NATIONAL PENSION COMMISSION DRAFT GUIDELINES ON WITHDRAWALS FROM RETIREMENT SAVINGS ACCOUNT (RSA) TOWARDS EQUITY CONTRIBUTION FOR PAYMENT OF RESIDENTIAL MORTGAGE 1.0 INTRODUCTION 1.1 Section 89 (2) of the Pension Reform Act (PRA) 2014 provides that a Pension Fund Administrator may, subject to guidelines issued by the National Pension Commission (the Commission), apply a percentage of pension fund assets in the retirement savings account towards payment of equity contribution for payment of residential mortgage by a holder of Retirement Savings Account (RSA). 1.2 Pursuant to the referenced Section 89(2), these guidelines provide the framework for its implementation. The Guidelines seek to provide the operational modalities for Pension Fund Administrators in determining the eligibility requirements, procedures and documentation required to enable RSA Contributors to access and utilize part of their RSA balances towards equity contribution in respect of first home ownership mortgages.
2.0 STAKEHOLDERS AND THEIR ROLES The main parties involved in the process and their roles are outlined as follows: 2.1 RSA Holder: A RSA holder shall satisfy the eligibility criteria and shall make a formal application to his/her PFA requesting for a portion of his/her RSA balance as equity contribution, based on a valid and approved Mortgage Loan by a Primary Mortgage Bank (PMB) or Deposit Money Bank (together, Mortgage Lending Institutions) licensed by the Central Bank of Nigeria (CBN). 2.2 Eligible Licensed Institutions: A Primary Mortgage Bank (PMB) or Deposit Money Bank (DMB) licensed by the CBN, shall grant mortgage loans to qualifying RSA holders as well as provide the required documentation to PFAs to facilitate remittance of the approved portion of the RSA balance to be utilized as equity contribution. 2.3 Nigerian Mortgage Refinance Company Plc (NMRC): The NMRC was established to encourage home ownership in Nigeria by providing long term and relatively cheaper refinancing facilities to the PMBs and DMBs, thereby increasing the availability and affordability of mortgage loans to RSA holders and other Nigerians. 2.4 Pension Fund Administrators (PFA): The PFA shall process the application by an eligible RSA holder to access a percentage of his/her RSA balance for mortgage loan; forward such processed application to the Commission for approval and ensure that the required documentation are provided to support the application. 2
2.5 Pension Fund Custodian (PFC): The PFC shall on behalf of the RSA holder remit to the licensed PMBs and DMBs, the approved portion of the RSA balance, based on instructions from the PFAs and approval by the Commission. 2.6 Central Bank of Nigeria (CBN): The Central Bank of Nigeria is the regulator and supervisor of the entire banking system under which DMBs and PMBs operate. It shall provide on its official website, the updated list of licensed PMBs and DMBs, and other relevant information on their financial stability, from time to time. 2.7 National Pension Commission: The Commission, as the regulator and supervisor of all pension matters in Nigeria, shall ensure that licensed Pension Operators and other relevant parties comply with the provisions of these guidelines. 3.0 GENERAL PRINCIPLES 3.1 All applications by RSA holders to access and utilize a percentage of their RSA balances as equity contribution for mortgage loans shall be approved by the Commission. 3.2 A RSA holder shall access a portion of the RSA balance as equity contribution for residential mortgage, only once in a lifetime. 3.3 A RSA holder shall make a formal application to the PFA requesting for a portion of the RSA balance as equity contribution for a mortgage loan. 3
3.4 A RSA holder that has utilized a portion of the RSA balance as equity contribution for residential mortgage may not be entitled to a lump sum payment at retirement. 3.5 An eligible RSA holder shall be allowed to access a maximum of 25% of the RSA balance as equity contribution for a mortgage loan. 3.6 The RSA balance shall be the Value of an Accounting Unit of the Fund (VAUF) of the RSA Fund multiplied by the accounting units held by the RSA holder as at the date the application was received by the PFA. 4.0 ELIGIBILITY CRITERIA FOR RSA HOLDER In order to qualify to access the RSA balance as equity contribution for a mortgage loan, the following eligibility criteria shall apply: 4.1 The RSA holder shall be in active employment, either as a salaried employee or self-employed person. 4.2 The RSA holder shall have been contributing consistently for a minimum of 10 years, prior to the application for drawdown. 4.3 The RSA holder s Debt to Income ratio shall not exceed 33.33% of his/her net monthly income at the time of applying for the mortgage. The RSA holder s debt shall be the sum of the monthly mortgage repayments and other personal debt obligations that impact on his monthly income. 4
4.4 The RSA holder shall provide the required documentation as required under Section 5.0 and/or other additional documentation requested, from time to time. 5.0 ELIGIBILITY CRITERIA FOR THE PROPERTY AND MORTGAGE 5.1 An eligible RSA holder shall use the proceeds of the mortgage loan to purchase either a single-family home or an apartment in a multiunit building, which must be owner-occupied. 5.2 The title to the property must have a fully perfected title and free from any encumbrance. 5.3 The property shall have comprehensive insurance policy in the name of the borrower, to cover the replacement or reinstatement cost of the property. The insurance policy must note the RSA Fund as one of the first loss payees, to cover the equity contribution released by the PFA. 5.4 The valuation of the property to be purchased with the mortgage loan shall be carried out by a licensed, independent valuer who is a member in good standing with the Nigerian Institution of Estate Surveyors & Valuers (NIESV) and must carry Professional Indemnity Insurance with an insurance company licensed and in good standing with National Insurance Commission (NAICOM). 5.5 The mortgage loan amount shall be a minimum of N1.5Million and a maximum of N50Million. 5.6 The tenor of the mortgage loan shall be for a minimum of 5years and a maximum of 20years. 5
