Apparently bowing to the unrelenting clamour for the reform of the critical aspects of the nation’s mortgage system, the apex supervisory authority, Central Bank of Nigeria (CBN) may have began a clampdown on Primary Mortgage Banks (PMBs) that ceased to carry mortgage business for which they were licensed.
The development is on the heels of new regulatory guidelines for PMBs aimed at recapitalising and repositioning them as specialized banks through the Other Financial Institutions Supervision Department (OFID) of the CBN. Under the new capital requirement, state and national PMBs will shore up their shareholders fund to the tune of N2.5 billion and N5 billion respectively, with compliance date fixed as April 2013.
Among, the mortgage operators, it is known fact the sector is facing a harsh economic down turn, notwithstanding the global economic crisis as the scarcity of long-term funds are hitting them 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) for their contributors through FMBN, and becoming a window for the collection of the fund, which has prompted umbrella body of the mortgage banks -Mortgage Banking Association of Nigeria (MBAN) to liaise with CBN and local financial institutions and international development agencies in planning to float a liquidity facility company.
In fact, at the last count, The Guardian learnt about 25 mortgage banks have fallen to the hammer of CBN recently, the firms include those that have unexpectedly closed shops. They ceased to carry on the business for which they were licensed for a continuous period of six months, which contravened Section 12 of the Banks and Other Financial Institutions Act of 1991 and Section 20(iii) of the Guidelines for Primary Mortgage Institutions in Nigeria.
Official estimates show that about 65 PMBs were in operation before the recent withdrawal of licenses, which may have further dip the number of operators to about 40 banks. But operators say the figures are much more lower than that number. 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.
Statistics released by CBN shows that loan and advances in the sector between 2008, 2009 and 2010 are N108, 531,488, N121, 290,217 and N124, 165,992 respectively; deposits for he same period are N166, 234,932, N151, 122,301 and N168, 577,083 respectively and shareholders funds are N70, 345,140,N86, 614,813 and N80, 341,095 respectively.
Specifically, among the licenses withdrawn is 16 Primary Mortgage Institutions that failed to meet CBN’s stipulated 30-days deadline to show proof of their existence and/or evidence of operations in the immediate past one year, recently.
In the course of the recent examination of all licensed Primary Mortgage Institutions (PMIs) carried out by the CBN, 16 PMIs were not found at their last known addresses. In addition, these institutions have failed to render monthly returns to the CBN for at least six consecutive months, in contravention of Section 58 (1) and (4) of the BOFIA, 1991.
The affected PMIs include Acclaim Homes Savings and Loans Limited; Allwell Savings and Loans Limited; Citihomes Savings and Loans Limited; Credence Savings and Loans Limited; Estaport Building Society Limited; Futureview Mortgages Limited; Guardian Trust Savings and Loans Limited; and Hallmark Home Savings and Loans Limited.
Others are Home Trust Savings and Loans Limited; Horizon Building Society Limited; Imani Savings and Loans Limited; New Capital Savings and Loans Limited; New Prudential Building Society Limited; Owners Home Savings and Loans Limited; Peak Savings and Loans Limited; and Sakkwato Savings and Loans Limited.
Meanwhile, CBN plans to undertake Risk-Based Supervision (RBS) of PMBs from September this year as part of it’s operational modalities and to check recapitalisation compliance plans submitted by the operators from December. The apex bank used Abbey Building Society Plc in its pilot phase, and the proposed audit will enable mortgage banks to develop risk policies, parameters, monitoring and eventually establish a risk management department.
Senior official of CBN and Director, OFID, Mr. Olufemi Fabamwo confirmed the development during a continuous education programme for directors of PMIs organised by MBAN and Financial Institution Training Centre (FITC) in Lagos, recently.