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CBN, PMIs work on modalities for proposed MRC

The Central Bank of Nigeria (CBN) and operators of Primary Mortgage Institutions (PMIs), have commenced work on the modalities for the establishment of the proposed Mortgage Refinance/Liquidity Company (MRC).

Vanguard investigation revealed that the apex bank met last week, in Abuja, with Mortgage Banking Association of Nigeria (MBAN) executives to discuss modalities for the establishment of the MRC.

The Mortgage Refinance/Liquidity Company (MRC) is a Special Purpose Vehicle (SPV) being planned as a specialized second-tier institution which would provide short-term liquidity, long-term funding or guarantees to mortgage originators and housing finance lenders (including DMBs and PMIs) to revitalize the mortgage sub-sector.

The MBAN delegation led by its President, Mr. Abimbola Olayinka, met with the CBN Deputy Governor, Financial Sector Stability, Dr. Kingsley Moghalu, to deliberate on the possible reforms of the mortgage sub-sector this year.

A source privy to the discussion reliably informed Vanguard that some of the issues discussed at the meeting include working out the modalities in establishing the proposed Mortgage Refinance/Liquidity Company (MRC) aimed helping the drive to consistently finance long_term loans on a sustainable basis, which has been lacking in the sector as part of the reform package for the sub-sector.

The source also hinted that the reform package to be unveiled will ensure a recapitalisation of the mortgage banks and also include measures that will ensure soundness of the industry by emphasising full compliance with the code of corporate governance, with the apex bank warning of zero tolerance for infractions.

It would be recalled that the CBN Governor, Mal. Sanusi Lamido Sanusi, during the 9th annual retreat for chief executive officers (CEOs) of PMIs, organised in conjunction with the International Finance Corporation (IFC), recently in Abuja, acknowledged that the Mortgage Refinance/Liquidity Company (MRC) has been proposed as part of the reforms of the housing finance sub_sector, as a Special Purpose Vehicle (SPY) to re_vitalize the sub_sector.

“It has become clear that the dearth of long term deposits coupled with low level of capitalization of the PMIs are key militating factors in the drive to consistently finance long_term loans on a sustainable basis. Thus, the need for a liquidity/re_financing facility is imperative and paramount.

“It would purchase loans with recourse or receive assignment of mortgages/loans, acting as intermediary between lenders and the capital market and would issue bonds in order to raise long-term capital. It would be a catalytic tool for the development of the secondary mortgage market and a precursor for securitization. In terms of funding, the MRC is expected to be private_sector driven and its seed capital would be sourced mainly from deposit money banks and PMIs, with the CBN providing necessary support and not more than 10 percent of the capital,” Sanusi noted.

Also in a presentation at the MBAN/IFC retreat, the Director, Special Insured Institutions Department (SIID), Nigeria Deposit Insurance Corporation (NDIC), revealed that more than 50 percent of registered PMIs in the country do not render returns while some of the returns rendered are inaccurate.

The unveiling of the reform package for the mortgage finance industry has been long awaited by operators and stakeholders, since the conclusion of the reforms of the universal banks which started in 2004, and later that of the microfinance banks.

In fact, operators have been complaining of the neglect of the sector by CBN citing the delay in unveiling the reform package as well as failure to convene,  in a very long time, the quarterly meeting of Committee of Mortgage Institutions of Nigeria (COMIN), comprising the Chief Executive Officers of PMIs and officials of CBN, NDIC MBAN and other stakeholders, meant to formulate policies for the sub-sector.


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