1. Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards
A presentation by
Mrs. Tokunbo Martins
Director, Other Financial Institutions Supervision Department, Central Bank of Nigeria, at the NMRC Session of the Abuja International Housing Show on July 17, 2018

2. Linear Outline of Presentation
Key terms – Robust mortgage market, Financial inclusion
Underwriting Standards – Definition and need
Underwriting Standards – Three current versions
Underwriting Standards – Benefits to borrowers
Underwriting Standards – Benefits to lenders
Underwriting Standards – Benefits to government
Uniform Underwriting Standards - Purpose of informal underwriting standards
Uniform Underwriting Standards: Some unique features of the informal underwriting standards
The role of the Nigeria Housing Finance Program (NHFP)
Conclusion
Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards

3. Key Terms What is a robust mortgage market?
A robust primary mortgage market is a synergy of several components all working together to effect increased access to mortgage finance for intending homebuyers
What is financial inclusion?
ensures the inclusion of all citizens needing financial access to meet their needs
Inclusion of the less privileged, women, youths and those living with disabilities
CBN has a target to achieve 80% financial inclusion by the year 2020.
Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards

4. Uniform Underwriting Standards: Description and Need
Description: Uniform underwriting Standards are guidelines used by lenders in a mortgage system to determine if a borrower is an acceptable risk that they can provide mortgage financing to.
Purpose: Uniform underwriting standards are an integral part of the mortgage origination process needed to protect the lender, its shareholders and the sector at large, from collapse due to mortgage defaults and non-performing loans.
Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards

5. Uniform Underwriting Standards: Three current versions
There are currently three versions of uniform underwriting standards for different sectors of the housing market:
i. Formal underwriting standards: for the salaried employee.
Ii. Informal underwriting standards: for the self-employed
Iii. Non-interest underwriting standards: for faith-based mortgage transactions.
** The industry is currently working on underwriting standards for borrowers in diaspora, and these will be unveiled once validated and adopted by the industry.
Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards

6. Uniform Underwriting Standards: Benefits to borrowers
Clarity of documentation required of the borrower
Easy determination of their capacity to obtain a mortgage
Homebuyer education as part of the mortgage origination process
Property title security due to title search, due diligence and mortgage registration
Market stability leading to lower rates and costs
Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards

7. Uniform Underwriting Standards: Benefits to lenders
Clarity of guidelines for assessment of borrower eligibility and capacity
Similarity of documentation and origination process
Industry stability as a result of uniform approach
Access to cheaper and longer term funds
Access to larger market and new borrower pools
Increased income from mortgage business
Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards

8. Uniform Underwriting Standards: Benefits to government
Ease of regulatory supervision
Ease of market assessment and intervention
Financial inclusion for its citizenry
Social and economic stability
Fulfilment of political mandate
Growth in IGR from the mortgage sector
Increased tax revenue from incoming homeowners
International acceptance of financial standards
Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards

9. Uniform Underwriting Standards: Purpose of informal underwriting standards
To address the needs of the informal borrower who makes up almost 60% of the national economy
To capture the informal sector into government economic activity and regulation
To reduce cost of mortgage transactions through increased homebuyer pool
To provide informal borrowers with more options in the process of home ownership
Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards

10. Uniform Underwriting Standards: Some unique features of the informal underwriting standards
Alternative proof of income e.g bank statements instead of paychecks to verify income
More flexible employment verification e.g letter from business association instead of an employer
More capacity to pool funds and income e.g husband and wife, if one or both are self-employed
No minimum loan amount, which offers opportunity to lower income borrowers and those in the rural areas.
Homebuyer education access, which will greatly enhance their ability to keep their homes from default
Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards

11. The role of the Nigeria Housing Finance Program (NHFP)
The NHFP is a program daily implemented by a Project Administration Team (PAT), domiciled in the Other Financial Institutions Supervision department (OFISD), Central Bank of Nigeria.
It is the result of a PPP between the Federal Government, CBN, industry and the World Bank.
The team is tasked with ensuring that this program is implemented with vigor, creativity and dedication.
The team has been able to tackle multiple parallel issues, and achieve ongoing progress for the benefit of the Nigerian Housing market, and its citizens.
Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards

12. The role of the Nigeria Housing Finance Program (NHFP) contd.
The NHFP partners with the industry in the development of policies designed to achieve the standardization of processes, enabling easier access to funding, and faster resolution of matters relating to Housing in the system.
Some of the critical policies passed in the market are to ensure an end-to-end funding flow for the market to access, in their creation of mortgages and other housing finance programs.
Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards

13. The role of the Nigeria Housing Finance Program (NHFP) contd.
We have partnered with NMRC, FMBN, NDIC as well as MBAN and other strategic partners, to design, validate and implement underwriting guidelines for the formal, informal and non-interest sectors.
We were very gratified to have the CBN FRACE committee of Islamic scholars engaged in the review and ratification of our non-interest guidelines, which has given us the confidence that they can stand up to any rigorous religious test of authenticity.
Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards

14. The role of the Nigeria Housing Finance Program (NHFP) contd.
As previously stated, the NHFP is currently partnering with industry to develop underwriting standards for our citizens in diaspora, who should be part of the mortgage population if we are to truly address the issue of financial inclusion.
The NHFP continues to provide industry support through its Technical Assistance (TA) component, by engaging in workshops, seminars and other training.
The NHFP also provides information and education to the public through its mass enlightenment campaign known as the “My Own Home” campaign.
Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards

15. Conclusion The development of clear, concise and relevant uniform underwriting standards for the Nigerian mortgage industry is clearly a win for all parties concerned. However, we must recognize that its success and/or viability will be directly related to the effort we, as an industry, invest in ensuring a suitable environment for its development, deployment and administration.
Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards

16. THANK YOU
Questions?
Enabling Robust Mortgage Market & Financial Inclusion Through Underwriting Standards