Nigeria: Central Bank releases framework for mortgage refinance companies

Feb 15, 2014

The Central Bank of Nigeria has released a regulatory and supervisory framework for the operations of a Mortgage Refinance Company (MRC).

The Central Bank of Nigeria has released a regulatory and supervisory framework for the operations of a Mortgage Refinance Company (MRC).

MRCs are financial institutions providing liquidity or medium to long-term funding to mortgage loan originators such as Primary Mortgage Banks or commercial banks. They are an intermediary between investors looking for long dated quality securities and the mortgage issuers themselves.

The regulation is designed to ensure MRC operations follow international best practice and is "aimed at increasing the liquidity within the mortgage sub-sector and availability of mortgage credit in Nigeria, reduce mortgages and related costs, and make residential housing more affordable."

The framework prescribes that the principal line of business of the MRC must be the re-financing of residential mortgage loans and other qualified collaterals. It sets the capital adequacy requirements (including a minimum paid-up capital of N5 billion, US$ 30.5 million at the current exchange rate), maximum leverage limit (capital/asset of five per cent minimum) and minimum risk-weighted capital requirement of ten per cent. It also regulates the type of collateral accepted, minimum liquidity requirements and interest rate risk management procedures.ADNFCR-2976-ID-801694007-ADNFCR