Nigeria Central Bank Gives Guidelines For Mortgage Refinance Companies

Nigeria Central Bank Gives Guidelines For Mortgage Refinance Companies

From Premium Times

The Central Bank of Nigeria has released a regulatory and supervisory framework for the operations of a Mortgage Refinance Company (MRC).

A Mortgage Refinance Company, according to the regulatory body, is a financial institution established to provide short-term liquidity and/or medium- to long-term funding or guarantees to mortgage loan originators.

The establishment of such company is primarily aimed at increasing the liquidity within the mortgage sub-sector and availability of mortgage credit in Nigeria, reduce mortgage and related costs, and make residential housing more affordable, the regulatory agency said.

The benefits of such mortgage liquidity facilities are well documented and globally acknowledged. As a financial institution, the MRC would be under the regulatory and supervisory purview of the Central Bank of Nigeria (CBN).

“The objectives of the MRC shall be to support mortgage originators such as Primary Mortgage Banks (PMBs) and commercial banks to increase mortgage lending by refinancing their mortgage loan portfolios. It shall act as an intermediary between originators of mortgage loans and capital market investors who typically are looking for long-dated high quality securities” the framework highlighted.

This regulatory framework, according to the Central Bank, is 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 Central Bank of Nigeria (CBN) Act 2007, Banks and Other Financial Institutions Act (BOFIA) CAP B3, Laws of the Federation of Nigeria (LFN) 2004, other relevant Laws, and extant CBN Guidelines and Circulars.

The framework prescribes the basic regulatory requirements for the MRC’s principal line of business of re-financing credits to borrowers on the security of residential mortgage asset and other qualified collaterals.

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

Written by Oluwaseyi Bangudu | Read more at Premium Times