Exactly 15 days after President Goodluck Jonathan inaugurated the Nigeria Mortgage Re-finance Company Plc in a bid to tackle housing deficit, the Central Bank of Nigeria has barred the company from financing real estate construction and a number of activities.

As a financial institution, the MRC will be under the regulation and supervision of the CBN.

The CBN, in a 42-page regulatory and supervisory framework for the operations of an MRC posted on its website on Thursday, also barred the NMRC from granting consumer or commercial loans; originating primary mortgage loans; and accepting demand, savings and time deposits, or any type of deposits.

The NMRC is also prohibited from undertaking estate agency or facility management; providing project management services for real estate development; managing pension funds/schemes; and all other businesses not expressly permitted by the central bank.

According to the CBN, the establishment of an MRC is primarily aimed at increasing the liquidity within the mortgage sub-sector and ensuring the availability of mortgage credit, reducing mortgage and related costs, and making residential housing more affordable.

The benefits of such mortgage liquidity facilities are well documented and globally acknowledged, according to the CBN.

The CBN framework stated, “This regulatory framework is, therefore, designed to ensure that the MRC operates in a safe and sound manner on internationally accepted principles, standards and best practice in mortgage liquidity facilities.

“The regulatory framework is drawn pursuant to the provisions of the CBN Act 2007, Banks and Other Financial Institutions Act, Laws of the Federation of Nigeria 2004, other relevant laws, and extant CBN guidelines and circulars.”

The framework prescribed the basic regulatory requirements for the MRC’s principal line of business of refinancing credit to borrowers on the security of residential mortgage assets and other qualified collaterals.

It also set the capital adequacy requirements for the MRC, including its minimum paid-up capital, maximum leverage limit, and the minimum risk-weighted capital requirement.

Furthermore, the framework specified the types of collateral that a borrower could pledge for the MRC’s advances and the discount that the MRC could apply in determining how much it could lend against any qualified collateral.

It also prescribed procedures for the management of The MRC’s interest raterisk, its permissible investments and liquidity requirements.

The central bank defined MRC as a financial institution established to provide short-term liquidity and/or medium-to long-term funding or guarantees to mortgage loan originators.

According to the CBN, the objectives of the MRC is to support mortgage originators such as primary mortgage banks, commercial banks to increase mortgage lending by refinancing their mortgage loan portfolios.

It would also act as an intermediary between originators of mortgage loans and capital market investors typically looking for long-dated high quality securities, it stated.

The CBN, however, listed activities the MRC could engage in as refinancing of fully secured mortgage loans and investment in debt obligations issued or guaranteed by the Federal Government or any of its agencies, which should not be less than 50 per cent of the MRC’s total investments.

Others are issuing guarantee for mortgage loans as part of its off-balance sheet engagements; issuing bonds and notes to fund its purchase of eligible mortgages; and other activities to be prescribed by the CBN from time to time.

2014-02-02