By YINKA KOLAWOLE

The establishment of Mortgage Refinance Company (MRC) is expected to increase annual mortgage origination in Nigeria to 200,000 from the current average of 20,000 mortgages within the next few years, representing an increase of 900 percent.

A Mortgage Refinance Company (MRC) is a financial institution established to provide short-term liquidity and/or medium – to long-term funding or guarantees to housing finance lenders.

President Goodluck Jonathan, speaking at an event in Lagos, last week, noted that the current mortgage origination of 20,000 per annum is grossly inadequate for a country of about 160 million people, with housing deficit estimated at 17 million units. He said this partly informed the creation of MRC with a target of 200,000 mortgage origination annually within the next few years.

Giving more insight on the creation of MRC, Minister of Finance and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, noted that government took the step having realized that the housing sector is a huge platform for creating jobs, in terms of both backward and forward integration.

According to her, with the current housing need in Nigeria put at 17 million, and 2 million more being added every year, 20,000 mortgages being presently originated every year are not sufficient. “We hope to launch the Mortgage Refinance Company within the next three months.

Already, a liquidity facility of $300 million has been secured from the World Bank at zero interest rate for this purpose. The role of government is just to facilitate the process of establishment. The company will be private sector driven and some of our banks will also be involved,” she remarked.

The Central Bank of Nigeria (CBN) recently issued a circular on exposure draft regulatory and supervisory framework for the licensing and operations of MRC in Nigeria, pegging the minimum capital base of MRC at N5 billion.It stated that the establishment of the company is primarily aimed at increasing liquidity within the mortgage sub-sector and availability of mortgage credit in Nigeria, reduce mortgage and related costs, and make residential housing more affordable.

“The framework provides for the licensing and establishment of a MRC as a specialised second-tier institution, which would provide short-term liquidity, long-term funding and/or guarantees to mortgage originators and housing finance lenders.

“The regulatory framework is drawn pursuant to the provisions of the Central Bank of Nigeria (CBN) Act 2007, Banks and Other Financial Institutions Act (BOFIA) CAP B3, Laws of the Federation of Nigeria (LFN) 2004, other relevant Laws, and extant CBN Guidelines and Circulars.

It prescribes the basic regulatory requirements for the MRC’s principal line of business of re-financing credits to borrowers on the security of residential mortgage assets and other qualified collaterals. It also sets the capital adequacy requirements for the MRC, including its minimum paid-up capital, maximum leverage limit, and the minimum risk- weighted capital requirement,” CBN stated.

The framework further specifies the types of collateral that a borrower can pledge for the MRC’s advances, and the discount that the MRC shall apply in determining how much it can lend against any qualified collateral. It also prescribes procedures for the management of the MRC’s interest rate risk,

its permissible investments and liquidity requirements. “The objectives of the MRC shall be to support mortgage originators such as Primary Mortgage Banks (PMBs) and Deposit Money Banks (DMBs) to increase mortgage lending by refinancing their mortgage loan portfolios. It shall act as an intermediary between originators of mortgage loans and capital market investors who typically are looking for long-dated high quality securities.

The MRC shall engage in the following activities: Refinancing of fully secured mortgage loans; Investment in debt obligations issued or guaranteed by the Federal Government of Nigeria or any of its agencies; Issuing guarantee for mortgage loans as part of its off-balance sheet engagements; issuing bonds and notes to fund its purchase of eligible mortgages; and other activities as may be prescribed by the CBN from time to time.”

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