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FG’s mortgage refinancing initiative raises dusts

By on September 16, 2013

WHEN the Federal Government, in June, announced that it would  launch the newly established Mortgage Refinance Company, MRC, by September, there were mixed feelings across the country.

This was not unconnected with the assumption that government may come up with another policy that could  be counterproductive. This was based on the fact that  government was already implementing the Steven Orasanya report, which  has to do with scrapping of government agencies that were either seen to be redundant or that had some semblance of duplicity.

There were also  questions on the rational for MRC.

However, the MRC story started with the disclosure of plans to  launch the firm  by the Minister of Finance, Dr. Ngozi Okonjo-Iweala.

Okonjo-Iweala, who spoke through her Special Adviser, Mr. Paul Nwabuikwu, explained that the company was established to make it easier for Nigerians to own their own houses. Mortgage refinancing is the process of paying off an existing loan by taking a new loan with  the same property as collateral.

She said that the country’s total housing deficit stood at 17 million units, adding that the World Bank had  bought into the emerging refinance institution with a soft loan of $300 million under the bank’s International Development Association, IDA, concessionary lending window.

According to her,  the Federal Government was also working on mass housing schemes with a rent-to-own option for workers to reduce the housing deficit in the country.

“The target of the first stage of the mass housing scheme is to increase the number of completed mortgages from the current 20,000 housing units to 200,000 units in three years. Though this target is quite a tough one, we believe that with the leadership of the President and the commitment and hard work of the various ministries and agencies involved, it is achievable,” she said.

However,  many have  argued that MRC  is a duplication of an already existing institution, the Federal Mortgage Bank of Nigeria, FMBN.

The FMBN  was established in 1956 to play the role of developing a robust mortgage finance system for the country.

Its mandate also include: Encouraging the emergence and promoting the growth of viable primary mortgage institutions to service the need of housing delivery in all parts of Nigeria; mobilizing both domestic and offshore funds into the housing sector; linking the capital market with the housing industry, establishing and operating a viable secondary mortgage market to support the primary mortgage market and collecting and administering the National Housing Fund in accordance with the provisions of the NHF Act.

Speaking on the matter, a member of Institute of Builders, IOB, Mr. Bode Oyewole, said: ‘The idea is good but this country does not need that at the moment. The industry should be talking about how to strengthen and make existing institutions more viable rather than what we are told the government wants to do.’

‘’Why are we multiplying institutions in Nigeria? The Federal Mortgage Bank should have been empowered to do that. If you have an institution and you are paying billions of Naira to workers as salaries  and you are creating a parallel institution, is that wise?

‘The race for 17 million houses should not start on this note, else we will end up embarking on a wild goose chase because I don’t know if MRC’s mandate will be outside what FMBN does. We know that the mortgage sector has been facing  challenges, including waning public confidence, and lack of long term funding, but does the coming of RMC offer a solution?

Oyewole’s position was echoed  by a lecturer in the Department of Estate Management at the University of Lagos, Professor Timothy Nubi, who stated that although mortgage financing in Nigeria is a welcome idea, MRC establishment is a duplication of an existing institution.

Nubi acknowledged that although mortgage refinancing aims at making housing affordable for Nigerians, the FMBN should have been empowered to do so.

‘’“We have said that much of our resources in this country is for recurrent expenditure – paying salaries and we don’t have enough money to do capital projects and we are still creating institutions, creating General Manager, creating layers of officers in the new company and the other company. FMBN is there, doing nothing… Let’s look at our institutions, what is the Federal Housing Authority not doing right? Let us restructure them and that was what we started in 2006,” he added.

Equally saddened by the development  is the Managing Director of Adeniyi Homes,  Lagos, Chief Adeniyi Iyanu.

He said: ‘’We were told that the MRC is being set up to help grow the housing sector in the Nigerian economy by bridging the funding cost of residential mortgages and promoting the availability and affordability of housing to Nigerians by increasing liquidity in the mortgage market. But that job is already being done by another agency. When you go to the UK and United States, their prosperous mortgage system was not achieved through duplication of functions. If the government does not have a rethink on this, I am sure it will be counter-productive.