Standardizing the mortgage Market
Promoting the adoption of global operational standards by key players in the Nigerian housing and mortgage sector is a key pillar of NMRC’s operations.
A notable milestone in is the development and institutioning of the Uniform Underwriting Standards (UUS). NMRC worked with key industry stakeholders like the Central Bank of Nigeria (CBN), the Mortgage Bankers Association of Nigeria (MBAN), the Federal Mortgage Bank of Nigeria (FMBN) and the Nigeria Deposit Insurance Corporation (NDIC) to develop and streamline mortgage underwriting standards to widen the net of potential borrowers and enhance financial inclusion.
The standards, which are now used by all NMRC member mortgage lending institutions for processing mortgage applications promote uniformity, efficiency and mitigate mortgage financing risks.
The industry-wide use of the mortgage underwriting standards has led to:
- a significant increase in the turnaround time for processing mortgage loans
- zero default rate on mortgage portfolios of NMRC member banks
- increased collaboration by housing value chain players.
Currently operational are Uniform Underwriting Standards (UUS) for the following sectors of the economy:
- The Formal Sector
- The Informal Sector
- Non-interest Banking
- Diaspora Nigerians
The Nigeria Mortgage Refinance Company(“NMRC”) is a Public Private Partnership arrangement between the Federal Government of Nigeria and private sector. It is a component of the Nigeria Housing Finance Programme initiated by the Federal Ministry of Finance in collaboration with the Central Bank of Nigeria (“CBN”), Federal Ministry of Lands, Housing & Urban Development (“FMLHUD”) and the World Bank/IFC.
NMRC provides mortgage-lending institutions with access to long-term finance at an affordable interest rate, thereby enabling mortgages to be issued by these institutions to Nigerians, at longer tenors and affordable rates. The provision of mortgage loans at longer tenors will provide the average working Nigerian citizens an opportunity to buy a home and conveniently pay for it.
In simple words, NMRC is government inspired but a private sector led effort to provide affordable housing for Nigerians through loans accessed from mortgage and commercial banks. NMRC will contribute to a better alignment of the Housing Finance Programme.
A core strategic objective for the Nigerian government is to achieve broad based and inclusive growth by unlocking markets that have the potential to generate jobs.
The increasing gap in residential homes in Nigeria is now estimated by experts to be in a deficit of about 22million housing units. This presents a huge opportunity for private investment and job creation. It is estimated — following labor impact assessments in countries such as Columbia, Malaysia and South Africa — that at least 5.62 direct jobs can be generated with every new home and 2.48 indirect jobs associated in housing related expenditure
One of the roles of NMRC is to provide a safety net for financial institutions, allowing them to convert illiquid mortgage assets into cash when in difficulties. This allows for a facility such as NMRC to make direct provision of long-term funding into the mortgage market.
In addition, given that the US$250 Million IDA loan is being used as Tier 2 capital, it allows NMRC to raise its own funds through the issuance of long-term bonds to institutional investors.