By YINKA KOLAWOLE

Chief Executive Officer of the Asset Management Company of Nigeria (AMCON), Mr. Mustapha Chike-Obi, has faulted the guideline establishing Nigerian Mortgage Refinancing Company (NMRC), arguing that the agency lacked adequate capital, and called for increase in the minimum capital base of NMRC to about N10 trillion.

Speaking at the Legal Business Summit 2014 in Lagos, Chike-Obi highlighted various pitfalls that could scuttle the objective of the NMRC of boosting homeownership in Nigeria. He noted that in spite of the lofty ideas behind setting up the company, the mirage of challenges on ground if not properly tackled will render it ineffective.

Some of the problems, according to him, include poor take-off capital, issues of enforcement of contract, absence of foreclosure laws and the general issues of equity contribution, period of recovery of loans and the uncertainty about what amount to recover in the case of breach of repayment plans.

NMRC was created to provide primary and secondary mortgage markets by raising long-term funds from the domestic capital market as well as foreign markets to provide accessible and affordable housing in the country. It has a N6 billion tier 1 capital, $300 million World Bank loan, while the Nigeria Sovereign Investment Authority (NSIA), through its Nigeria Infrastructure Fund (NIF), also approved a firm equity commitment of N1.6 billion in the NMRC.

The AMCON boss said the recommended capital outlay could be raised by the Federal Government through its guarantee of 80 percent of mortgage loans in the country, with banks and insurance firms taking up 10 percent each of such loans. “We want the banks to take the first 10 percent loss, insurance company 10 percent and the Federal Government 80 percent. By so doing, banks will be comfortable that if the mortgages go bad, they can claim at least 80 per cent of that loan from the government,” he said. This according to him, would encourage the lenders to create mortgage loans.

“What they have done is that they have taken a good idea, and watered it down. There should be government guarantees not government loans. The NMRC should only buy bad mortgage loans from the banks and should not be a direct lender in the mortgage business.”

He, however, said the government should not guarantee 100 percent of the loans because doing so could make the lenders to lend irresponsibly.

“There should be government guarantees not government loans. The NMRC should only buy bad mortgage loans from the banks and should not be a direct lender in the mortgage business,” he said. Chike-Obi noted that it still takes about 10 years for banks to sell properties collected as collateral, he said this discourages banks from lending to the mortgage sector.

“The issue of being able to foreclose quickly and efficiently is the biggest problem for banks,” he said, adding that the NMRC should also secure a foreclosure power, similar that of AMCON, which enables it to foreclose any property presented to it as collateral.