A primary mortgage institution is usually a bank, either commercial or a savings

and loan. It may be local, privately owned, state-owned or a corporation. It does

not matter if the bank is one out of many in a chain or a small family operation

with just one branch. The primary mortgage institution is the direct lender of the

money that the potential homeowner uses to purchase a house or other property,

paying the mortgage back in monthly payments to the issuing institution.

Profits of Primary Mortgage Institutions

Primary mortgage institutions make a large portion of the institution's profits by

charging interest on the money loaned to property purchasers. However, a limit

exists to the amount of capital in the bank's reserve. To grant more loans, the

bank needs to maintain money in this reserve. Therefore, to increase profits, it

needs to obtain more capital.

Primary mortgage institution emerged after eighties and early nineties,

following the establishment of the national housing fund by decree (N0 53 of

1989) and the announcement of the 1991 national Housing policy.The primary

mortgage institution decree was passed in 1993 to facilitate speedy

implementation of financial return envisaged under the national policy.

The housing sector plays a more critical role in a country’ s welfare than is

always recognized, as it directly affects not only the well being of the citizenry

but also the performance of other sectors of the economy. Adequate housing
provision has since the 1970’ s consequently engaged the attention of most

countries, especially the developing ones for a number of reasons.

First, it is one of the three most important basic needs of mankind, the others

being food and clothing. Secondly, housing is a very important durable

consumer item which impacts positively on productivity, as decent housing

significantly increase workers well being and health, and consequently growth.

Thirdly, it is one of the indices for measuring the standard of living of people

across societies. Consequently, programmes of assistance in the area of finance,

provision of infrastructure and research have been designed by governments to

enhance its adequate delivery.

The focus on finance has however been very prominent for obvious

reasons. This is because housing provision requires huge capital outlay, which

is often beyond the capacity of the medium income/low income groups.

The housing problems in rural areas are not as serious as the urban areas.

But there is still the renewal problem involving the construction of existing

dwellings. Such modernization schemes, including the provision of basic

housing facilities, require an amount of money greater than which private

finance or low income inhabitants can provide as stated in the fourth national

plan 1992-2008 housing problem.

 The thrust of these is therefore, to articulate the main issues that must be

addressed so as to ensure efficient and sustainable credit delivery to the housing

sector.

The purpose was to encourage the establishment of financial institution capable

of mobilizing saving and facilitation greater access to loan in other to popularize

home by individual wishing to build or buy their own house and for large scale

private builders producing house for sale

The idea for the evaluating the impact of primary Mortgage Institution (PMIS)

in real estate development is necessitated by the increasing need for solution or

alternative housing finance for the population in the face of inequality in

personal income of citizens. The need for this impact of (PMIs) in real estate

delivery is enormous. This problem is most noticeable in urban area where a

majority of the working population lives in rented apartment. However, there

are areas yet to be covered which this work is set to achieve some of the related

works are highlighted below.

Oghifo (1997). The Primary Mortgage Institution are empowered by the

mortgage Decree to bridge the gap between the Federal Mortgage Bank of

Nigeria (FMBN) and the contributions (employers and workers). They are the

primary lenders evaluated loan application from the individual contributors.

The maximum loan allowed for a contributor was pegged by the Decree of one

and half a million naira and is to be jointly provided or financed by both

Primary Mortgage Institution and the Federal Mortgage Bank of Nigeria

(FMBN). The loan are given at half of fifty percent of the prevailing market

rate (see the mortgage institution Decree 53 of 1989 and NHF Decree 3 of 1992.

In paper presented by Timothy Olugbenga (1991). The problem of housing has

become an everyday discussion in all quarters of the public and private service

of developing countries in Africa. It has become increasing glaring that most of

the urban population live in dehumaning environment while those that have to

average housing do so at abnormal cost. According to Nubi (1991) stress

further that rent in major cities of Nigeria is about 60% of an average worker

disposable income. This is far higher than the 20-30% recovered by United

Nation (UN). According to Ighodaro (1988) studies the factors influencing

mortgage-lending decisions using first bank of Nigeria as a giving out of loan

for mortgage by banks. On the other hand, these studies gateway savings and

loan LTD and factors considered by the institution before any mortgage loan is

disbursed. The Federal Mortgage Bank of Nigeria also directly affects thus.

