Housing fund of fraud, deception
Inability of Nigerians to access affordable mortgage loans for their housing needs is causing them tears, while those lucky to get are finding it difficult to repay, Dayo Ayeyemi reports
With population of over 180 million, high level of unemployment rate and huge shortage of decent and affordable homes, Nigeria is at the centre of 17 million housing crisis, with no immediate solution in sight.
Despite efforts made by government to reduce accommodation shortages, affordable mortgage finance at single digit to enhance easy access to homeownership by Nigerians is still a mirage.
For this reason, many Nigerians have to part with their entire savings to own houses, while those without the wherewithal still depend on mortgage loan, which is hard to come by and, at a very high interest rate.
In Nigeria, the Federal Mortgage Bank of Nigeria (FMBN) and the Primary Mortgage Banks are saddled with the responsibilities of mortgage to home-seeking Nigerians. But from the latter, people’s experiences about mortgage loans and repayment have been full of pains and, in some cases, tears, no thanks to ‘almighty’ collateral requirements, high interest rates, job insecurity and pressure of loans’ repayment.
Borrowers are not alone in the pains; many lending mortgage banks have burnt their fingers in the process due to high rate of defaults and inability to foreclose on loans.
For Samuel Falade, a public relations practitioner and resident in one the private estates at Ogba in Lagos, accessing mortgage loans in Nigeria is a herculean task for home seekers as the entrance is difficult while the repayment is burdensome.
Falade said he got a home loan of N10 million from a commercial bank to buy a two-bedroom bungalow at Ogba, and after six months in default, his indebtedness grew to a whooping N15 million.
His major burden is that he has lost his job for the past six months and the bank is bent on taking over his home or he pays all the outstanding debt before his demand for loan restructuring could be looked into.
Falade, who said he was in a fix, has been pleading with the bank not to sell his house, but to give him more time to source for loans elsewhere to offset the debt.
Another homeowner in an estate jointly owned by the Ogun State government and a private developer in Ibafo-Mowe axis on Lagos-Ibadan Expressway, Mrs. Chichi Alozie, said that she secured a mortgage loan of N5 million was approved for her at 22 per cent interest rate four years ago by a bank to buy a house.
She lamented that six months later, her interest rate increased to 30 per cent, with the threat of increasing to 35 per cent two months thereafter by the bank.
Another person, who identified himself simply as Odunayo, has a mortgage account as well as a current account to service her loan. When Odunayo defaulted, both the mortgage and servicing accounts were debited at default rates of up to 45 per cent.
With the existence of FMBN and National Housing Fund (NHF), it has been complaints galore from home-seekers and real estate developers seeking loans as inadequate liquidity of the nation’s apex mortgage bank, bureaucratic processes and delay in loan disbursement have dashed homeownership’s dream of many subscribers.
It was discovered that many companies would deduct money from workers’ salaries without remitting it to the NHF. Some of the employees only discovered the fraud after retirement.
One of such people, Johnson Adebayo, a media practitioner, whose company had deducted on monthly basis certain per cent of his salary for the NHF for more than 10 years, is yet to secure a home or get a refund.
According to him, the money was deducted at source compulsorily from his salary for over 10 years without getting a refund or using it to access a home after leaving the company.
Adebayo added that all efforts to get the management to explain what happened to his contribution had proved abortive 10 years after.
He said: “I believe that NHF deduction is fraud because we don’t even know what the law setting up the fund is saying about this.”
Adebayo’s experience was not different from Andrew’s. Andrew’s salary was deducted for NHF but he never used the money to access any home. “This can only happen in Nigeria. The money is there and nobody is saying anything about how I can use it to access my own house,” he said.
An official of a private university, who did not want his name in print, said he did not know the reason for deducting money for the NHF from his salary monthly. To him, he doesn’t even have a card to indicate that he is a subscriber, neither does the university told him what it wants to use the contribution for.
Another contributor, Ms. Ekaette, said she applied for a NHF loan at six per cent. She was offered and gladly accepted a bridge loan of 20 per cent (for a few months) pending the approval of her NHF loan by FMBN.
“Three years after, I am still stuck with the bridge loan that now attracts an interest rate of 38 per cent,” she said, adding that the NHF loan was still pending.
Also, some of the subscribers to the housing units under the Lagos Home Ownership Mortgage (LAGHOM) scheme are already defaulting.
It was learnt that those defaulting lost their jobs during the economic recession, which lasted for almost two years, and are yet to secure another.
However, a source from the Lagos State Mortgage Board said the issue had been resolved.
