The federal government has secured a $300 million World Bank IDA loan to prosecute a revolutionary housing finance scheme that is designed to ensure sustainable increase in home ownership in the country.

The initiative, known as Nigeria Housing Finance Programme, (NHFP), has a project, “My Own Home” Scheme, which is a public-private partnership that seeks to increase access to housing finance in Nigeria through mortgages, mortgage guarantee/Insurance and housing microfinance.

The scheme is one of the four components of the Nigeria Housing Finance Programme that was set up by the federal government and is being implemented by Central Bank of Nigeria with the support of a World Bank IDA loan of $300 million, said the Head, Programme Administration Team, NHFP, Mr. Adesemoye Adedeji in Lagos, recently.

The IDA loan, he said was to provide finance for the four components of the programme: to set up the Nigeria Mortgage Refinancing Company (NMRC), which has been done; Mortgage Guarantee/Insurance scheme; Housing Microfinance; and Technical Asistance.

According to Adesemoye, “It is a catalytic programme, comprising different projects in the housing finance chain,” stating that it was fueled by the age-long need to shelter Nigerians. “It has been fraught with a lot of constraints, some cultural, some financial, some land tenure system in operation that pose challenges.”

The NHFP, he said is creating the enabling environment for strengthening the Nigerian housing sector by setting up sustainable framework for mortgage originators (i.e. financial institutions that provide housing finance) to access long-term refinancing. In addition, the framework is setting up mortgage guarantee/insurance as well as a Housing Microfinance scheme for the strengthening of Nigeria’s housing microfinance sector.

The NHFP intervention includes carrying out mass literacy campaign on consumer education, protection and responsibility with regards to housing finance in Nigeria.

The Nigeria Mortgage Refinance Company (NMRC), he said is a major component of the Nigeria Housing Finance Programme. “It is established to deepen the Nigerian primary and secondary mortgage markets for increased home ownership by Nigerians.

Its objective is to address the housing deficit in Nigeria through increased access to long-term finance by mortgage originators who are also stakeholders through equity participation in the company (NMRC). This component is a vital requirement for the deepening of the mortgage market.

It addresses the paucity of long-term finance for mortgage. The primary mortgage banks hitherto had to grapple with the challenges of sourcing long-term fund to create mortgages. “Owing to lack of access to long-term funds, most of the mortgage banks at best create only medium term mortgages. This severely constrained mortgage creation in Nigeria.

“The NMRC has started addressing this hurdle through refinancing mortgages for the long term thus addressing the long-term funding constraints hindering the growth of the primary mortgage market in Nigeria.

“NMRC has also standardised lending practice of mortgage providers through uniform underwriting standards for member institutions and the entire mortgage industry.”

He said the NMRC does not give mortgages to individuals or organisations; it refinances mortgages through “My Own Home” participating Mortgage Originating Banks.

Mortgage Guarantee Scheme…The Mortgage Guarantee & Insurance product of “My Own Home” scheme would provide a platform for potential mortgage clients who do not have the required equity contribution (e.g. initial down payment of 20% of the value of the property) for a mortgage but have the capacity to make the regular repayments, to access a mortgage on the basis of a third party guarantee.

The mortgage client pays a premium to the third party who in turn provides a guarantee to the mortgage lender i.e commitment in lieu of equity contribution.

He said intending home owners with insufficient or no equity contribution can approach their lenders for a Mortgage Guarantee. “The mortgage guarantee firm will insure only the equity contribution required so that the lender can advance the full value of the mortgage loan for the property.

Once the borrower repays the value of the required equity contribution, there would be no need for further guarantee; hence they would discontinue payment of the premium. Increase in the value of the property could also shorten the duration of the guarantee.

“The access to mortgages and other forms of housing financing is enhanced by long-term finance now made available. The “My Own Home” scheme would also scale-up mortgage and housing finance awareness through mortgage literacy, customers’ rights, responsibilities and education.”

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