Mortgage banks in Nigeria: History, role, functions and more

Every adult, whether single or married, desires a home they can call their home whether it is built or bought,  a personal abode void of landlord problems and incursions. And if you agree with me, then this article is for you.

The shelter is ranked among man’s most indispensable and basic needs according to Abraham Maslow’s hierarchy of needs. It therefore should be the priority of every responsible government as a matter of policies to provide housing solutions to its citizens, and most importantly, affordable housing solutions.

But in Nigeria, the housing problem is quite endemic, as it has continued almost since the inception of the nation.

While the government has put several policies in place to solve this issue, the housing problem in Nigeria persists.

Moreover, the citizens of Nigeria are not well schooled on the opportunities and access to loans from mortgage institutions, and as such have been unable to provide this basic necessity for themselves and their household.

Of course, there are mortgage banks in Nigeria, which are headed and supervised by the apex mortgage bank of Nigeria, the Federal Mortgage Bank of Nigeria, but how many of the average Nigerian can boast of being a beneficiary of a mortgage from any of these institutions?

In this article, we will explore the history of mortgage banks in Nigeria, their role, and functions and how you could benefit from the financial securities they offer.

What is a mortgage 

A mortgage is a loan provided by mortgage banks or other financial institutions to buy or maintain a home, plot of land, or other real estate. The borrower agrees to repay the lender over time, usually in the form of regular payments divided into principal and interest. The property is then used as collateral to guarantee the loan.

A mortgage is a loan in which property or real estate is used as collateral. The borrower agrees with the lender (usually a bank) wherein the borrower receives cash upfront and then makes payments over a set period until he pays back the lender in full.

Commercial and Mortgage Banks play an active role in lending to people with less access to banking services, such as the unbanked or underbanked or in situations where borrowers do not have a good credit history.

Mortgage applications undergo a rigorous underwriting process before they reach the closing phase. Mortgage types, such as conventional or fixed-rate loans, vary based on the borrower’s needs.

The history of mortgage banks in Nigeria 

Mortgage financing in Nigeria began in 1957 with the founding of the Nigerian Building Society (NBS) at the initiative of our British colonial masters. The establishment of housing corporations began at the regional levels (mostly in regional capitals), which marked the beginning of the establishment of Middle-Class Residential Housing Estates.

The federal government later on bought over the Nigerian Building Society and transformed it into the Federal Mortgage Bank of Nigeria (FMBN) to facilitate housing finance. 

During this plan period, a new Ministry of Housing, Urban Development and Environment and the Federal Housing Authority were created to further stimulate the housing supply in the country. 

Concerning the direct participation of the government in the housing supply, about 60,000 housing units were constructed and allocated to people.

The federal government increased its participation in the direct construction of housing with an emphasis on low-income housing, through the Federal Housing Authority (FHA). To facilitate this, the government created Layouts that adequately serviced roads, drains and other infrastructure, particularly in the urban areas. Other measures adopted during this plan period, included the provision of more financial resources for federal and state governments. 

Also, the federal government made a concerted effort the encourage institutions concerned with credit facilities for housing, such as the Federal Mortgage Bank, and the liberalization of bank credit facilities to the housing sector, and also encouraged the establishment of Self-Help homeownership programmes in each Local Government area to facilitate increased housing finance in the urban and rural areas.

The FMBN was formally established on 1st July 1977 to inherit the assets and liabilities of the NBS, which was dissolved on 30th June 1977, and its initial authorized Capital was N20 million. The Management of the Bank was contracted to an expatriate Consulting firm for three years but became wholly indigenous in 1979 with the appointment of a board of directors. At its inception, the FMBN took over more than 3,200 mortgage loans and undisbursed commitments with a total value of about Nl00 Million, comprising N75 million in Mortgage Assets, and undisbursed commitments making up the total from the NBS

List of top  mortgage institutions in Nigeria

1. Federal Mortgage  of Nigeria (FMBN)

The Federal Mortgage Bank of Nigeria was once known as the Nigerian Building Society. It was established in 1977 as a joint venture between the Commonwealth Development Corporation, and the Federal and Eastern governments of Nigeria.

