THE apex mortgage institution has ended a five-year financingof N26 billion series 1mortgage bond issued to financing of the sale of the FederalGovernment properties in Abuja to civil servants under the monetization scheme.The Federal Mortgage Bank of Nigeria (FMBN) through FMBN SPV ISSUER LIMITED raised the Mortgage-Backed Bond (MBB) from the capital market as part of the Government'sN100 billion residential mortgagebackedsecurities programme and on-going reform ofmortgage sector in the country.FMBN in 2007 recorded the first mortgage-backed bond transaction in sub-Saharan Africa with the successful floatation of the first tranche of N26 billion of a N100 billion mortgage-backed bond (MBB) programme to refinance civil servants' acquisition of 9,525Federal Government's residential houses sold in the Federal Capital Territory.Speakingat a formalclosingceremony in respect of the private placement of N24.5 billion series 3 zero coupon notes due on May 24, 2015 held at the Civic Centre, Lagos, FMBN Executive Director, Securities Issuance and Market Development, Mr. Bola Ogunsola explained that the five year bond, the longest tenured bond available at the time, was deployed to refinance the Mr. Yates created under the scheme.'The mortgagees had an average amortization period of 15 years, hence the need to refinance the bond at maturity was intentioned.'According to him, 'while the goal to bring about the regime ofsingle-digit interest rate mortgages in Nigeria was central to the scheme at the design stage, the subsequent volatilities in the market interest rates created a steep negative carry between the already created fixed rate mortgages and the market determined bond yields.'This present challenges further supports the suitability of Adjustable Rate Mortgages (ARMs) in an unstable interest rate environment like ours. This is a central lesson that will guide future transactions of this nature.He said that the record of mortgage repayments and prepaymentsunder the scheme attests to the fact that Nigerians have the culture to take mortgage loans and see through their payments, provided the right supporting structures such as effective and servicing arrangements and foreclosure process are internalized.Ogunsola disclosed that the scheme brought to limelight, the existence of some positive attributes in the Nigerian economy that is suitable for the regime of sustainable mortgage origination and refinancing.He said that there is evidence of high appetite for appropriately structured long term mortgage instruments among Nigerians institutional investors, especially pension fund administrators.Under the scheme, Messrs Dunn Loren Merrifield (DLM) acted as structural adviser, lead arranger and lead book runner to the transaction whileEcobank Nigeria Limited, WSTC Financial Services Limited, Greenwich Discount House Limited, Cowry Asset Management Limitedand Mainstreet Bank Limited acted as the joint book runners.The mortgage loan servicers are Access Bank Plc, Aso Savings and Loans Plc, Ecobank, Union Homes Savings and Loans Plc and United Bank for Africa Plc.The Managing Direcor, Dunn Loren Merrifield, Mr. Sonnie Ayere, said: 'This transaction is a reflection of FMBN's mandate to link the capital market with the housing industry and to establish an evergreen source of providing long tenured and cheaper financing for the mortgage market in Nigeria through the capital market'. Speaking further, Mr. Ayere mentioned that the advantages of mortgage securities include liquidity to the housing sector, housing affordability and further deepening of the Nigerian Capital Market with special emphasis on the Mortgage Backed Securities subset of the market.
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