FOLLOWING the recapitalization exercise of the Primary Mortgage Institutions (PMIs) in the country, 36 mortgage firms have scaled the hurdle and now gotten the Central Bank of Nigeria’s license to administer mortgage portfolio in Nigeria.
While 10 mortgage firms have been approved to remain in business with a national license, the remaining 26 banks are approved to operate with a state license.
The newly licensed banks are coming to the fore as investors and players within the industry awaits the operational take off of Nigeria Mortgage Refinancing Company (NMRC), which was inaugurated few months ago.
Also, it is now on record that 15 of the mortgage firms downscaled and consequently has been converted to sub-sectors such as microfinance banks and finance companies, 26 PMIs totally failed to meet the prescribed minimum capital requirements.
Although the apex’s bank is yet to make its decision public, The Guardian exclusively, obtained a circular on the update of the recapitalization of Primary Mortgage Bank (PMB) in the country.
According to the circular, the following PMIs namely Abbey, Platinum, Mayfresh, Jubilee-Life, Aso, Trust Bond, Sun Trust, Infinity Trust, Haggai and Imperial Homes attained National PMB status, having made the N5 billion minimum capital.
The notice, under update on the recapitalization of PMBs, the CBN says: “The deadline for the completion of the recapitalization process was December 31, 2013.  However, CBN extended the conclusion of on-going transactions to  June 30,  2014.
“26 PMBs have attained the state PMB status, having made the N2.5 billion minimum capitalization.  Four out of these have properties held for sale, which they were yet to fully dispose off or create mortgages for.”
The circular also says that the merger between Post Service Homes Savings and Loans Limited and Cooperative Savings and Loans Limited is still in progress, with on-going verifications, adding that three other PMBs were also submitted in concluded merger and acquisition arrangements.
For the mortgage firms that are now designated, the apex’s bank circular says: “15 PMBs down scaled and converted to sub-sectors wit lower capital requirements such as microfinance banks and finance companies, 26 PMBs failed to meet the prescribed minimum capital requirements for either of the two categories and do not have acceptable capitals for downscaling and, or conversion.”
Sources further disclosed that the mortgage firms led by its national body –Mortgage Banking Association of Nigeria (MBAN) have lobbied the CBN’s Other Financial Institutions Department (OFID) to soft pedal on the announcement of the about 38 PMIs that have been adjudged to be financial sound and undergone recapitalization to limit crisis of confidence rocking the sector.
It was further gathered that series of talks have taken place between some of the recapitalized and non-recapitalized banks in move to ensure soft landing for most mortgage firms through mergers and acquisitions.
This was confirmed by one of the affected mortgage institution, who disclosed that a deal was recently brokered to shift customers’ liability to the new firm.
Recently, CBN explained that its rationale for the State PMIs is to promote the spread of mortgage firms across the six geo-political zones to further embed the objective of financial inclusion and national PMBs will provide options for operators to remain in business at different authorization levels, and similar to other banking segments.
It is a known fact that the sector is facing a harsh economic down turn, notwithstanding the global economic crisis as the scarcity of long-term funds are hitting the operators hard.
The short-term funds are mostly sourced from the money market, where commercial banks also complete for funds.
Their cash flow is also hampered by their inability to tap into the National Housing Fund (NHF), and becoming a window for the collection of the fund, which has prompted MBAN to liaise with the Federal authorities, local financial institutions and international development agencies to float a Mortgage Refinancing Company.
The apex bank had initially granted the mortgage firms a 12-month deadline from November 1, 2011, which would have terminated by December 12, 2012, but extended to 18 months, by April 30, 2013. Another circular was issued in March 20, 2013 to extend the date to December 2013, which according to CBN will afford all affected PMBs sufficient time to exercise any of the options for capital raising, business combination and downscaling.
Under the guidelines, mortgage firms have been categorised into National and State mortgage firms, while the National PMBs are allowed to operate in any or all parts of the federation after the payment of a new N5 billion minimum paid up capital, the State PMBs are restricted to only one state at the payment of N2.5 billion.
About 292 PMBs were licensed between 1990 and 1998. In July 1997, the Federal Mortgage Bank of Nigeria (FMBN), which later handed over 195 firms to CBN in 1998, revoked the licenses of 97 of the firms. The initial minimum share capital for PMBs was N5 million, rising first to N20 million and later N100 million.
In the former dispensation, mortgage firms were allowed to grant loans or advances for the purchase or building, improvement or extension of a dwelling/commercial house, acceptance of savings and deposits, management of pension funds/schemes, performing estate management duties as well as offering of project consultancy services for estate development and engaging in estate development through loan syndication.
But under new guidelines, PMIs would only be allowed to perform duties such as mortgage finance, real estate construction finance acceptance of savings and time/term deposits, acceptance of mortgage-focused demand deposits. It clearly streamlines the activities of a PMB to the provision of mortgage finance and exclude other related activities such as the provision of estate management duties.
The policy thrust of the latest document is to rejig the housing finance market, where the ratio of mortgage finance as a percentage of GDP stands at 0. 5 per cent and lags behind emerging markets like compared to South Africa 29 per cent, Mexico 10 per cent and Malaysia 29 per cent.

SOurce – The Guardian