The Bank acts as an effective vehicle for increasing long-term capital mobilization, lending volume, and mortgage lending services to all segments of Nigerian society.

2. FBN Mortgages

FBN Mortgages Limited is a significant Primary Mortgage Bank (PMB) that focuses on offering the best mortgage banking services and products, reflecting its parent business First Bank’s supremacy in the financial services market.

FBN Mortgages, as a committed provider of a wide range of mortgage and real estate finance solutions, is well-positioned to help consumers navigate the crucial stages of seamless homeownership and real estate development.

3. Infinity Trust Mortgage Bank Plc

Infinity Trust Mortgage Bank Plc was founded on January 28, 2002, as Infinity Trust Savings and Loans Limited. However, business operations began in Abuja in 2003. For nearly two decades, ITMB Plc has been dedicated to providing Nigerians with limitless homeownership prospects through fast mortgage servicing.

They provide 8 out of 10 consumers who visit the bank with the best-suited mortgage package that suits their income and allows them to become homeowners.

4. Abbey Mortgage Bank 

One of the most significant, well-known, and lucrative non-aligned primary mortgage banks in Nigeria is Abbey Mortgage Bank Plc. It holds a license from the Federal Mortgage Bank of Nigeria and the Central Bank of Nigeria, making it one of the seven national Primary Mortgage Banks (PMBs) to be granted the license. In terms of the National Housing Fund’s on-lending services, it is also an accredited primary mortgage bank (PMB).

In addition to offering support and advisory services to help them get housing finance, they provide business organizations and individuals a range of mortgage and investment solutions. In response to customer requests, they additionally finance and facilitate the provision of mortgage and real estate-related services.

5. Platinum Mortgage Bank Ltd

Platinum Mortgage Bank Ltd is one of Nigeria’s most prominent primary mortgage institutions. It was registered with the Corporate Affairs Commission in 1992 to provide savings, loans, and home ownership services, and it is licenced by the Central Bank of Nigeria and the Federal Mortgage Bank of Nigeria to provide mortgage banking.

Platinum Mortgage Bank Limited is headquartered in Lagos and was recapitalized to become a strong Primary Mortgage Institution backed by innovative products, services, cutting-edge information technology, and qualified management.

Role and functions of mortgage institutions in Nigeria 

A Mortgage Institution is defined by Decree 53 of 1989 (Now Act) as any company licensed to carry on mortgage business under the Decree, and make available, mortgage loans and advances for purchase, construction, improvement and extension of dwelling houses

This definition includes all primary mortgage institutions (PMis) and the Federal Mortgage Bank of Nigeria (FMBN), which hitherto supervised mortgage institutions, in addition to managing the national housing fund.

In light of this decree, the function of mortgage institutions are as follows  

1. Estate Development and Management Services: Many PMis are venturing into estate development and management. To overcome the problem of funding, many have been involved in loan syndication. 
2. Mobilizing Deposits from the Public: The PMis operate various types of accounts, which have made it possible to attract deposits from the public by way of savings. The establishment of PMis has given the banking public the required opportunity to save. 
3. Offering technical advisory services to the public for the purchase and construction of houses: Many individuals and even corporate bodies who could not access the services of relevant professionals have taken advantage of services from the PMis. Such services have boosted the pace of property development. 
4. Granting loans and advances to individuals and corporate bodies for the acquisition of houses: Studies carried out in 1997 indicated that a proportion of their total assets portfolio, 14 per cent was dedicated towards this lending (World Bank 2000). This has significantly improved, especially as it is being monitored by the CBN continuously from the statutory returns of the PMis. 

Conclusion 

While it’s obvious that the federal government has made some contributions in terms of policies and providing affordable housing, it must be noted that those in charge of implementing this policy have failed. There are cases of corrupt practices where low-cost houses are awarded to themselves, friends and relatives. Also, the mortgage process is not known to the average Nigerian. 

Awareness should be created of the need for every adult Nigerian to own a home, and the financial instruments must be made accessible to the public also.