Presentation on theme: "THE ROLE OF FMBN IN THE DEVELOPMENT OF THE NIGERIAN MORTGAGE MARKET"— Presentation transcript:
1 THE ROLE OF FMBN IN THE DEVELOPMENT OF THE NIGERIAN MORTGAGE MARKET A PAPERPRESENTED BYMR. GIMBA YA’U KUMO, MD/CE, FMBNAT THE1ST ASO HOUSING EXHIBITION & CONFERENCE17TH – 18TH MARCH, 2011THE ROLE OF FMBN IN THE DEVELOPMENT OF THE NIGERIAN MORTGAGE MARKET
2 INTRODUCTIONHousing sector plays a critical role in the development of an economy. It not only affects the welfare of the citizens but also the performance of other sectors of the economy.It is one of the three most important basic needs of man, the others being food and clothing.Consequently, greater attention is being given by governments in the delivery of affordable housing to its citizenry, through- Assistance in finance (via aid, subsidy or grants or combinations)- Assistance in provision of infrastructureThe focus on housing finance has been very prominent, because housing provision requires huge capital outlay which is often beyond the capacity of the vulnerable medium/low income groups.
3 OVERVIEW OF HOUSING IN NIGERIA 720,000 housing units required yearly to meet MGD Goal on housingHuge housing deficit estimated at 16m unitsEstimated mortgage financing gap of over 56 trillion Naira
4 OVERVIEW OF HOUSING IN NIGERIA Low homeownership rate of 25% compared to 70% in the USA, 63% in Brazil, 61% in Benin and 56% in South Africa
5 OVERVIEW OF HOUSING IN NIGERIA CHART 1CHART 2Real estate sector in Nigeria contributes only about 0.5% of the total GDP, while in developing countries contribution is about 60% and between 30-40% in emerging economiesCHART 1: Real Estate sector contribution to GDP has stagnated over timeCHART 2: Real Estate sector growth has underperformed real growth and non-oil growth ratesSource: National Bureau of Statistics Nov 2010
7 FMBN MANDATE FMBN was established to - MANDATE 1: Encourage the emergence and growth of a viable secondary mortgage market to service the needs of housing delivery in NigeriaMANDATE 2: Link the mortgage market to the capital market for sustainable long tenored funding and become a prominent capital market operator through issuance of debt and Mortgage Backed Securities (MBS)MANDATE 3: Mobilize domestic and foreign funds into the housing finance subsectorMANDATE 4: Collect and manage the National Housing Fund (NHF) in accordance with the NHF law
8 PERFORMANCE ON MANDATE Encourage the growth of a viable secondary mortgage market in Nigeria- Successful refinancing of 9,525 mortgages valued at N26 billion created by Mortgage Loan Originators in the 1st tranche of the N100 billion Mortgage-Backed Bond programme to sell FG non-essential residential houses in the FCT in Year 2007- The expected refinancing of about 6,533 outstanding mortgages valued at N14 billion in the 2nd tranche
9 PERFORMANCE ON MANDATE Link the Mortgage Market to the Capital Market- The Federal Mortgage Bank of Nigeria is registered as an issuing house by the Securities and Exchange Commission (SEC)- FMBN is recognized as an issuer of mortgage-backed instruments by the Federal Government of Nigeria- FMBN’s mortgage-backed bond (MBB) continued to retain its ‘AAA’ rating
10 PERFORMANCE ON MANDATE Mobilize foreign and domestic funds- FMBN is recognised as a first-choice investment conduit by foreign investors- FMBN is exploring opportunities of issuing debt instruments in local and international capital markets in collaboration with international financial institutions- Investor profile include global banks, international investment firms, conglomerates, foreign housing corporations, etc.
11 PERFORMANCE ON MANDATE Collect and manage the National Housing Fund (NHF)- Significant increase in the number of registered participants which reflects growing confidence in the Scheme+ 26 states now participating, from only 3 in Year 2002+ all 24 banks participating, etc.- Willingness to expand access channels to NHF mortgage originations e.g. PFAs, insurance companies, MFBs- Steady increase in total annual collections and disbursements(see next slides)
12 MANDATE 4: Collect and manage the NHF: NHF Collections NHF collections of N31.8b realised between Jan ’08 - Dec ’10That is, 49% of cumulative collections from Jan ‘92 to Dec ‘10
13 MANDATE 4: Collect and manage the NHF: NHF/PMI and Estate Development Loans
14 OTHER ACHIEVEMENTS AS AT DEC 2010 NHF CONTRIBUTIONS REFUND:Cumulative of N942,662, refunded to 50,522 contributorsLOAN RECOVERY:Total of N4,063,480,982 recovered on classified facilities in past 24 monthsRESEARCH & DEVELOPMENT:To bridge the knowledge gap on the housing situation, in 2010 FMBN’s Research & Documentation Unit carried out -a survey on housing delivery in the FCT anda market survey of building materials in all geopolitical zones of the country.