The LAGHOM allows subscribers to pay a down-payment of 20 per cent for the housing units, irrespective of the price, while the balance is spread for a period of 10 years.
Some of them pay as high as N65,000 monthly for their repayment plan.
One of the subscribers, Ibidun Francis, said she was paying N45,000 monthly for a home mortgage of N8.5 million spread for over a period of 15 years.
Home seekers also realised that some primary mortgage banks set additional conditions and rates for loan seekers, making repayment difficult for them.
In many developed and emerging countries of the world, citizens do not require to have the entire money before they access their homes. This is the major reason government put in place mortgage finance or a mortgage loan as a way for would-be homeowners to purchase his property without having to pay full value of the land or home upfront, provided he or she has a job.
Even the wisest savers are unable to pay the full amount of a house out of their savings and hence, require a mortgage loan to own the desired property.
Generally, mortgage loans come with an agreement that the borrowers would pay the seller the principal amount of the property plus pre-disclosed interest in regular over a time period.
The interest rates are usually calculated at either a fixed or variable rate, and the term of mortgage finance varies from 10 to 30 years.
Expressing concern over high interest rate, which has limited access to housing units by Nigerians, Director, FSS Training, Central Bank of Nigeria (CBN), Mohammed Suleiman, told mortgage bankers at a forum in Abuja to reduce their rates.
He said: “Where do you expect a civil servant who is earning N18,000 per month to get N12 million to pay contributions for home? It is certainly not possible.”
Managing Director, Homebase Mortgage Bank, Mr. Femi Johnson, blamed the issue of high mortgage interest rate on high cost of money.
Social housing activist and international housing finance specialist, Adekunle Faleti, blamed main issues about mortgage on its processing, debt collection, loan servicing and false advertising. Besides, he cited high interest rate, high cost of housing units and low-income nature of people among other factors.
Faleti said when customers were pushed to the wall; their way of fighting back was to stop making payments on their mortgage loans.
“This is why over 60 per cent of the total loan portfolio for mortgage banks in Nigeria is non-performing,” he said.
Perturbed by bank’s high interest rate, which has increased loan defaults among borrowers, Faleti stated that many Nigerians had been victims of acts which violated their consumers’ rights without anywhere to turn to for redress.
The activist advocated a strong Consumer Finance Protection Agency that would protect Nigerians. According to him, unsuspecting and naive members of the public have been ripped off by financial institutions to the tune of hundreds of millions of naira.
“I say this authoritatively, having served in executive management positions as chief risk officer and chief executive officer in two top mortgage banks in Nigeria,” Faleti said.
It was learnt that as borrowers are in tears, lenders (banks) are also in pains over huge non-performing loans and collaterised risk assets in their portfolio.
Findings show that, at a time, debt profile of the apex mortgage bank in Nigeria rose to N70 billion, with greater percentage residing with real estate developers, who were granted Estate Development Loan (EDL), but refused to pay back.
Many real estate developers defaulted in their loan repayment to the bank, while some companies are not remitting their workers’ contribution to NHF, leading to suspension of EDL window by FMBN.
According to the Managing Director of FMBN, Ahmed Musa Dangiwa, non-payment of NHF loans by defaulters has denied other contributors the opportunities of home ownership and impeded current efforts of the bank in making refunds to eligible contributors as at when due.
Non-repayment of the loans, he said, was sabotaging public interest and working against the noble objectives of NHF schemes to facilitate home ownership for Nigerian workers.
In a document published by the bank late 2017 entitled: “Public Notice from the FMBN on Recovery of Mortgage Loans from Defaulting Beneficiaries of the NHF,” the bank said it was embarking on recovery of all loans in collaboration with the Mortgage Banking Association of Nigeria (MBAN) and Real Estate Developers Association of Nigeria (REDAN).
Immediate past President of Chartered Institute of Bankers (CIBN), Prof Segun Ajibola, expressed concerns over banks’ rising risk assets above CBN’s stipulation.
He stated that Assets Management Company of Nigeria (AMCON), in the aim of resolving non-performing loans assets, had recovered over N681 billion worth of property, cash and shares in the past six years.
Non-remittance to NHF
According to findings, commercial banks, insurance companies and private firms which are supposed to be contributing 10 per cent of their revenues to the fund annually as mandated by NHF Act 1992, are also culpable.
Between 2011 and 2016 till now, investigations showed that these institutions have defaulted to the tune of N6.7 trillion.
