Q: As the Executive Secretary of the Mortgage Banking Association of Nigeria, what responsibility and task does your job entail?
A: The Mortgage Banking Association of Nigeria (MBAN) is the self-regulatory and umbrella body for all Mortgage Banks and Mortgage Brokerage companies in Nigeria. As the Executive Secretary of the Association, I am saddled with the responsibility (under the National Executive Council NEC) of over-seeing the activities of the association which includes ensuring compliance of all Mortgage Banks and Mortgage Brokerage companies with the regulation from the external regulators such as the CBN and NDIC. I also drive and coordinate the advocacy initiatives of the Association, I represent the Association and its member at meetings and stakeholder engagement, I coordinate the capacity building and continuous education programs of the Association and in addition, I oversee the running of the Association’s Secretariat.
Q: Can you provide an overview of the current state of the mortgage banking industry in Nigeria, including any recent trends or developments?
A: The Mortgage Banking Sub-sector in Nigeria is a component of the larger financial services sector. It is comprised of core mortgage lenders (in the primary and the secondary tier), the regulators, the affiliate institutions including the refinancing institution, the warehousing funding institution and the mortgage brokers. The core mortgage lenders include the primary mortgage banks and commercial banks, which occupies the primary tier while the Federal Mortgage Bank occupies the secondary tier. The sub-sector is regulated primarily by the Central bank of Nigeria, the Nigeria Deposit Insurance Corporation (NDIC). The Securities and Exchange Commission and other government agencies that provides statutory regulatory oversight on organisation offering financial services. For recent developments, the association is working to ensure that the Mortgage Guarantee Insurance Company is set up and running. In addition, we are collaborating with the Nigerian Insurance xx to develop insurance products for mortgages. The Association is also engaging with the CBN on the Interest rate matching Fund. This program is aimed to reduce lending interest to make mortgages more affordable for Nigerians.
Q: What role does the Mortgage Banking Association of Nigeria play in shaping policies and regulations related to the mortgage industry, and how does it advocate for the interests of its members?
A: It seems that this is two-in-one question. The first part is our role in shaping policies while the second part is how the Association advocates for its members’ interest. To answer the first part, Mortgage Banking Association of Nigeria has been at forefront of advocating for as well as sensitizing and mobilizing relevant stakeholders and government agencies at the federal and state levels to enact policies which foster the growth and development of the Mortgage Banking Sub-sector of the Financial Services Sector in Nigeria. The Association has been instrumental to the initiation, planning, enactment and implementation of programs and legislation to ensure that the industry is able to operate in a way that is beneficial to all stakeholders – consumers, lenders, affiliate organisations (secondary mortgage bank and refinance company) as well as other industry participants (real estate developers, mortgage insurance providers, etc.).
For instance, the Association and its constituent members, out of the need to deepen mortgage finance sources and to address the issue of funds mismatch (financing long term loans with short term deposits), sensitized the Federal government to the need for a refinance institution to link mortgage financing to the capital market. The Association went further to initiate the starting process through a feasibility study and stakeholder engagement and thankfully, the Federal government lent its full support to the initiative and that brought into existence the Nigerian Mortgage refinance Institution. The association had also successfully advocated for policies to enhance affordability of mortgages such as the withdrawal of 25% from Retirement Savings Account (RSA) for mortgage equity contribution. These are just to mention a few among other successful advocacy engagements that the Association had helped embarked on.
Apart from this, the Association is represented in quite a lot of committees of government agencies that oversee housing, housing finance and real estate development. This offers us the opportunity to provide our input into discussions, deliberations and ultimately decisions that pertain to housing and housing finance in Nigeria. So, I would say that the Association has played a critical role in shaping mortgage and real-estate related policies primarily through advocacy and stakeholder engagement. As to how MBAN advocates for the interests of its members, I would say that it does this essential through stakeholder engagement, strategic partnerships and collaborations
Q: With the economic landscape constantly changing, how does the association work to ensure that mortgage banking remains a viable and accessible option for Nigerians?
A: Primarily, the Association through its advocacy drives seeks to ensure that the sub-sector is provided with all necessary infrastructure such as legislation, regulation, and a sound framework to ensure affordability of mortgage and to stimulate demand for housing finance through mortgages. Specifically, MBAN has put in place some structures to enhance affordability. First, the association has successfully advocated withdrawal of 25% from RSA accounts for equity contributions for prospective borrowers would qualify for a mortgage but might not be able to raise the downpayment. There is also the collateral replacement Indemnity (CRI) to increase loan-to-values ratio from 80% to 95%. The implication is that a prospective borrower who subscribes to the CRI would only pay 5% equity as against the default 20%. Besides this, the proposed Mortgage Guarantee Insurance would also help to reduce LTV to 90% so that generally, prospective mortgage borrowers would only pay 10% equity to access mortgage loans. We have also expanded the mortgage underwriting standard to extend mortgages to the low and middle income earners and the self employed in the informal sector.
Q: Are there specific initiatives or programmes that the association is currently undertaking to promote financial literacy and educate the public about the benefits of mortgage financing?
In collaboration with the Federal government, through the Central Bank, under the National Housing Finance program (NHFP) MBAN developed the Consumer education program. The program is to be undertaken by prospective home owners – anyone applying for a mortgage. The Association has also included Consumer Education in its training curriculum to increase awareness of mortgages. In addition to this, the Association has also registered and licensed Mortgage Brokers to operate in the Mortgage Banking ecosystem. The Brokers engage in aggressive marketing to increase awareness of mortgage product in or der to increase both the latent and effective demand for mortgages in Nigeria.
Q: In your opinion, what are the key challenges facing the mortgage banking sector in Nigeria, and what steps is the association taking to address them?