16 Consolidate on capital market activities with issuance of subsequent tranches of its N100 billion bond to refinance sale of FG non-essential residential houses in FCTTo issue mortgage bonds based on FMBN’s financial strength and/or government guarantee- To take advantage of investor appetite for bondsSupport legal and regulatory framework reviewAmendment/replacement of unfriendly housing-related lawsCollaborating with National Assembly Committees on HousingConsolidate NHF collection and funding operationsIncrease in NHF collections by compliance of non-participating state & local governments, the organised private sector & the self-employedCreation of 8 Zonal Offices for more effective coverageIntroducing NHF e-collection platform pilot scheme for FCT MDAs
17 Commencement of Commercial Lending Operations: - using capital market resources applied as market-determined, risk-based priced loansExpand mortgage financing to non-salaried informal sector- which contributes as much as 65% of GNP, 90% of new jobs in the country, 80% of all non-agricultural employment and 60% of urban jobs [Vanguard, Sept 2008]- Service delivery channels are trade groups, unions and housing cooperatives, microfinance institutionsEncourage formation of housing cooperatives- To expand mortgage finance to target groups (teachers, nurses, mission groups (e.g. Catholic missions, organised Islamic organisations), trade groups, etc.
18 Attract foreign funding & investments - Interests by American, Chinese, Korean & Saudi Arabian investors- Strategic advantage as a FG-Sponsored entity for investors to channel investments into local economyIntroduction of Innovative Mortgage-related Products- Mortgage and Title Insuranceto mitigate mortgage-credit risks for lendersIncreases/stimulates mortgage originationsAdvantage of lower costs of mortgages (affordability) based on higher volumes- Real Estate Investment Trusts (REITs)Covered BondsRental Market Development ProductsSecuritisation
20 Institution/Country (Year) 1. INADEQUATE CAPITAL BASE:Low capitalization in comparison with similar secondary mortgage institutions worldwide- FMBN’s capital base is currently equivalent to US$16m compared to an average of US$158m held by similar secondary mortgage institutionsInstitution/Country (Year)Paid-up Capital (‘000)Total Liabilities(‘000)Cagamas Holdings Berhad – Malaysia (2009)US$49,309US$9,811,535Hong Kong Mortgage Corporation Ltd. (2009)US$256,862US$6,808,213Sociedad Hipotecaria Federal – Mexico (2008)US$342,235US$4,760,743National Housing Finance Corporation – South Africa (2010)US$117,788US$93,628Canada Mortgage & Housing Corporation (2009)US$25,196US$265, 629Average Paid-up Capital for selected InstitutionsUS$158,278Federal Mortgage Bank of NigeriaUS$16,367US$352,241
21 Cost To Register Property – Administrative Fees Vary 2. HIGH COST AND DELAY IN MORTGAGE PERFECTIONCost To Register Property – Administrative Fees VaryWB: Doing Business Report
22 Governor’s Consent – Bottleneck To Registering Property 2. HIGH COST AND DELAY IN MORTGAGE PERFECTION CONT…Governor’s Consent – Bottleneck To Registering PropertyWB: Doing Business Report
23 3. NEED TO REVIEW CBN PRUDENTIAL GUIDELINES FOR REAL ESTATE LENDING To be more conducive to the long-term nature of mortgage lending4. POOR INFORMATION STRUCTURESInvestment in information infrastructure to improve lenders’ capability to assess riskCredit BureausReal Estate Information AgenciesProperty Valuation Companies5. COMPLIANCE WITH THE NHF ACTBy banks, insurance companies and organised labour- only 3.5m out of 50m workers are registered- employers not remitting deductions to FMBN or not deducting at all
24 “…everyone deserves a home” THE WAY FORWARD…FMBN commends Aso Savings & Loans Plc for the initiative to organise a forum for stakeholders to showcase products and services FMBN appeals to stakeholders in the housing industry to work together towards the collective goal of ensuring that every Nigerian owns a home at affordable prices“…everyone deserves a home”
25 THANK YOU FEDERAL MORTGAGE BANK OF NIGERIA PLOT 266 CADASTRAL AO CENTRAL BUSINESS AREAABUJA