5.7 The interest rate on the mortgage loan shall be at a fixed rate for its whole duration. 6.0 ELIGIBILITY CRITERIA FOR PRIMARY MORTGAGE BANKs (PMBs) AND DEPOSIT MONEY BANKS (DMBs) 6.1 The eligible PMB and DMB shall be a NMRC Member Mortgage Lending Bank, as published and updated from time to time on the NMRC website (www.nmrc.com.ng). 6.2 An eligible PMB shall have a minimum paid up share capital of N2.5Billion or as stipulated under CBN Guidelines for PMBs. whilst, a DMB shall have a minimum paid up share capital of N25Billion or as stipulated by CBN. 6.3 The PMB or DMB shall maintain a credit report from 2 independent Credit Bureau Agencies licensed by the Central Bank of Nigeria (CBN), indicating a minimum credit score of Satisfactory. 6.4 The PMB or DMB shall have good and stable financial standing at all times, and satisfy the minimum requirements of the CBN and NMRC, in terms of credit policy, asset/liability management policy, arrears management and repossession policy, Basel 2, IFRS financial statements, liquidity, leverage, capital adequacy, overall asset quality, profitability etc., as may be prescribed from time to time. 6.5 The NMRC and/or CBN shall confirm: i. The good and stable financial standing of the PMB or DMB. 6
ii. That the PMB or DMB has satisfied the minimum requirements in terms of credit policy, asset/liability management policy, arrears management and repossession policy, Basel II, IFRS financial statements, liquidity, leverage, capital adequacy, overall asset quality, profitability and other requirements as may be prescribed from time to time. 7.0 DRAWDOWN PROCEDURES AND DOCUMENTATION REQUIREMENTS 7.1 A RSA holder on obtaining a confirmed Offer of Mortgage Loan Facility from a PMB or DMB, shall forward an application to the PFA requesting to access his/her RSA balance, and attaching the following relevant documents: i. Application Letter to access RSA balance signed by the RSA holder ii. Mortgage Loan Offer Letter issued by a licensed PMB or DMB iii. Copies of valid documents to property on which mortgage loan was granted iv. Draft Mortgage Loan Agreement v. Letter of Confirmation issued by the PMB or DMB to the PFA, attesting to the genuiness and authenticity of the mortgage transaction with the RSA holder. The Letter of Confirmation shall be signed by, at least, two Directors of the PMB or DMB, in addition to the Official Stamp or Seal of the PMB or DMB (standard format of Letter to be issued by the Commission) vi. Other relevant documentation requirements 7
7.2 Notwithstanding the provisions of Section 7.1(v), the NMRC and/or CBN shall verify the authenticity of the Mortgage Loan granted by the PMB or DMB, prior to submission to the PFA. 7.3 PFA shall review the application to ascertain that it meets the minimum eligibility requirements as outlined in these Guidelines, validate the authenticity of all documents submitted in support of the application and forward the documents to the Commission for approval of the remittance of the equity contribution from the RSA. 7.4 The Commission shall review and approve the application where documents forwarded in 7.1 above meet the minimum stipulated requirements. 7.5 However, where the documents do not meet the requirements, the application shall be rejected, with the PFA clearly stating the deficiencies in the stipulated requirements. 7.6 The PFA shall upon receipt of approval from the Commission, authorize the PFC to release approved funds to the PMB or DMB. 7.7 The PFC shall then remit the approved amount to the designated PMB or DMB based on advice from the PFA and approvals received from the Commission. 7.8 The PMB or DMB shall notify the PFA once the mortgage loan transaction is successfully concluded. 7.9 However, where there are any unresolved issues or challenges, which may render the transaction to be inconclusive, the PMB or DMB shall immediately notify the Commission/PFA in writing and provide detailed information on the issues. 8
7.10 A RSA holder shall notify the PFA / Commission in writing, of any breach of contractual obligation by the PMB or DMB. 7.11 Upon receipt of any compliant from the RSA Holder, the PFA shall immediately forward such complaints to the Commission. 7.12 The Commission shall subsequently notify the CBN on complaints received from RSA holders and follows up on resolution of the breach, in order to safeguard the pension assets of RSA holders. 8.0 SANCTIONS FOR VIOLATION OF THESE GUIDELINES 8.1 The provisions of Sections 99 to 105 of the Pension Reform Act (PRA) 2014 shall apply to violations of these Guidelines. 8.2 Specifically, any RSA Holder or PMB or DMB that misappropriates pension fund assets or with intend to defraud, produces any document or gives any information or explanation, which is false or misleading, in respect of these mortgage transactions, commits an offence and shall upon conviction be liable to a fine or imprisonment or both. 8.3 Where the violation of these Guidelines is committed by a body corporate, the body corporate or every director, manager, secretary or other officers of the body corporate; person who was purporting to act in such capacity of the body corporate, who had knowledge or believed to have had knowledge of the commission of the offence and who did not exercise due diligence to ensure compliance with the Guidelines shall be deemed to have committed an offence and shall be proceeded against in accordance with the PRA 2014. 9
9.0 REPORTING REQUIREMENTS 9.1 All PFAs and PFCs shall submit to the Commission, quarterly reports on withdrawals from RSA Active Funds in respect of payments to PMBs and DMBs in the format below: Report on Equity Contribution Remittances of RSA Contributors to Primary Mortgage Banks (PMBs)/Deposit Money Banks (DMBs) S/N Name of PIN Total Value of Amount of Date of Remittance Name and RC of Contributor Number Mortgage Equity of Equity PMB/DMB Contribution Contribution Remitted 10.0 ENQUIRIES All enquiries or clarifications with respect to these Guidelines should be forwarded to the Director General of the National Pension Commission. 10