nation’s housing finance agenda towards the path of a sustainable housing development for the country.

The FMBN through FMBN SPV ISSUER LIMITED raised the Mortgage-Backed Bond (MBB) from the capital market as part of the Government’s N100 billion residential mortgage backed securities programme and on-going reform of mortgage sector in the country.

FMBN in 2007 recorded the first mortgage-backed bond transaction in sub-Saharan Africa with the successful floatation of the first tranche of N26 billion of a N100 billion mortgage-backed bond (MBB) programme to refinance civil servants’ acquisition of 9,525 Federal Government’s residential houses sold in the Federal Capital Territory.

Speaking at a formal closing ceremony in respect of the private placement of N24.5 billion series 3 zero coupon notes due on May 24, 2015 held at the Civic Centre, Lagos, FMBN Executive Director, Securities Issuance and Market Development, Mr. Bola Ogunsola explained that the five year bond, the longest tenured bond available at the time, was deployed to refinance the Mr. Yates created under the scheme. “The mortgagees had an average amortization period of 15 years; hence the need to refinance the bond at maturity was intentioned.”

According to him, “while the goal to bring about the regime of single-digit interest rate mortgages in Nigeria was central to the scheme at the design stage, the subsequent volatilities in the market interest rates created a steep negative carry between the already created fixed rate mortgages and the market determined bond yields.

“This present challenges further support the suitability of Adjustable Rate Mortgages (ARMs) in an unstable interest rate environment like ours. This is a central lesson that will guide future transactions of this nature.

He said that the record of mortgage repayments and prepayments under the scheme attests to the fact that Nigerians have the culture to take mortgage loans and see through their payments, provided the right supporting structures such as effective and servicing arrangements and foreclosure process are internalized.

Ogunsola disclosed that the scheme brought to limelight, the existence of some positive attributes in the Nigerian economy that is suitable for the regime of sustainable mortgage origination and refinancing.

He said that there is evidence of high appetite for appropriately structured long term mortgage instruments among Nigerians institutional investors, especially pension fund administrators.

Under the scheme, Messrs Dunn Loren Merrifield (DLM) acted as structural adviser, lead arranger and lead book runner to the transaction while Ecobank Nigeria Limited, WSTC

Financial Services Limited, Greenwich Discount House Limited, Cowry Asset Management Limited and Mainstreet Bank Limited acted as the joint book runners.

The mortgage loan servicers are Access Bank Plc, Aso Savings and Loans Plc, Ecobank, Union Homes Savings and Loans Plc and United Bank for Africa Plc.

Managing Director, Dunn Loren Merrifield, Sonnie Ayere, said: “This transaction is a reflection of FMBN’s mandate to link the capital market with the housing industry and to establish an evergreen source of providing long tenured and cheaper financing for the mortgage market in Nigeria through the capital market”.

Speaking further, Ayere mentioned that the advantages of mortgage securities include liquidity to the housing sector, housing affordability and further deepening of the Nigerian Capital Market with special emphasis on the Mortgage Backed Securities subset of the market.

Segum Moradeka, former General Manager of a defunct Lagos-based mortgage firm, said though the houses under the scheme were for Federal civil servants, but this will go a long way at solving their housing problems.

“Most people will say that because the houses that were being refinanced are for civil servants so it is not an important development, but what they don’t know is that a move at providing houses for a group of people will have its effects on the overall housing needs of Nigerians”, he stated.

James Udoka, a developer, said the move by FMBN is a signal that there is hope for majority of Nigerians who are either homeless or leaving in deplorable houses. He urged the bank not to rest until they utilised the whole N100 billion Federal Government of Nigeria backed facilities.

Others who spoke to Daily Independent were of the opinion that the bank should spread the facilities to other segments of Nigerians as the issue of housing is so paramount to the development of the country.

Meanwhile, to bridge the housing deficit in the country, Managing Director of FMBN, Gimba Ya’u Kumo, has stated recently in Abuja that about N56tn is needed by the Federal Government to provide 16 million housing units across the country.

He said the 16 million houses would be constructed at a conservative cost of N3.5m per unit.

He said, “Fundamentally, the nation needs 16 million housing units to bridge the housing deficits in the country; and providing these houses will cost N56tn at a conservative cost of N3.5m per unit.

“This is a colossal amount, which cannot be funded only through the National Housing Fund, but requires urgent injection of funds from both the government and the private sector.

“That is why we are exploring offshore funding to boost financing for mass housing, which the nation urgently needs.”

Kumo said the new management of FMBN had been pursuing new relationships with key institutions such as the Nigerian Air Force, Nigerian Navy, the Economic and Financial Crimes Commission, the Nigeria Police, with a view to financing the building of staff residential estates for them through the NHF scheme.

He said the bank had offered to finance the building of 150 housing units in each state of the federation and Abuja for officers and men of the Nigeria Police, making a total of 5,550 housing units.

He added that the FMBN was working towards providing shelter for Nigerians, despite constraints it was facing in the area of enforcement of compliance with the NHF scheme, outdated mortgage legislation and inadequate funding.

Just like the FMBN, a Yenagoa-based mortgage firm, Trans Atlantic Mortgages Limited took a step forward recently when it signed an agreement with GEP Nigeria Limited. They are both to jointly invest N14.5bn in the development of the Goodluck Jonathan Legacy City in Yenagoa, Bayelsa State.

The project, according to a statement by the facilitators, will deliver 1,440 units of houses in the state and also lay a foundation of the group’s plans to deliver more than one million energy saving housing units across the country.

The statement said the modern community development initiative would provide luxury but affordable housing units for Nigerians in both urban and rural locations.

It said the GEP was an international organisation with interests in the construction, mining, oil and gas, power, telecommunications and land development sectors, among others.

It added that the group was known for urban development and the construction work, leveraging on a global partnership with some of the leading master planning and community development companies.

It further explained that GJLC would be built on a modern European standard as a self-sustaining community with world-class infrastructure.

“Apart from the group’s impressive financial resources, leading international lenders are fully in support of this project,” the statement added.

The project, it said, was expected to create estimated 700,000 jobs, both skilled and unskilled labour, as well as provide platforms for new business linkages; promote sustainable economic growth, and the birth of green environment in Nigeria.

The Managing Director and Chief Executive Officer of Trans Atlantic Mortgages Limited (TAM), Mr. Preye Ogriki, said the focus of the project was wealth creation through housing platform, rendering cutting edge and technology driven service, anchored on satisfying customer’s unique needs as well as delivering optimum returns to shareholders in a friendly atmosphere.

 

 

 

Source: Daily Independence