Mortgage House

By AYOOLA OLAOLUWA

Mortgage banks operating in the country are losing the battle for the control of the nation’s mortgage finance market to commercial banks, Business Hallmark findings can reveal. According to the approved List of Primary Mortgage Institutions (PMIs) in Nigeria licensed by the Central Bank of Nigeria (CBN) displayed on its website, 35 PMIs are currently operating in the country.
However, checks revealed that only few of the Primary Mortgage Banks (PMBs) are performing well. They include FBN Mortgages Limited, owned by First Bank Holdings (FBN), Abbey Building Society Limited, Aso Savings and Loans Limited, Haggai Savings and Loans Limited, Lagos Building and Investment Company Limited, Federal Housing Authority (FHA) Homes Savings and Loans Limited, Platinum Mortgage Bank Limited and Trust Bond Mortgage Bank.
In 2018, the CBN had revoked the licenses of six of the 34 PMBs operating in the country for different infringements ranging from undercapitalization to insolvency, putting the number of PMBs at the end of 2018 at 28.
The PMBs whose licenses were revoked included Accord Savings and Loans Limited in Lagos which failed to recapitalise; Ahocol Savings and Loans Limited owned by the Anambra State government; Bayelsa government owned Trans-Atlantic Savings and Loans Limited in Bayelsa which became insolvent; Royal Savings and Loans Limited in Delta State; Amex Savings and Loans Limited in Lagos which failed to recapitalise, as well as Supreme Savings and Loans Limited in Lagos.
The number again rose to 35 at the end of December 2020 with the licensing of seven more PMBs. However, available data suggests that few of the mortgage banks are really doing well, owing to several factors, including stiff competition from commercial banks, as well as inadequate funding.
According to several players in the mortgage industry, commercial banks are edging out PMBs in the battle for dominance largely due to their deep pockets.
“As things stand, PMBs, apart from those owned by commercial banks like FBN Mortgage Limited and Trust Bond Mortgage Bank, owned by Access Bank that get financial assistance from their parent companies, cannot favourably compete with commercial banks with unlimited access to funds despite.
“They (PMBs) primarily get their funding from the Federal Mortgage Bank of Nigeria (FMBN). The FMBN which was established in 1956 provides long-term credit facilities to mortgage institutions in Nigeria.
“But as we all know, the FMBN, being a government owned institution is underfunded like all other government agencies. And owing to the low interest rate of six percent charged on its loans, the competition is so massive that most Nigerians lose out in their quest to obtain low interest loan to become landlords”, declared an housing expert, Architect Bode Adeogun.
Adeogun’s stance was corroborated by the Chief Executive Officer (CEO) of Abbey Building Society Limited, Nadu Hamman, who bemoaned the unfair competition between PMBs and commercial banks.
According to the Abbey Building Society Limited boss, commercial banks are still a major competition to mortgage banks in Nigeria.
“Our major competitors are still commercial banks. Mortgage banks are trying, but because we don’t have the same kind of resources that commercial banks have, we can’t really dig deep into the market”, declared Hamman.
A check on the website of the FMBN shows that every Nigerians desirous of getting a loan from it must begin with the payment of 2.5% of their monthly basic salary or income. The 2.5% of monthly basic salary contribution then qualifies an applicant to access the loan.
The pool of funds created by the contributors nationwide becomes available to any contributor to borrow from, after contributing for a minimum of six months.
A contributor interested in obtaining NHF loan then needs to apply through a registered and duly accredited mortgage loan originator (e.g. Primary Mortgage Banks), who packages and forwards the application to FMBN.
However, that is where the good news seems to have ended. Most Nigerians, who spoke with our correspondent on their experience while trying to access the FMBN loan, described the process as tedious and most times a waste of time.
“It is easier for a camel to pass through the eye of a needle than to get the 6% government financed housing loan. I am a deputy director in the Federal Ministry of Health. I have been saving for several years to be able to access this loan to no avail.
“After trying for about fifteen years, I abandoned the quest and approached GTBank. I got the GTB loan in less than one year, though not at the same interest rate”, declared Mrs. Rosemary Abu, a civil servant.
Owing to the near impossibility of getting the FMBN provided loan, many aspiring home owners are increasingly turning to commercial banks which are daily churning out innovative products to consumers.
One of the advantages commercial banks have over FMBs is the option of refinancing unperforming mortgage loans.
“Unlike most FMBs that on most occasions forecloses the properties of bankrupt costumers, commercial banks, due to their deep pockets, often offer them the option of refinaning the bad loans.
Few banks, like GTBank, UBA, First Bank, Access Bank and Zenith Bank have enticing products for customers. For instance, prospective house owners can choose from the UBA Homes mortgage options designed to help them own their home conveniently.
Some of the benefits in the UBA housing loan include variable Interest rate benchmarked against UBA Prime Lending Rate (PLR); loan tenor of up to 20 years; loan amount up to 80% of property value subject to a maximum amount of N70m for properties in Lagos; loan amount up to 80% of property value subject to a maximum amount of N40m for properties in Abuja, Enugu or Port Harcourt and access to salary advance.
Others include freedom to repay loan in full without prepayment penalty; monthly or structured pre-agreed repayments terms; interest only repayment allowed up until completion for properties under construction; progressive drawdown against bank approved Quantity Surveyor’s certificate, reduced or no COT on linked account as well negotiable management fee.
Like the UBA home ownership package, the FBN Mortgage Limited package also offers customers the options of buying their homes or constructing or simply renovating it.
Some of the benefits include a maximum tenor of 20 years, subject to retirement age of 60 years; simplified documentation; minimum down payment of below 30%, subject to the location; competitive interest rates. The icing on the cake is that a loan applicant does not need equity contribution for home equity refinancing.
Meanwhile, findings revealed that FMBs are hoping that despite the push to gain more foot-hold in the mortgage market, commercial banks will soon lose interest and focus more on their core responsibilities.
A senior staff of one of the leading FMBs in the country maintained that banks would soon lose interest in the housing loan business.
”Banks are very old-school and don’t focus on long term investments. The mortgage business is a long term one, between 20 and 35 years. I don’t see them (banks) having the patience to wait for over 20 years to recoup their investments.
“They will try to lend more aggressively to corporates and mainly focus on their existing customers, where they have visibility of their cash flows.
“What is currently happening is that banks have lush funds they needed to invest. But can they wait 20 years or more to get back their money? I doubt they will have the patience,” he added.