HDAN sees coordinated risk-sharing expanding access to mortgage

An affordable housing advocate says coordinated risk-sharing has the capacity to expand access to mortgage loans by Nigerian home buyers, contending that an alliance of notable housing agencies will make that access a lot easier and possible.

The advocate, known as Housing Development Advocacy Network (HDAN), says there is a need to establish what it calls ‘National Mortgage Guarantee and Inclusion’ to bring together commercial banks, mortgage institutions, and housing funds.

Notable among the institutions and funds are the Federal Mortgage Bank of Nigeria (FMBN), Nigeria Mortgage Refinance Company (NMRC), Ministry of Finance Incorporated Real Estate Investment Fund (MREIF), and Family Homes Funds Limited (FHFL).

The Network, in a statement by its Research and Economic Development Unit, noted that Nigeria needs a coordinated mortgage system capable of serving not only salaried workers but also traders, artisans, farmers, entrepreneurs and other Nigerians earning legitimate but irregular incomes.

Nigeria already has several institutions and interventions capable of supporting a stronger mortgage market, but they need to be better coordinated around long-term funding, risk sharing, affordable housing supply and financial inclusion.

“Nigeria does not necessarily need to keep creating new housing-finance institutions. We need to connect the institutions and interventions we already have and make them work together at scale,” HDAN advised.

It reasoned that FMBN, NMRC, MREIF, FHFL and the banking sector could play complementary roles under a national framework rather than operating largely through separate interventions.

It reasoned further that government guarantees could unlock private capital, and therefore proposed that a mortgage guarantee mechanism should form a major component of the framework, allowing government-backed institutions to share an agreed portion of the risk on qualifying mortgages.

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It is expected that this could encourage banks and mortgage institutions to deploy more private capital into housing, particularly for Nigerians who can demonstrate repayment capacity but fail to meet conventional mortgage requirements.

“Government cannot provide all the money required to finance homeownership for millions of Nigerians. Government intervention should be used strategically to reduce risk and attract more private-sector capital into housing finance,” the Network said.

It stressed that mortgage guarantees should not encourage reckless lending, adding that the system must have clear eligibility requirements, proper underwriting standards, transparent risk-sharing arrangements, monitoring and consumer protection.

HDAN also canvassed the inclusion of informal sector workers, arguing that the absence of a monthly salary should not automatically be treated as evidence that a prospective borrower lacks the capacity to repay a mortgage loan.

“A trader may not receive a salary every month but may have operated a profitable business for 15 years. An artisan may not have an employment letter but may have consistent bank transactions. A farmer may earn seasonally, while an entrepreneur may receive irregular payments,” Festus Adebayo, HDAN’s executive director, noted.

“The fundamental question should be whether that person can demonstrate sustainable income and the capacity to repay a properly structured mortgage,” he stated.

He suggested an alternative mortgage underwriting system that could consider verified bank transactions, rent-payment history, cooperative contributions, business turnover, digital transactions, tax records and other credible evidence of income to take care of the informal sector.