According to Dangiwa, data from the CBN and the National Insurance Companies have indicated that between 2011 and 2016, total loans and advances by commercial banks and non-life and life funds from insurance companies amounted to N66.996 trillion.
If the banks and insurance companies had remitted 10 per cent of their investment to the fund as stipulated by the Act setting up NHF, he calculated that about N6.7 trillion would have been invested in the fund.
“At 10 per cent investment of their loan advances and non-life and life insurance with the NHF, about N6.7 trillion should have been invested in the fund by the banks and insurance companies over the period,” the FMBN boss said.
Worried by this development, MBAN President, Mr. Adeniyi Akinlusi, suggested the need to close ranks in order to nip in the bud incessant cases of non-performing loans.
First Vice President, Nigerian Institute of Building (NIOB), Mr. Kunle Awobodu, noted that FMBN’s loan was highly restricted.
“People that are supposed to benefit don’t see the impact. Professionals don’t know much as the loan’s accessibility is not available to them for homeownership,” he said.
Former President, International Federal of Real Estate Industry, Nigeria Chapter, Chief Kola Akomolede, said that high interest rate on loans was one of the major reasons for mortgage finance’s failure in Nigeria.
Besides, he noted that people were not putting money in mortgage institutions to be lent to people who wanted to borrow at low-interest rate unlike overseas.
“Rather, they prefer treasury bill, where they can get 15 and 17 per cent on loans,” he said.
A Lagos-based estate valuer, Mr. Lanre Bolu, while calling for government’s intervention in lowering mortgage’s interest rates, said that high interest would always lead to loan defaults.
He called for stronger foreclosure law in the country, while urging the need to simplify and reduce time for legal mortgages.
Managing Director, Datis Nigeria Limited, Mr. Jide Ijimakinwa, noted that issues of non-performing collaterised risk assets were prevalent in most African countries. He urged bankers to ensure that their customers meet loan requirements to guide against cases of non-performing loans.
The Acting Managing Director, Heritage Bank, Mr. Jude Monye, listed improper documentation, over-invoicing, inconsistent valuation values and deferrer letter as some of the challenges of collaterised risk assets of banks.
Head of Enterprise Risk Management, Trust Bond Mortgage Bank, Mr. Tokunbo Aberuagba, said there was need to up the game of professionalism to reduce the risk emanating from collaterised assets.
In the quest to deepen mortgage penetration and promote home ownership among the citizens, MBAN is mounting pressure on the state governors to adopt its Model Mortgage and Foreclosure Law in their states.
Its president, Akinlusi, said that the establishment of the law had become necessary in order to entrench mortgage finance in the country.
Faleti said it was the responsibility of government to ensure that “someone” out there had the sole and primary mission of looking out for consumers.
He called for the establishment of an agency whose responsibility and authority would be to review financial products and services, especially in the mortgage sector.
“The goal for the agency is to make the market for consumer financial products and services work for Nigerian consumers, responsible providers, and the economy as a whole. It should strive to promote transparency and consumer choice while preventing unfair, deceptive, abusive, and discriminatory practices,” he said.
Besides, he pointed out that policies for promoting sustainable consumption should take into account the goals of eradicating poverty, satisfying the basic human needs of all members of the society, and reducing inequality within and between countries.
“Federal and state governments should provide or maintain adequate infrastructure to develop, implement and monitor consumer protection policies. Special care should be taken to ensure that measures for consumer protection are implemented for the benefit of all sectors of the population, particularly the under-served population and people living in poverty,” he added.
For the mortgage industry, he suggested that rules must be enacted that would require lenders to clearly and concisely disclose all their key terms in plain language, and prohibit a slew of predatory provisions and practices, such as ‘teaser rates.’
“Many of the tricks and traps that fascinated so many borrowers to delinquencies and non-performing loans should be outlawed. The agency should also look into the practices of debt collection companies,” Faleti said.
A Director at CBN, Mrs. Tokunbo Martins, said there was need for richer strategies to bring all stakeholders together to move the mortgage industry forward.
Director in charge of National Housing Finance Programme at CBN, Adedeji Adesunloye, warned on the need to address some constraints in the mortgage sector, calling for strategies to aid the market to be able to allocate resources.
Meanwhile, the managing director of FMBN has called on the Primary Mortgage Banks (PMBs) to harmonise their interest rates. Besides, he urged PMBs to spread their branches to cover the entire country for easy access of mortgages by Nigerians.
President of REDAN, Ugochukwu Chime, lauded the initiative of FMBN in introducing SMS alert to NHF contributors, calling the idea a game changer that speaks well about the transparency of the current leadership of the bank.
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