CBN Moves To Reduce Credit Risk In Mortgage Financing

The Central Bank of Nigeria (CBN) has announced the introduction of Mortgage Guarantee Companies (MGCs), aimed at reducing credit risk in the mortgage finance sector as well as increase access to mortgage loans.

The new firms, according to the CBN will operate with minimum capital base of N6 billion and authority to provide full or partial guarantee for residential mortgage loans. This is contained in the exposure draft on the regulations for the operations of MGCs released through a letter to all banks, Federal Mortgage Bank of Nigeria (FMBN), Nigeria Mortgage Refinance Company (NMRC) and Mortgage Bank Association of Nigeria (MBAN). Signed by the Director, Financial Policy and Regulations Department, CBN, Kevin Amugo, the letter stated:

“In an effort to promote mortgage financing and advanced home ownership, the CBN is proposing the introduction of MGCs in Nigeria”. According to the apex bank, the objectives of the MGCs are to support mortgage originators such as Primary Mortgage Banks (PMBs) and commercial banks to increase mortgage lending by guaranteeing against losses resulting from borrower defaults on their mortgage loan portfolios.

Photo Caption: CBN LOGO