The Role of Mortgage Institution in Housing in Nigeria (A Case Study of Anambra Home Limited (2006-2014)
There are many literature elating to the subject matter under investigation. Some of them are journals text books, newspaper and so many other materials which are elated to this study.To be review in this research work, include the role of mortgage institution in solving housing problem in Nigeria, operational modalities and performance of mortgage institution, characteristics of mortgage institution in Nigeria.
Problem encountered by mortgage institution in carrying out their operation, the target of the sector towards increasing mortgage facilities in the country and some other area.
- ROLES OF MORTGAGE INSTITUTION IN HOUSING
DELIVERY IN THE COUNTRY
According to Agbola and Okatubara (2010) the federal mortgage finance limited (FMFL) was in corporate in July 2003 as fully owned by the federal government of Nigeria to provide the roles and also provide credit and responsible housing finance service that will facilitate housing delivery to all the segment of Nigeria society.
The FMBN also state that the institution has the responsibility to provide proper policy control over the allocation of resource and funds between the housing sector and the sector of the economy.
It is also the role of the mortgage product and are now being rewarded by a favourable response from the public.
According to the decree that established this institution, the institution is also to mobilize funds for the provision of houses for Nigerians at an affordable cost, ensure constant supply of loan to Nigerians for the purpose of building, purchasing and improvement /renovation of residential houses. Encouraging the development of specific programmes that will ensure effective housing for low income earners or workers.
Ademilyi (2013) pointed out in his article tagged “Housing in Nigeria Development” that mortgage institutions have the role of helping to improve the standard of living of Nigeria citizens by providing housing. He also pointed out that a person standard of living can also be determined by kind of housing he lives.
- MODEL AND THEORY RELEVANT TO THE RESEARCH QUESTION
2.2.1 OPERATIONAL MODALITIES AND PERFORMANCE OF MORTGAGE INSTITUTION
In the opinion of Nubi (2012) mortgage institution should encourage perspective owners to open account with them and deposit regularly to save towards their home acquisition project still according to him, upon receipt and approval application from qualified customers. They should pay the full value of houses to developers on behalf of their subscribers and retain the title document as collateral until subscribers fully repay lost through installmental repayment of loan with the interest charges.
When default occur, they should be able to recover the full value form the for closure of the arrangement where a thinking secondary market exists they should be able to package their portfolio of loan for sale to other investors in the capital market through securitization and from the proceeds embark on further operation.
Nubi further discovered that mortgage institution are not their bid to get greater profit, several mortgage institution engage in direct construction of houses for sale there by competing with the operators they are expected to be financing.
Many also engage in no-housing business which are very risky. Nubi in his study discovered that not less than 80% of these institution sampled in his study, were engaged in direct construction of houses for 57% were into merchandizing while 70% were more accustomed to give it out short-term loan to traders. A a esult of these number of distractions form mortgage institution has been obysmally low in terms of the number of housing units actually produced through their financial assistance very few could boast of 100 units produced through their loans.
- CHARACTERISTICS OF MORTGAGE INSTITUTION IN NIGERIA
Nubi (2012) from his study discovered that out of 258 primary mortgage institution that exist in 1996, only 90 have remain on the registered list of CB till date. The majority of these mortgage institution are limited liability company. This is the reason why it has been difficult for many of them to meet up with capitalization requirements.
In view of recent reforms in the banking sector, it has been suggested that rather than wait for an official directive, mortgage institution should begin to work towards increasing their capital base to between 500- 1 million and 2 million, to enable them attain higher levels of functional efficiency. To date most of the mortgage institution operate as small companies with few employees and only a few have so far accessed funds from the national housing funds for housing finance purpose.
Also operations are to a large extent information Technology (IT) enabled and majorities do not have enough branches to cater for users, of their services method adopted for disseminating information on their services has been severally limited.
- PROBLEM EFFECTING THE OPERATION OF MORTGAGE INSTITUTION IN NIGERIA
According to Achaka (2013) the problem bedeviling mortgage institution can be evaluated from two perspective that of small scale individual borrowers (micro scale) and macro scale.
They are treated below
- Low capital: mortgage institution of 100 million is too small to finance housing on the scale of the country requires in fact most of them have not been able to grant individual loans exceeding 3 million and have not also been able to cope with the volume of demand from their customers.
- Inadequate mortgage mobilization of funds through savings deposit. Based on Rayi (2012) opinion, he noted that low income and poor saving culture are large extent, the reason for this problem mortgage institution too have not explored the full potential of their position in this area.
