BARELY a month after its circular exempted Primary Mortgage Institutions (PMIs) from cash withdrawal limits, the apex financial institution, Central bank of Nigeria (CBN) has issued a new policy granting state governments access to 100 per cent equity shareholding in mortgage firms.The move is aimed at fleshing up bigger business in the mortgage sector, after operations have in the last months been in a tailspin.The new decision of the regulatory authorities was conveyed to the mortgage banks, through their umbrella body, Mortgage Banking Association of Nigeria (MBAN) at the rejuvenated Committee of Mortgage Institutions in Nigeria (COMIN) held few weeks ago in CBN headquarters in Abuja.The meeting, attended by representatives of CBN, Nigerian Deposit Insurance Corporation, MBAN, commercial banks and Federal Mortgage Banks of Nigeria (FMBN) is the highest decision making body for PMIs.Under the CBN new monetary policy, state governments were allowed to hold 10 per cent equity shareholding in the commercial banks while in revised Guidelines for Primary Mortgage Banks (PMBs) in Nigeria, the issue relating to ownership by State governments was unsubstantiated and with the clarification, states can own 100 per cent equity shareholding in either of the National or State authorization licenses of PMBs at N5 billion and N2.5 billion respective.Before now, only a handful of state governments that ventured into ownership of PMIs have sustained their operations and the ownership structure was at 100 per cent. Some of the States PMBs have winded up due to poor management and lack of financial commitment on the part their owners. But the new policy gives the leeway for the states having PMBs to team up with the private sector to consolidate their operations.CBN senior officials also specified that in the pro-consolidation period, with a deadline of April 30, 2013, PMBs that have 100 percent shareholding could take necessary steps towards dilution of the ownership through strategic investments by private sector or public subscription.Meanwhile, any person seeking a license for the operation of a primary mortgage business in Nigeria will now pay a non- refundable application of N1 million and licensing fee of N2 million, which will be addition of the minimum capital for National PMB and State PMB while change of name will attract a fee of N50, 000.According to the 44- page new CBN guidelines for PMBs, the application for new licence will also be accompanied with a feasibility report containing information on branch expansion Programme within the next five years, proposed training programmes for staff and management succession plan, a five year financial projection for the operation of the mortgage bank indicating expected growth and profitability and evidence of the payment of either N5 billion for national authorization of N2.5billion for state authorization to CBN.The new guidelines have also fixed the number of directors on the board of mortgage bank to seven and a maximum of 15, while executive directors of a PMB will be allowed to hold office for fixed term of not more than five years and such term may be renewed only once. The non-executive director will serve a fixed term of not more than four years and renewed only twice. The maximum tenure for both positions will not exceed a total of 10 years and 12 years respectively.Unlike now that mortgage banks engage in diverse activities, the guideline stipulated that PMBs are permitted after the consolidation to engage in mortgage finance, real estate construction finance within the permitted limits, acceptance of savings and time- term deposits, acceptance of mortgage focused demand deposits, drawing from the mortgage funds such as National Housing Fund (NHF) for on lending, and financial advisory services for mortgage customers.Activities not permissible include granting consumer or commercial loans, leasing, estate agency or facility management, project management for real estate development, management of pension funds.Similarly, mortgage banks that engage in activities outside the approved business are to pay a fine of N100, 000 for each day of the default with a maximum of N5million, in addition to the institution forfeiting the estimated profit, while use of depositors' fund for asset acquisition attracts a fine not less than N1million in addition to an immediate injection of funds by shareholders to the extent of the use of the depositors' funds.Also, the regulatory authority increased penalty for various offences. For instance, submission of false or inaccurate information to regulators attract a fine of N5 million for the institution and N100,000 for the individual. PMIs are also liable to a fine of N500,000 for non publication of annual accounts and a fine of N2.5 million for non-disclosure of contraventions.Recently, CBN exempted Primary Mortgage banks from the policy of N1 million limit for corporate bodies to enable them meet the legitimate demands of their numerous customers. However, the cast withdrawal/ deposit limits are applicable to customers of PMIs.
Click here to read full news..
