As is usually the case, I was involved in a conversation with a very good friend in the Nigerian Legal sector, who specializes in mortgage and real estate transactions. As is also usually the case, she was not too positive about the possibility of Nigeria making a full transition to a mortgage based real estate sector. She was quite certain that the typical Nigerian homebuyer is still too spooked regarding the idea of owing money on the house they live in, and therefore the number of mortgages funded would probably not support the sector for a long term projection.
I responded with the same question I ask anyone with a negative viewpoint of the industry – “Is it enough of a reason for us to then stop trying?” This has become my battle cry for so long, that it is my go to question. Should we be so focused on the possibility of failure that we stop trying to build a sustainable mortgage industry in Nigeria? If we do so, have we not failed simply by our inaction?
With the NMRC gaining approval to issue bonds on the Nigerian Stock Exchange, every company should be training hard to ensure access to these low interest funds they will be raising. As of May 72015, I remember being in a workshop and learning that only one company had so far submitted a request to sell some of their MBS files to the NMRC. If approved, the loan file would be sold at a discount to NMRC, and the bank would then receive funds that they reinjection into their mortgage pool of funds. This is what keeps the market vibrant in most of the developed mortgage markets, and the Nigerian industry should definitely strive to achieve this.
Once a mortgage company has raised an initial fund base for mortgage loans, all that would be needed would be for the company to learn to originate NMRC compliant loans. The company would then simply sell the loans to the NMRC and recapitalize, in order to give out more mortgages. This would ensure that the company stays liquid, remove the burden of the long term loan portfolio, and generate much faster and easier profits. The only caveat that the companies would need to be very conversant with the said rules, and with how to package a loan in compliance with NMRC guidelines, and this involves a pretty intensive training process.
Our company, MV Professional Solutions, Inc. is involved in the training of mortgage company staff in Nigeria, and I have found a very disturbing common thread. There is a huge void in the area of mortgage training that actually meets Fannie Mae as required by the IFC/NMRC, Freddie Mac or any other international guidelines. The problem is compounded by the additional burden of having to meet Central Bank of Nigeria (CBN) as well as the National Mortgage Refinance Corporation (NMRC) guidelines.
The good news is that all of these bodies have several overlapping guidelines. The bad news is that pretty much every mortgage company in Nigeria has its own independent proprietary mortgage system for everything from software to loan underwriting processes, and this is a huge hindrance to the standardization of the industry.
In our opinion, this is definitely an issue that CBN / NMRC have to address and as soon as possible, to enable document and process compliance. One of the most unusual practices of the industry is the diversification/ progression from giving consumers the mortgage loans directly, to the building and development of estates for sale to their clients.
This practice actually seems to move mortgage companies closer to becoming building societies. I have been reliably informed by a top CBN officer however, that CBN will not allow this practice to continue, and that there will soon be a directive barring mortgage companies from building such estates, and limiting them to the provision of finance for mortgages.
Training the mortgage officers to effect this change should be a priority, and should be happening right now, because there will need to be a total shift in their mindsets to embrace the new directive. So, as our MVPS team heads from Chicago, Illinois to Port Harcourt, Nigeria in the very near future to train a 250+ employee mortgage company, we are determined that at the end of the one week training period, the company must be able to immediately start generating NMRC compliant loans, as well as drastically improving the quality of their loan packages.
Source: National Mirror