Saving the mortgage sector from a pandemic

Mortgage financing is relatively new in Nigeria. The Coronavirus Disease did not help the nascent sector. NKASIOBI OLUIKPE sought experts’ views on ways the sector can be given a lift amid the pandemic

The availability and affordability of housing, one of the three basic human needs, is a parameter for measuring the performance of any economy.

However, it is very difficult for the real estate sector to thrive without a sound and efficient mortgage sector, which has been described in some quarters as the backbone of the real estate sector.

In Nigeria, statistics have it that the contribution of the mortgage sector to the Gross Domestic Product, prior to the pandemic, is put at 0.5 per cent.

Cornerstone as luxury

With the pandemic, which has been described as a force majeure and its attendant economic downturn, people’s needs and priorities shifted. Basically now, a lot of people think of survival first. In fact, to some households, housing has become a luxury. This can be seen from the increase in the vacancy rate at the high end housing market and the congestion at the low end housing market.

The reason for this is not far-fetched. Most families, who can no longer retain their apartments at the high end housing market, now seek alternatives at the lower end.

This has not helped the struggling mortgage industry in any way, as, before now, it was very easy to get off-takers for a housing project, even before the commencement of the project. The pandemic has, however, crippled the performance of most loan obligations. Presently, it is common to see houses put out for sale or rent for a number of months, and even years, without prospective clients.

Bankers lament

As if that is not enough, before now, mortgage bankers in Nigeria had been clamouring for the passage of the foreclosure bill, which will empower them to take action against any mortgage loan defaulter. Some states even went ahead to adopt the bill and sign it into law. They include Lagos, Ogun, Edo, Ekiti, Kaduna and Nasarawa states.

Right now, with the economic disruptions caused by the pandemic, concerned citizens are asking questions as to what becomes the fate of mortgagors, whose loan obligations are non-performing. Will their contractual agreements be reviewed or will the mortgagee foreclose on the property?

Managing Director of the Nigerian Mortgage Refinance Company, Kehinde Ogundimu, who has been an advocate of enforcement of foreclosure bill, in a chat with Financial Street, admitted that the existence of foreclosure law does not mean that a creditor will foreclose on a property, especially at a time like this.

Leasing taking lead

Most creditors, he said, will rather have workout arrangements with a borrower than go through the foreclosure process.

It is better to have a foreclosure law in place and not need it than to need it and not have, he said.

He added, “The law is needed, irrespective of the economic situation. So, whether the economy is good or bad, we need a foreclosure law in place. But the creditor should realise that when a situation like we have now arises, they should temper justice with mercy and work out something.

“Like in the developed economies, the government can say there will be no foreclosure in the next six months. Government will work with creditors to make sure that something is done to lessen the sufferings of the borrower.”

Bad economy

Other professionals in the built environment, who spoke with Financial Street confessed to the negative impact of the pandemic on not just loan obligations alone, but the economy as a whole.

They suggested the application of waivers or time extension for borrowers to be able to comply with their mortgage obligations.

Managing Director of RealtyPoint Limited, a real estate development firm, and convener of the Sack Your Landlord radio programme, Bode Adejana, said from his general observation of the housing market, there was pressure everywhere, which caused a lot of disruptions in the job market.

“Some people have lost their jobs. Some pays have been cut. That necessarily would have negatively impacted on loan obligations, including mortgages. All the parties should engage with one another and work out something.

“Whoever has a problem with payment of his mortgage should engage with his mortgagee, and the mortgagee should also be able to discuss with his mortgagor,” he said.

Adejana explained further that during the pandemic, some people started re-negotiating their loans and that should the second wave of the pandemic drag longer, there might still be further re-negotiation.

Former chairman of Nigerian Institute of Estate Surveyors and Valuers, Lagos State chapter, Stephen Jagun, remarked that from a professional point of view and in view of the economy and the market, the players in the sector had been going through a lot of challenges in meeting their mortgage obligations.

Businesses, said the member of the Tribunal at Estate Surveyor and Valuers Registration Board of Nigeria, are struggling and some may possibly want to pull out of the arrangement

His reasons, “The National Bureau of Statistics just told us that almost a quarter of our population is now jobless. Many companies are struggling to survive; the exchange rate is getting out of hand. The cost of power itself is high; diesel is approaching N300 per litre.

“During America’s financial crunch in 2008, we heard stories about people running out of their homes where they are paying mortgages and going to rent because it was cheaper for them to take leases. So, they run away and just disappear, so that the mortgage institutions will not hold them.”

Way out

One of the things mortgage institutions can do to keep afloat in business is to package themselves and look for ways to approach the regulatory body, the Central Bank of Nigeria, to give them soft landing, as government is trying to cushion the effect on various sectors of the economy.

“If you noticed, during the lockdown last year, most banks were given about three months’ moratorium on loan repayment. So, they can actually look at that for their clientele to encourage them,” he added.