By  Yinka Kolawole

National Pension Commission (PenCom) has issued draft guidelines on withdrawals from Retirement Saving Accounts (RSA) for equity payment of residential mortgage. This is contained in a document released by the commission on its website last week, the guidelines help to determine the eligibility requirements, procedures and documentation required to enable RSA contributors to access and utilise part of their RSA balances.

Typical houses requiring mortgage financing

It would be recalled that the 2014 Pension Reform Act had made provision for RSA holders to access part of their pension contribution for mortgaged financing. The document was titled: “Draft Guidelines on withdrawals from Retirement Savings Account (RSA) towards Equity Contribution for Payment of Residential Mortgage”.

It stated as follows: “The Guidelines seek to provide the operational modalities for Pension Fund Administrators in determining the eligibility requirements, procedures and documentation required to enable RSA Contributors to access and utilize part of their RSA balances towards equity contribution in respect of first home ownership mortgages.

All applications by RSA holders to access and utilise a percentage of their RSA balances as equity contribution for mortgage loans shall be approved by the Commission. A RSA holder shall access a portion of the RSA balance as equity contribution for residential mortgage, only once in a lifetime.

“A RSA holder shall make a formal application to the PFA requesting for a portion of the RSA balance as equity contribution for a mortgage loan. A RSA holder that has utilised a portion of the RSA balance as equity contribution for residential mortgage may not be entitled to a lump sum payment at retirement.

An eligible RSA holder shall be allowed to access a maximum of 25 percent of the RSA balance as equity contribution for a mortgage loan. The RSA balance shall be the Value of an Accounting Unit of the Fund (VAUF) of the RSA Fund multiplied by the accounting units held by the RSA holder as at the date the application was received by the PFA.

Eligibility criteria for RSA holder

“In order to qualify to access the RSA balance as equity contribution for a mortgage loan, the following eligibility criteria shall apply:  The RSA holder shall be in active employment, either as a salaried employee or self-employed person. The RSA holder shall have been contributing consistently for a minimum of 10 years, prior to the application for drawdown.

The RSA holder’s Debt to Income ratio shall not exceed 33.33 percent of his/her net monthly income at the time of applying for the mortgage. The RSA holder’s debt shall be the sum of the monthly mortgage repayments and other personal debt obligations that impact on his monthly income. The RSA holder shall provide the required documentation as required under Section 5.0 and/or other additional documentation requested, from time to time.”

Eligibility criteria for mortgage

“An eligible RSA holder shall use the proceeds of the mortgage loan to purchase either a single-family home or an apartment in a multiunit building, which must be owner-occupied. The title to the property must have a fully perfected title and free from any encumbrance. The property shall have comprehensive insurance policy in the name of the borrower, to cover the replacement or reinstatement cost of the property.

The insurance policy must note the RSA Fund as one of the first loss payees, to cover the equity contribution released by the PFA. The valuation of the property to be purchased with the mortgage loan shall be carried out by a licensed, independent valuer who is a member in good standing with the Nigerian Institution of Estate Surveyors & Valuers (NIESV) and must carry Professional Indemnity Insurance with an insurance company licensed and in good standing with National Insurance Commission (NAICOM).

The mortgage loan amount shall be a minimum of N1.5 million and a maximum of N50 million. The tenor of the mortgage loan shall be for a minimum of 5 years and a maximum of 20 years. The interest rate on the mortgage loan shall be at a fixed rate for its whole duration.” PenCom urged stakeholders to forward their feedback, comments and enquiries about the draft guidelines to Director-General of the commission on or before the close of business on September 11, 2015.