In furtherance of the objectives of the Central Bank of Nigeria (the “CBN”) to promote affordable financing and a sound financial system in Nigeria, the CBN recently released an Exposure Draft Regulations for the Operations of Mortgage Guarantee Companies (“MGCs”) in Nigeria (the “Draft Regulations”). The concept of MGCs is designed to deepen the mortgage market through increased access to mortgage finance and sharing of credit risk with mortgage lending institutions.
The Draft Regulations define MGC as a financial institution established to provide guarantees or partial guarantees to lenders against losses resulting from borrower defaults on residential mortgage loans. The objective of the MGC is to support mortgage originators and commercial banks and to increase mortgage lending by guaranteeing against losses resulting from defaults on residential mortgages and mortgage loan portfolios.
In addition to their core activity of guaranteeing residential mortgage loans, the permissible activities of MGCs include investing in government securities, assuming ownership of residential property in the event a lender is unable to dispose of a foreclosed property, issuance of bonds and notes to fund their operations and providing technical assistance to lenders. MGCs are not allowed to accept any type of deposits, grant consumer, commercial or mortgage loans; originate primary mortgage loans; finance real estate construction; engage in estate agency or facilities management; undertake project management relating to real estate development; manage pension funds and schemes and engage in foreign exchange, commodity and equity trading.
Stakeholders are requested to provide their comments on the Draft Regulations to the CBN by Friday, 26th October 2018. Click on the link below to download the Draft Regulations.