Mortgage refinance firms get new guidelines

Central Bank of Nigeria (CBN) has paved the way for full take off of mortgage refinancing in the country with the release of regulatory and supervisory guidelines for the operations of a Mortgage Refinance company.

The apex bank noted that the framework is designed to ensure that the MRC operates in a safe and sound manner, on internationally accepted principles, standards and best practice in mortgage liquidity facilities.

It prescribes the basic regulatory requirements for the MRC’s principal line of business of re-financing credits to borrowers on the security of residential mortgage assets and other qualified collaterals. It also sets the capital adequacy requirements for the MRC, including its minimum paid-up capital, maximum leverage limit, and the minimum risk-weighted capital requirement.

The apex bank pegged the minimum capital base of an MRC at N5 billion, noting that the MRC shall commence operations with, and maintain at all times, a minimum paid-up capital of N5 billion. It also stated that a MRC should maintain, at all times, a minimum ratio of core capital to total assets (leverage ratio) of not less than five per cent.

The framework also stipulated that the core or tier 1 capital of the company should consist of paid-up capital and reserves plus retained earnings, statutory reserves, other reserves and published current earnings, less goodwill and other intangible assets and identified losses, or as otherwise defined by the CBN for licenced financial institutions.

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