CBN to introduce new framework on mortgage lending – TheNigerialawyer

The Central Bank of Nigeria plans to introduce a framework to
boost mortgage lending in the country.

According to the apex bank, a lot of equities are currently tied
down in mortgage assets, which are entirely cash backed.

The bank said in its effort to support the growth of Nigeria’s
real estate industry, it would work in developing a framework that
would enable banks to securitise mortgage loans, which could then
be sold in the capital markets.

It stated, “Adequate safeguards will be put in place to reduce
the risk of delinquency in the mortgage backed assets that will be
sold in the capital markets.

“These measures will reduce the credit and liquidity risk to
banks holding these assets on their balance sheets and improve the
amount of funds available to support mortgage loans. It will also
reduce the high cost of obtaining mortgages for banking
customers.”

Also, in a recent letter to the Deposit Money Banks, as part of
its efforts to boost growth in the Nigerian economy through
investment in the real sector, the CBN introduced some measures to
boost lending.

Part of the letter read, “All DMBs are hereby required to
maintain a minimum Loan to Deposit Ratio of 60 per cent by
September 30, 2019. This ratio shall be subject to quarterly
review.

“To encourage small and medium enterprises, retail, mortgage and
consumer lending, these sectors shall be assigned a weight of 150
per cent in computing the LDR for this purpose.

“The CBN shall provide a framework for classification of
enterprises/businesses that fall under these categories.

“Failure to meet the above minimum LDR by the specified date
shall result in a levy of additional Cash Reserve Requirement equal
to 50 per cent of the lending shortfall of the target of the
LDR.”

The CBN said it would continue to review developments in the
market with a view to facilitating greater investment in the real
sector of the Nigerian economy.

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