This is clearly a worrying time for an estimated 60 percent of renters who may struggle to meet their rental obligations as the impact of coronavirus spreads and crimps household income.
This problem, which affects mostly renters on monthly rents, also applies to mortgagors whose ability to pay has been badly hit by the deadly coronavirus pandemic. Default cases are already on the rise with lenders getting edgy.
A mortgage is a loan someone secures against his home or property. His home or property, according to the law guiding this transaction, may be repossessed if he does not keep up or he defaults on repayments on the mortgage loan he has taken.
This, indeed, is a source of worry for any borrower because he would not like to lose his home or property. The developed economies have a way of getting around this such that the borrower is protected. This approach, which is explained shortly, is a good lesson for Nigeria to learn.
In the UK, most mortgage lenders are allowing borrowers who have been impacted by Covid-19 to take a break from paying all or part of their monthly payment for a period of up to three months. Such borrowers are, however, reminded that the payment holiday is not free money.
This kind of arrangement or consideration is not obtainable anywhere in Nigeria. Many of the lenders, particularly the primary mortgage banks (PMBs), are just struggling. Though they seem to show understanding, the rising waving of default is hurting them in more ways than one.
The mortgage bankers, under the aegis of Mortgage Banking Association of Nigeria (MBAN), is urging the federal government of Nigeria to learn from what other countries are doing to curb default in mortgage repayment.
Adeniyi Akinlusi, the MBAN President, notes that COVID-19 cuts across the economy and all industries such that everybody is impacted at differing degrees.
Akinlusi was quoted as saying recently that many people who are taking mortgages are working in different sectors and COVID-19 affects their obligations. “This is the normal thing, we expect that if the people, who are employed lose their jobs, it will affect their obligations since many companies are not able to meet up,” he noted.
He affirmed that several countries have taken actions by asking borrowers to take off one to two months to meet their obligations and the banks are not expected to take them as defaults. “Since this is not something that is peculiar to Nigeria, we can learn from what other countries are doing because the shock is global,” Akinlusi advised.
To have a functional mortgage system, experts say that Nigeria needs to have a strong thriving housing industry to deliver enough housing stock on which mortgage could be created. They add that the industry needs government intervention to make that happen.
This is why, according to them, the intention of Central Bank of Nigeria (CBN) to create a fund for developers in the real estate sector who have the capacity to repay as at when due is a good one.
Recently, the CBN Governor in a letter titled ‘Turning the Covid-19 Tragedy into a New Opportunity for Nigeria’, said it was working with deposit money banks to identify potential/eligible off-takers.
This is being done with the use of the BVN. In other words, the CBN intends to verify the financial capacities of potential off-takers before any loan can be given to them.
The apex bank also disclosed that efforts were underway to provide assistance to the mortgage finance subsector in order to encourage its optimal performance, adding that it would work with state governments to ensure that the needful was done.
These include ensuring that the processes of issuing land titles become faster and less cumbersome, reducing the cost of land documentation, and ensuring investment-friendly foreclosure laws.
It should be noted, however, that the CBN document did not disclose exactly how much the housing fund will be worth, or how much each off-taker will be eligible to get. Other conditions of the loan and how potential off-takers may apply for it were also not readily made available.
Source: businessdayng