- Poor and uncertain state of the economy and socio-political environment makes it difficult to take advantage of funding opportunities
- Too many mortgage institution still engage in import / export business financing etc in order to gain short term profit.
- Inadequate monitoring of the central bank of Nigeria (CBN) and other monitoring bodies is a problem also.
- Inadequate number of branches in all segments of the economy is also a problem.
- Inadequate awareness of their services and opportunities to the public due to non use of local language in information dissemination, this lending to few in exclusion of vast majority.
- Low loan servicing capacity of so many Nigerians is a problem. This is as a result of low and irregular income, rising cost of living and poor saving culture.
- The process of getting approval for loan is too cumbersome. According to the findings of Nubi (2012). It takes about an average of 13 months to get loan approval.
- Loan default: This is one of the greatest challenges of mortgage institution most institution have a way of managing or minimizing this problem.
- It is normally done through appropriate credit management or assessment.
2.3 CURRENT LITERATURE RELEVANT TO RESEARCH QUESTION
2.3.1 SUGGESTED SOLUTION TO THE PROBLEM OF MORTGAGE INSTITUTION
According to Ola (2011) in financial time properly guide one of the ways out is to build momentum for change in housing mortgage institution should be encouraged to improve their capital base in order to empower them for greater effectiveness in financing housing. This will afford them wider coverage and enable them access greater pools of funds.
The FMBN / PMs, NSE and other stake holders should hasten the opeationalization of secondary mortgage market (S1919) as a means of mobilizing more funds for mortgage origination and encouraging greater efficiency in the sector. The full operation S1919 and boast the liquidity and make the market more competitive and eventually reduce cost of mortgagors.
Also with the energetic of new pension scheme and he emergence of Real Estate Investment Trust (REIT) mortgage institution now have a wide market to invest their potentials and earn good returns.
On the micro-scale, there is need to hasten the land use act to provide adequate recognition of the types of interest and transaction that would emerge in the new dispensation land title need to be made clear and simple. The present incorporation of IT enabled record keeping and land data management is a stop in the right direction but, the state government needs to perceive the broader advantage of relaxed land market control as against the myopic treated of land matters only in terms of revenue generation. In this regard, consent to transactions should be cheaper and less cumbersome to obtain.
Mortgage institution should be encouraged to desist from distracting activities like LPO financing short term commercial lending etc.
The central bank of Nigeria should put measure of frame work in place to ensure the achievement of the above.
mortgage institution should create more awareness of their products and endeavours to attract patronage across a broader section of the country than from a new individual. This will require the opening of new branches, where prospective customers easily access them and providing publicity / information materials in local language which people can easily understand.
Proactive assistance and counseling given to mortgage institution by the appropriate authorities also help.
Mortgage institution should encouraged to embrace the use of mortgage default insurance.
This will help to minimize the problem of loan default insurance, it will help to minimize the problem of loan default by borrowers.
Mortgage institution should properly position themselves to be able to assess offshore funds either through partnership arrangement similar to the one which was recently initiated between guardian express assurance limited, Howell compbell and associate and first premier mortgage corporation Maryland, USA to market mortgage plan to assist home ownership in Nigeria
Under the arrangement, subscribers are expected to save up to 25% of the cost of any house they wish to acquire up to 15 million over a period of 36 to 60 months, the guardian express will then finance the subscribers over a period of 10-15 yrs.
Estate surveyors in general needs to empower themselves to be more productive as initiation through consultancy services of housing investment on large scale than have seen so far. There should be more collaboration between stakeholders in the shaping of policies and monitoring of their implementation.
The need for greater involvement in the packaging of housing development scheme loan sourcing etc cannot be over emphasized. Infact, there are no better professionals who by training and experience have better understanding of all the issues involved than others in the building industry.
According to Ahmed (2012) the managing director and chief executive of the bank in a media briefing reveals that the present capital base of the bank is N25billion and has granted N41.958 billion to primary mortgage institution and estate develops out of N99.515 billion already approved for disbursement of beneficiaries at the end of January that year.
The new bankers who was recently appointed to the position disclosed that the federal government was on the process of significantly raising he equity of the organization because of the need for recapitalization of FMBN and an enhanced adequate budgetary funding to meet the huge sector efficiency and effectiveness of financing workers contribution performing loan to improve he bank profitability and financial position.
As the medium term, the bank would embark on issuing of bonds, attract foreign and investment commerce liquidity facility provision for mortgage operations. Introduce mortgage and title insurance an expand financing to non-salaried informal sector among others.