According to Onabule (1996) 245 Primary Mortgage Institution were

established under the NHF between 199101996. Unfortunately, only 54 are

now operating, mainly in South West part of the country and Abuja.

According to Arilesre (1997), Abiodun (2000) et al (2000) the sudden leap

Agro-based to petrol-Naira based did not help matter. The assertion that money

was not our problem but now how to spend it accredible to one ot our heat of
state, is a summary of Nation that lacked focus in the formative years . this

situation together with unprecedent population growth has remained unchecked

over sine. If the foundation is faulty, what can the righteous do? Housing

finance was during the colonial day was limited to the expatrate staff and few

selected indigenous senior civil servant in the urban countries. The

establishment is Lagos Executive Development Board (LEDB) in 1928.

Nigeria Building Societies (NBS) in 1956; formation of state housing

corporation between 1956 and 1960; National Council of Housing 1971 and

Federal Mortgage Bank of Nigeria (FMBN) 1979 are very familiar development

in our history.

Also Adejumo (1988) focused on the determinants of defaults in residential

mortgage. This is very important to the mortgage finance sector in order to curb

such defaults. This research, however assess the effectiveness of the mortgage

finance particularly (PMIs) taking into cognizance the nation that if Primary

Mortgage Institution device more effectiveness scheme and methods of

rendering their services such defaults could be curbed.

Okororo (1996) in his research looked into mortgage financing mechanism as

strategy for the operation of staff housing loan scheme in Obafemi Awolowo

University Ile-Ife. On the contrary this research takes into cognizance to real

state development sector taking a study population of Lagos State, which is a

commercial nerve centre. With the experience of licensed primary mortgage

institutions in the country there are yet challenges encountered in the mortgage

institution sector. This research looks into the role played in the mortgage

finance institution in real estate development.

The Role of and Challenges of the Primary Mortgage

Institutions in the Provision of Housing:

A Primary Mortgage Institution (PMI) is a company licensed to carry out

mortgage business in Nigeria. Such businesses include granting of loans or

advances to any person for building, improvement or extension of a dwelling

and commercial house, and the purchase of a dwelling or commercial house

among others (Guidelines for PMI and OFID, 2003: 1). It is also defined as an

institution that is usually a bank, either commercial or savings and loans. It

could be locally owned, privately owned or corporation. This institution is a

lender of money to potential homeowners who uses such loans to purchase a

house, paying back the loan on monthly installments to the mortgage institution.

The primary mortgage institutions operate under the coffers of the National

Housing Fund Decree of 1992, revised in1996 and further revised in 2006. The

federal mortgage bank serves as its apex regulatory authority. The PMIs are

authorized to raise funds through borrowings from the National Housing Fund

unit of the federal mortgage bank, which should not exceed fifty percent (50%)

of its shareholders fund. Such loan must be secured by a block of existing

mortgages previously granted by a mortgage institution. In addition, the PMI

must execute a sale and administration of agreement and deed of assignment

with the bank, prevent misallocation and deviation of loans, disbursed the loan

after presentation of acceptable security, demand for immediate repayment of

loan with interest and payment of two hundred percent penalty of interest for

PMIs that misallocate their loans or be suspended from further borrowing until

it complies with the regulations earlier stated (Oduwaye, Oduwaye &

Adebamowo, 2003, : 5-7). From CBN report in 2003, out of about three

hundred and fifty (350) PMIs licensed, only eighty one (81) were then declared

healthy. In 2008, a study conducted by Oduwaye et al showed that at of sixty

five primary mortgage institution in Lagos, forty three were owned privately,

eighty of them were government owned, ten were owned by commercial banks,

two by insurance companies and others owned the remaining two. In addition to

all these, the federal mortgage bank charges fees for services rendered in

granting a loan and other administration charges.

Apart from the tight arrangements for PMIs as discussed above, other factors

like the poverty level in the country, cost of raising a good building, poor

savings, highly changing macroeconomic policies, processes in land acquisition

and the complex structure of the mortgage financing in Nigeria culminate to

render the services of the PMIs invaluable.