How FMBN is championing delivery of affordable housing

Recently, the Executive Management Team of the Federal Mortgage Bank of Nigeria (FMBN) under the leadership of Arc. Ahmed M. Dangiwa clocked four years in office.

Within this period and under the supervision of the Hon. Minister of Works & Housing, Babatunde Fashola (SAN), the team of experienced professionals have posted remarkable performance by pursuing bold, dynamic, and strategic Institutional reforms.

From unprecedented levels of mortgage loan disbursements to stronger collaborations with industry stakeholders, innovative housing product designs, financial transparency, and broad institutional reforms, the FMBN Board and Management team have built and sustained a trajectory of strong corporate performance across key indicators.

Historic Increase in Mortgage Loan Disbursements

First, consider the quantum of loans disbursed. Between April 2017, when the Executive Management team took charge of the bank to February 2021, FMBN leveraged funds accruing to the National Housing Fund (NHF) Scheme to record N130.460Billion in various loan disbursements. The figure comprises NHF Mortgage Loans totalling N43.141 billion granted to 4,985 beneficiaries and Home Renovation Loans totalling N49.265billion granted to 60,500 beneficiaries.

The bank also deployed over N38billion towards the development of 9,540 affordable housing units across the country through different construction product windows. This includes Estate Development Loans totalling N20.195billion, Cooperative Housing Development Loans totalling N10.985billion and Ministerial Pilot Housing Scheme loans totalling N6.873billion.

The size of mortgage loans disbursed within the four-year period is remarkable at many salient levels. First, it accounts for over 46 percent of the cumulative N282.914 billion that FMBN has disbursed since the National Housing Fund (NHF) Scheme commenced operations 29 years ago in 1992.

Secondly, the amount translates to an 85 percent increase in the cumulative value of mortgage loans totalling N152.453 billion in April 2017 when the Management team came on board to N282.914 billion as of February 2021.

The speed of processing, size of the loan approvals and disbursements are all unprecedented in the history of the Bank.

Speedy Processing of Refunds to Retired Contributors to the National Housing Fund (NHF) Scheme

The past four years have witnessed improved efficiency in the management of the National Housing Fund (NHF) Scheme that requires workers to contribute 2.5% of their monthly income, which qualifies them to access all FMBN products and services. One notable area is the departure from the perennial problem of long delays in processing refunds to retired workers. Over the past four years, FMBN made refunds totalling N29.905 billion to 201,304 retired contributors to the scheme. The figure represents a 275 percent increase from N10.836 billion recorded by previous managements over a 25-year period to N40.742billion. The current Management disbursed more to more people in four years than previous managements did in 25 years.

Development of a Five – Year FMBN Strategic Turnaround Plan

In a bid to reform and reposition the bank, FMBN engaged the services of a reputable International Consultancy Firm, Messrs. KPMG Ltd to produce a five-year Strategic Turnaround Plan for the Bank. The plan was approved for implementation at the 202nd meeting of the Board of Directors in May 2020.

A notable component of the strategy blueprint includes the financing of 100,000 housing units by year 2024. Second is growing the number of NHF contributors from the current 5 Million to 31.6 Million and aggressively transforming the mixture of formal/ informal sector contribution from 8:20 to 50:50 by the year 2024 through widening informal sector participation, given that this sector comprises over 80% of the working population in Nigeria. Furthermore, the plan projects to accelerate the growth of NHF contributions from annual collections of N48.8 billion in 2019 to N284.7 billion by the year 2024.

Review of Equity Requirements for Accessing FMBN Housing Loans

In a bid to lower the financial burden on potential homeowners within the low- and medium-income segment of the economy seeking FMBN housing loans, the FMBN within the period under review proposed and secured approval for a reduction of equity requirement for accessing mortgage loans. Notable aspects of the approval which has been in effect since 2018 are that mortgage loans of N5 million and below attract zero (0%) equity contribution, a downward review from the 10% previously required as loan down payment; and mortgage loans of over N5 million to the maximum amount of N15 million now attract a flat equity contribution rate of 10%, down from the 20% and 30% previously mandatory to access the loan facility.

The historic downward review of equity requirement for accessing the NHF mortgage loan has made it more accessible and affordable to Nigerian workers within the low- and medium-income brackets. This implies that workers who contribute to the National Housing Fund (NHF) consistently and are up to date are eligible for up to a N5 million loan without having to put down a single kobo as equity while those seeking for loans above N5 million to N15 million will only put down 10% as equity.

Introduction of Innovative Housing Products to Increase Affordability

After decades of pushing and promoting legacy housing loan products, the current Board and Management opened a new vista of innovative home loans designed to create a good fit between what the bank is offering and the income capacity of workers who subscribe to the NHF scheme. This new management thinking, and focus led to the creation of more worker-friendly home loan products with more flexible payment conditions.

First is the FMBN Rent-To-Own’ Homeownership Product. The rent to own product offers a cost-friendly housing loan which ensures a convenient re-payment arrangement for Nigerians. The product makes it possible for a Nigerian worker that contributes to the National Housing Fund (NHF) Scheme to move into an FMBN-owned housing property as a tenant and conveniently pay towards ownership of the property in monthly or annual instalments over as long as 30 years at an interest rate of just 7 percent.

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The second is the Individual Home Construction Loan. The loan enables NHF contributors with unencumbered land, appropriate land titles and approved building plans to undertake self-construction. The loan provides up to N15 million to contributors to the National Housing Fund (NHF) scheme at 7 percent interest rate. Beneficiaries can pay back over a period of up to 15-years depending on their age and number of years left in service.

Another equally worker-centric affordable home ownership product that FMBN has upscaled is the Home Renovation Loan. The loan provides up to N1million to enable beneficiaries who already own their homes to carry out improvements. About 63,079 Nigerians have benefitted from this facility in the last four years.

FMBN has also revamped its legacy Cooperative Housing Development Loan (CHDL) in line with the initiative of the Minister of Housing, Babatunde Raji Fashola (SAN) to adopt cooperative societies as the channel for the aggregation and delivery of houses to members of cooperative societies.

The FMBN Cooperative Housing Development Loan (CHDL) enables a cooperative society that has acquired a plot of land to develop houses for allocation to its members. Key features include tenors of up to 24 months with a moratorium of 12 months and interest rate of 10%. Up to N500 million is accessible by qualified cooperative societies under the facility subject to review upon judicious assessment of utilization of funds earlier disbursed.

Leveraging on Technology to Boost Transparency in the NHF Scheme

Another notable achievement of the FMBN within the past three years is the launch of FMBN Digital Platforms.

Source: Business Day