A: Presently, I would say the most crucial issues that need to be addressed are macroeconomic policies relating to interest rates, inflation rate as well as exchange rate. High interest rate is currently a major factor that makes mortgages not affordable for people who qualify for and are willing to take one. Although addressing these macroeconomic issues of fundamental nature is outside the control of either the Mortgage Banks or the Mortgage Banking Association of Nigeria, notwithstanding, the Association has engaged with the government to seek how this issue could be resolved. Currently, we are actively seeking government subsidy on interest rate for mortgages as a temporary solution pending when macroeconomic policies that would address the issue on a permanent or long-term basis is obtained.
High cost of land titling and property registration equally remain a significant challenge at the moment. The exorbitant price and cumbersome process of property registration has been a clog in the wheel of progress of mortgage. Apart from its negative impact on the perfection of mortgages, it has also prevented homeowners from maximizing their investment in housing. When properties are not registered, they become dead assets as the owners would not be able to leverage on them for other financial transactions such as for collateral purposes. The Association and its constituent members are actively engaging with all relevant government agencies to for the implementation of the 1:3:1 operation bureaucracy. This entails the reduction in Cost of Title Transfer to a maximum of 1% of Property Value; Time to a maximum of 3 days, and Procedures limited to only 1 Desk (1:3:1).
Q: How has technology impacted the mortgage banking industry, and what innovations do you see playing a crucial role in the future of mortgage financing in Nigeria?
A: Mortgage Banking is still highly regulated in Nigeria and the sub-sector has not been penetrated by fintech, so essentially Mortgage Banking in Nigeria has largely maintained the ‘brick and mortar’ system of housing finance. That notwithstanding, individual mortgage banks are leveraging on technology in everyway possible to make their operations more user friendly and attractive; they have and maintain an online presence through their websites. Collectively, the subsector has also leveraged on technology in the larger financial services sector to improve the efficiency of mortgage loans originations through integration of the customers of Mortgage Banks into the BVN platform, Issuance of NUBAN Numbers to facilitate online transactions for Mortgage Bank customers and Direct debits from customers’ accounts. Similarly, Mortgage Banks have collaborated to develop a software for automating the origination and servicing of mortgage loans.
We are looking at a state in the very near future where mortgage loans could be originated entirely online (end-to-end), and mortgage loan origination could operate on centralized underwriting and processing augmented by automation. The augmented automation helps the underwriter to verify the customers’ balances and income sources, verify employment information, property deed records etc. In terms of technology, I feel that there is still a lot that needs to be put in place by the government to integrate the different databases that are currently existing in silos. For instance, if the subsector would be able to operate end-to end online loan origination, then, there must be access to the National Identification Number (NIN) and Bank Verification (BVN) databases.
Q: Can you discuss any collaborations or partnerships that the Mortgage Banking Association of Nigeria has forged with government agencies, financial institutions, or other stakeholders to advance the goals of the industry?
A: The Association has forged and maintained a long standing relation with the Chartered Institute of Bankers of Nigeria (CIBN), Nigeria Inter Bank Settlement Systems (NIBSS) and FITC for capacity development. MBAN and FITC have jointly organised training for Director of Mortgage Banks for continuous and we are working to extend the scope of training to other level (cadre) of staff within the sub-sector. The MBAN-CIBN joint workshops are designed for middle level staff in both the Commercial and Mortgage Banks
Q: What measures are in place to ensure responsible lending practices within the mortgage sector, and how does the association contribute to maintaining a healthy balance between risk management and market growth?
A: First, the Central Bank of Nigeria’ s guidance for the practice of mortgage lending in Nigeria ensures that mortgage finance providers act in the customer’s best interests, ensuring affordability, transparency of terms and conditions and supporting a borrower if they experience repayment difficulties. The regulatory support to ensure ease of repayment was exemplified during the COVID-19 pandemic in 2020 when necessary prudential adjustments and waivers were permitted by the CBN to accommodate the mass repayment default as a result of the crunch in economic activities which was occasioned by the lock-down.
In addition, the amortization structure of all mortgage loans in Nigeria is that Loan repayments are structured such that the loan will be fully repaid by the end of the period for which it is written. In order words, there is no negative amortization. In no case does the remaining principal amount that is owed increase during the time that the loan is outstanding, although default interest can be charged but not added to principal. After default, any payment made is applied to interest.
Lenders also ensure that prospective borrowers fully understand the weight and financial implications of a taking a mortgage through the Consumer Education Program. Every prospective mortgagor is mandated to undertake the consumer education program for proper enlightenment. Through this program, lenders ensure that borrowers understand the details of a loan and carry out thorough checks on any borrowers, so they can be confident that what customers will receive will be suitable for their circumstances.
Q: Looking ahead, what do you see as the future prospects and opportunities for the mortgage banking sector in Nigeria, and how is the association preparing for these changes?
A: I see a vast opportunity in mortgage banking and housing finance. First, the population f the country is potential advantage for housing requirement. Currently, the population is in excess of 190 million people and at a population growth rate of 2.8%, it is projected to reach 263 million by 2030.the implication of this statistic is that there is enough population replacement to ensure that there is constant need for new housing development for the next three to 4 decades. Similarly, the population has a large percentage (about 63%) of young people below thirty-five years of age. This guarantees continuous formation of new households for another 2 – 3 decades. All these is in addition to the existing housing deficits, which has been estimated to require over I million houses annually to defray. These create a potential and necessary market for housing and by extension housing finance. So given that every necessary infrastructure is put in place, and which the government and all relevant agencies and institutions are working towards, I foresee, in the very near future a sub-sector that will thrive and blossom