The economic confidential gathered that he bank (FMBN) planned to raise money through foreign borrowing as securitization would be the major focus of the bank in the years ahead. The FMBN boss confirmed that securitization has proven to be a number of advantage including economic benefits in connecting the capital and financial capital market commodities resulting in lower funds, improves the few of fund into housing sector and better allocates risk inherent in the housing financing industry sector.
Securitization is also a deep potential source of funds, it can give rise to relate industries by introducing, new aspect classics improve competition and specialization with the resultant positive effect of efficiency. Lower cost of funds and reduction in margin interest rate spreads.
According to EBIE (General manager of federal Housing Authority (FHA) in that capacity he supervised the designing and developing of festival (FESAC) town which provides accommodation of arts and culture help in Nigeria that year. In the interview with daily dum in Lagos. Ebie Uche warned that the present pace of government policy, the housing package of the vision 220 might not be realized considering. He said that FMBN between 2006 and January 2009 made a cumulative collection of N41.965 billion through the National Housing Funds (NHF) schemes. Giving further break down of the disbursement he explained that the total of N29 billion and N50.514 billion were approved for the primary mortgage institution and estate developers only N14.546 billion and N22.412 billion use respectively disbursed.
Ahmed further said that “comparison with a similar secondary mortgage institution indicate that FMBN’s current capital of N2.5 billion (17 million) is inadequate compared o an average of 132 million of selected contemporaries. Recapitalization and consolidation of primary mortgage institution similar to bank and insurance companies as being proposed need to be carried out to improve he capacity of payment to operate the magnitude of quality mortgage loan necessary for the sector contribution and for the take off of the secondary mortgage market. FMBN loss lamented that nations mortgage sector contributed to the gross domestic product (GDP) as less than 2% while it ought to contribute up to 50% he added Nigeria suppose to have at least 700,000 unit houses per annum.
The federal government has guaranteed the bank N100 billion bond out of which N27 billion was issued in 2006. The turn around in the operation of FMBN would entail short term, medium term and long term objectives.
In short term, he said it would entail supporting legal and regulatory frame work reviews. Consolidating National Housing Fund Operation to the enormous work to be done. However, he said that what the government need to actualize its housing policy was a political will.
2.4 SUMMARY OF THE RELATED LITERATURE
In the opinion of Ademilyi (2013) mortgage is a legal agreement that conveys the conditional right of ownership on an asset or property by its owner (the mortgagor) to a lender (the mortgagee) as security for a loan.
According to Onyeagba (2013) mortgage is an arrangement where he borrower called the mortgagor supplies a security for money advanced to him by a lender called the mortgagee.
According to Achaka (2013) the federal mortgage finance Limited (EMFL) was established to finance housing services that will facilitate housing delivery to all segment of the Nigeria society.
According to the federal mortgage bank of Nigeria (FMBN) which is the apex mortgage institution in the country, mortgage institution is the only institution of the sources of housing financing.
According to Nubi (2012). He view mortgage as a legal agreement in which a person borrows money and buy property (such as house) and pays bank the money over an agreed period of time.
Adesuwa (2012) view mortgage as a loan that a bank or mortgage lender gives out to help finance the purchase of a house to be paid back at he stated period of time.
According to Ebie (2012) view mortgage as a loan in which property or real estate is used as collateral.
According to Ola (2011) mortgage is a legal agreement which a bank build society etc lends money at interest in exchange for taking title of he debtors property, with the condition that conveyance of title becomes void upon the payment of the debt.
According to Akpan (2011) mortgage is a legal agreement in which one borrows money to purchase property and pays back the money over an expected period of time.
According to Acha (2011) mortgage is a situation where some one get a loan from a bank or any organization or individual and give such right over a specific property until such loan is repaid.
In the opinion of Okeke (2013) Mortgage institution are charged with the responsibility of providing adequate fund for housing financing.
According to Ebie General manager of Federal Housing Authority (FHA) view mortgage as a loan in which property or real estate is used as collateral.
Rayi (2012) noted that Housing delivery is one of the major function of mortgage institution.
Mbaeri (2012) said that mortgage institution plays an import role in the housing delivery.
Orji (2013) define mortgage as legal agreement which a bank gives out fund at interest in exchange for taking title of the debtors.
In my own opinion mortgage is an arrangement where a borrower known as the mortgagor supplies a security for money given to him by the lender called the mortgagee.
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