NIGERIAN MORTGAGE LAW

BY BARR CHIGOZIE EZEKIEL

A mortgage protection policy is useful to protect the borrower (and his estate) in the event of death or bankruptcy and the borrower cannot repay the loan.

Mortgage institutions are regulated by the provisions of the Mortgage Institutions Act, Cap. M19 LFN, 2004. The object of this is to make provisions for establishment and licensing of mortgage institutions and to accept savings and deposits from members of the public and pay interest on the deposit. The following are examples of mortgage institutions in Nigeria:

FEDERAL MORTGAGE BANK: This is the apex institution for mortgage business in Nigeria. It is established by section 1 of the Federal Mortgage Bank of Nigeria Act, Cap E16 LFN, 2004. Section 5 of the Act provides that the function of the Bank shall be to provide loan-term credit facilities to Primary Mortgage Institutions (PMI) in Nigeria, licence, control, and encourage the growth of Secondary Mortgage Institutions, the Bank also collect, manage and administer the National Housing Fund. The advantages of the bank as a source of loan are:

1.      It gives as much as 66% of purchase price as loan;

2.      It gives a long term loan payable over a period of 20 years;

3.      It gives a low interest rate of about 6% per annum; and

4.      It has lots of branches across Nigeria so it is widely spread and easily accessible.

COMMERCIAL BANKS: Commercial banks provide credits for financing projects including party acquisition. They are usually the last resort for mortgage loan because they prefer to give short term loans with very high interest rate. It is normally between 5 to 10 years of repayment while the interest is some times as high as 20%. Thus, it is not the best option for loan.

INSURANCE COMPANIES: This is a policy of life insurance which is a form of savings. Such companies may lend or guarantee loan from a Bank with a collateral mortgage of life policy, that is, the insurance company may serve as a guarantor to a holder to borrow from a Commercial Bank. Thus, the insurance companies provide money for the purchase of a property or guarantee loan from a bank. In this type of mortgage loan, no option of the loan is repayable until the period stated in it matures or upon the death of the borrower. click on the picture at your left or right hand side for more stories.

HOUSING CORPORATIONS: An example of this is the Federal Housing Authority established by Federal Housing Authority Act, Cap. F14 LFN, 2004, for the primary function of recommending to government a National Housing Programme and the execution of such programmes. They provide funds for building or sometimes they build and offer them to the public for sale. The advantages of this as a source of loan are:

1.      It gives low interest rate.
2.      Security of title in respect of party purchased from it since they are granted on state land, the granting of Certificate of Occupancy is automatic and immediate.

STAFF HOUSING SCHEME: This is a scheme made for the benefits of employees to enable them acquire their own houses. The employer gives loan on the security of the property; the practice is that the employee is required to deposit the title document with the employer until the loan is fully paid. In consideration, the banks make deductions from the salaries of the employee over a period of time. Only very few organization are still able to operate this scheme because of lack of funds.

PRIVATE DEVELOPERS
This has to do with developing of estates for sale to the public. A prospective buyer is expected to pay only 50% to take possession and the balance is payable over 15 years at an interest of 15% per annum upon delivery.

Barr. Ezekiel Chigozie has many years experience in providing legal representation and advising clients across exceptional broad range of contentious and non-contentious matters. His main goal is to help clients resolve contentious or non-contentious legal problems they are having rapidly and cost effectively. 08034997413.