CHAPTER ONE

1.1        BACKGROUND OF THE STUDY

FEDERAL MORTGAGE BANK OF NIGERIA (FMB)

Housing is one of the Importance factors that determine Urban forms and constitutes the single most serious problem facing large cities in Nigeria today.

          In the 1950s and 1960s, the need to finance housing in Nigeria remained so small mainly because of low urbanization level.  The byoyancy of the Nigeria economy in the 1970s and the uneven spatial distribution of industrial development accelerated the rate of urbanization in Nigeria.  The heretherto uncontrolled and unplanned urbanization resulted in housing shortages in qualitative and quantitative forms.  There existed today a yawning   gap between the demand and supply of decent accommodation.  The consequence of excess demand over supply, was high rent, and the growth of informal rationing system which discriminated against the poor to the extent that over half of the urban population in Nigeria live in slump against this background and considering the fact that housing provides the physical frame work in which man’s human, social, economic and cultural resources are realized, entrenched and integrated, it becomes obvious that adequate housing deserved great attention.

          In realization of the importance attached to housing the federal government of Nigeria established the Federal Mortgage Bank of Nigeria in the year 1977 as a successor to Nigeria Building society established in the year 1956.

1.2        STATEMENT OF PROBLEM

Mortgage Banking was established by the Federal Government of Nigeria to assist in financing housing prograts as a means of checking the magnetude housing problems facing the Urban cities.  But this aspiration has not been fully realized due to pressing problems facing the mortgage banking.

          In Nigeria, in the disbursement of loan to individual developes, some of those problems  includes;

a.            Now repayment of housing loans given out to individual, this situation of non repayment makes it highly difficult for the mortgage banks to still extend such housing loans to other customers who has a need the loan, for housing development.

b.           The ability of the individuals to declare his or her actual income is another major problem facing the bank.  This situation makes imperstively difficult for mortgage bank to disburse enough loan, enough to complete the individual’s housing project.  In a situation of such kind, the mortage bank will require the customer to bring the house to a point before applying to the bank to come in with a loan that will be enough to complete the building project.

c.            The inability of the individual to obtain title documents like this certificate of occupancy (CFO) for urban areas create a problem to the mortgage bank in disbursing loans.

1.3        INTRODUCTION

The Nigeria building society was the first mortage institution to be established in 1956 to finance house building not necessarily home ownership it was financed by substantial equity by the colonial later common wealth development corporation (CDC) and the federal and regional government in the regions, housing corporation were established, partly to build and save or let estates.

Housing and impact mortgage finance represents the third area where special intervention is made necessary by the sheer magnitude of the problems. 

The Federal mortgage bank of Nigeria (FMBN) was established in 1977 as a fully owned federal government housing development finance agency under the federal mortgage bank Act No 7 of 1977.  This  step followed the dissolution of the Nigeria building bank society (NBS) whose assets and liabilities were taken over by the FMBN.  The Nigeria building society was itself incorporated in December 1956 with a capital of N3.25m and jointly owned by the common wealth Development corporation (CDC), the Federal government of Nigeria and the Eastern Nigerian government in the proportion of 60 percents, 31 percent and 9 percent respectively.  The federal military government however tool over the (CDC) share of the capital in 1972.  the authorized share capital at the time federal mortgage bank of Nigeria (FMBN) 1987 diary.

The firm of Bereuschool move Bosboom (Management consultant) was contracted by the federal government to supervise the take off of the new bank for a 3years period of from 1977.

With the exit of the Dutch management consultants in July 1980, the management operations of the bank became wholly independous in the same time.  There was also a charge in the authorized share capital and ownership structure of the bank.  The authorized share capital increased to N150 million jointly subscribed by the federal government and the central bank of Nigeria in the proportion of 60 percent to 40 percent respectively.  The federal government appoints the chairman and members of the board of directors.  By 1931, the bank has established branches in all the state capitals.  Underscoring its national outlook, since then additional forty-three (43) home savings center had been established in major in outside the state capitals.  This is decidedly to expand it sprend of service delivery as we as to widen its savings mobilization buse.

The 19 branches offices were organized into 4 zones otherwise known as area offices.

Each branch office is self-accounting and is empowered to approve individual mortgage loans up to N65,000.00 which has to be rectified by the head offices for the time being, the low lending rate and longer matarity spread of FMBN loans have led to an influx of mortage applicants from allux over the federation since 1977 to date.

The mortgage assets of the bank have been increasing steadily over the years.  As at 30th June 1977, the next mortgage assets of the bank was N75 million but as at 31st December 1982.  The next assets of the bank stood at N326 million between 1977 and May 1986, a total loan disbursement of N365, 560, 130 was made to 12,000 mortgage (federal motgage bank of Nigeria diary of 1987) in 1986, a wholesome loan type was introduced to serve the loan requirement of private developers, state housing corporation and big commercial ventures.

1.4        PURPOSE OF THE STUDY

There may be several purposes opened to any one carrying out a research of this nature but my own purposes are narrowed down as follows.

a.            To examine the extent to which mortgage bank have conformed to the federal government and central bank stipulated credit guideline to operate of nature housing fund scheme.

b.           To evaluate the reason why despite federal government finding, they fed relevant to extend credit to operators of national housing fund.

c.            To find out the purpose of mortgage creation.

d.           To find out why the guidelines are not workable within the context of the present mortgage structure without jeopardizing their business interest.

e.            To identify the problem of mortgage bank as regards the disbursement of loans to the national housing fund and actual causes of loan disbursement delay.

f.             To investigate as far as mortgage banking is concerned and its resultant effect to the people and the overall economy.

g.            To also examine other area of the guidelines that constitute problem.

1.5        SIGNIFICANE OF THE STUDY

The research is greatly concerned over the relevance of the study to the entire society and more important to the operators of the National Housing fund scheme the study was undertaken to find out how and to what extent then mortgage bank loan disbursement polices had helped the operators of the National Housing scheme to realize the general aspiration of the government on house for all by the year 2000.

I have the believe that if the findings of this work will be followed, it will afford the contributors and the general public the opportunity to start investing in the mortgage development by floating mortgage institutions.

1.6        SCOPE OF THE STUDY

Considering the large geographical nature of Nigeria and scattered federal and state ministries, this study will be carried out within the geographical boundries of Aba, Abia State and Enugu, Enugu State of Nigeria.  The potential respondent will be from workers of federal and state ministries and staffs of selected mortgage institutions.

1.7        DEFINITION OF THE TERMS

BANK:  Bank has been defined by many author and educated elites.  But to their purpose of this project, bank may be defined as any person or corporation that provides the minimum banking services and which is licensed as a bank by the federal government of Nigeria as a banking institution.

MORTGAGE:  A legal agreement by which a bank or similar organization lends one money to buy or to build a house and the money can be paid over a particular number of years.

MORTGAGEE:  This is a person or organization that lends money to people to build or buy a house.

MORTGAGOR:  This is a person or organization who borrows money from a bank or similar organization to build or buy a house.

BANK LOAN:  This may be defined as the financial facility granted by a bank which is intended to be applied for financing of a specific purpose.

DISBURSEMENT:  This means to pay money from a large amount that has been collected for a purposes.

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