The mortgage banking sector in Nigeria has been confronted with numerous challenges that have impeded the attainment of its policy objective of acting as a catalyst for the development and provision of affordable housing in the country. Nigeria Deposit Insurance Corporation (NDIC) highlighted some of the challenges being encountered by primary mortgage banks (PMBs) in its 2014 annual report.
The report stated: “Some of the challenges include: Delay in accessing NHF funds/dearth of long term funds. Most of the PMBs continued to find it difficult to provide the required bank guarantee to access the NHF. Only four out of the 42 PMBs in operations were listed on the Nigerian Stock Exchange which meant that many others did not have access to long term funds through the Stock Exchange window.
“Due to lack of understanding of the nature of business of PMBs by the public, it had been difficult for the PMBs to mobilise deposits to finance their housing projects which were usually long term in nature. The public prefer to open savings/current accounts with deposit money banks (DMBs) rather than with PMBs whose operations were considered to be too complicated.
Another challenge is the Land Use Act, which had made the process of perfecting title to landed property burdensome, slow and costly. That had affected negatively the foreclosure procedures on the properties pledged as collateral. Accordingly, the Land Use Act needs to be reviewed to address this issue.
“Also, under-developed Mortgage-Backed Securities (MBS) which allows mortgage assets to be traded on recognized stock exchanges, do not presently exist in Nigeria. Securitization of mortgage assets should be encouraged to enhance marketability and promote market deepening; Appalling state of facilities like roads, transportation, power and water supply had contributed to the high cost of building construction in Nigeria.
Furthermore, the high foreign exchange content of imported building materials such as cement, tiles, ceramic wares etc have made housing non- affordable for the average and low income earners.”
Experts have always identified some of the major challenges facing the mortgage banking sector to include the lack of foreclosure laws governing the default mortgage loans, the entire cost associated with the task of title transfer, poor infrastructure to provide support for house constructions and highly complicated and lengthy legislative and legal frameworks for land acquisition.
Operators of mortgage finance in the country have therefore intensified their clamour for government to overhaul the housing finance system, especially strict financing laws and weak banking structures that have led to volatile markets and made investors, reluctant to do business in such trying market conditions.