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Lagos State Governor, Mr. Babatunde Fashola (SAN), Monday said the newly launched Lagos Home Ownership Mortgage Scheme (Lagos HOMS) would remain open to review and suggestions from stakeholders until all the challenges that may arise as it goes public are resolved adding that it is the only way to get the best out of the scheme for the good of the people.
Governor Fashola, who spoke at the Banquet Hall of the Lagos House Ikeja venue of the flag-off ceremony of the Scheme noted that although a lot of time was spent in preparation for the launch of the scheme to the public, not all the challenges that could possibly arise in the real world were foreseen and dealt with at that “laboratory” stage adding that as members of the public get involved unforeseen challenges would surely arise.
“We have spent a long time trying to see the import of all of the things that can possibly happen. Now we are ready to hit the real world in which all sorts of things will happen. Some we have foreseen and we are trying to prepare to deal with, we may find out that our preparations are not enough and therefore we need to do more”, the Governor said.
According to him, “Some of the challenges we had anticipated and answered in the frequently asked questions but some we have not and that is why I said in my speech that we remain open to reviews, to suggestions and so on and so forth”.
He, however, maintained that rules guiding the new scheme would be strictly enforced advising prospective home owners under the scheme to embrace insurance to secure the ability to pay their mortgages.
Listing such rules as prompt payment of mortgage and adherence to arbitration as only means of resolution of conflicts arising from the scheme, the Governor told the capacity audience comprising captains of industry, property developers and other stakeholders in the Housing Sector as well as Media Executives that any inability or unacceptable delay in payment of mortgage would mean repossession of the house by the Government.
“For us therefore, late payment should not be the rule because it endangers sustainability. If those who were paying taxes were delaying, you won’t have any houses to give out”, he said adding, however, that whether there would be penalty or not would be a matter of the banking relationship with the Lagos Building Investment Company (LBIC) who will be the managers of the Mortgage account.
According to him, “That is why the office of the Lagos Mortgage Board is going to be in the same building with the LBIC so that as an applicant, you don’t have to submit your form here and go to another place to pay, everything relating to this transaction will be in one building”.
On arbitration as the only means of resolving conflicts arising from the scheme, the Governor reiterated that it is embedded in the agreement between the home owner and the Government that he would not go to court and that the decision of the arbitration panel was final.
“Arbitration as the only means of resolution, yes because arbitration is an agreement itself and we have worked that into the system so if you don’t want to go into arbitration when there is dispute about this property, don’t even apply”, the Governor said.
He maintained that arbitration is part of the agreement and a condition for owning a home under the scheme adding that when the owner submits to arbitration by international best practice, the outcome, the decision is final unless there is misconduct which, according to him, may require an appeal.
“But that is not the purpose of arbitration. It is to find a less contentious, more dispute-resolving atmosphere. So really and truly electing to come into this scheme precludes you from going to court because you have signed a contract with us that you will use arbitration”, he said.
Governor Fashola said Government was not going to impose any insurance on prospective home owners adding, however, that Government still expect that they would patronize LASACO which, according to him, is an outfit in which the State has some interest.
“But as the market expands LASACO itself will know that in the insurance business it cannot carry all the risk alone and, therefore it will share the risk and so on and so forth so that things can happen”, he said.
In terms of whether Government should make Mortgage protection insurance compulsory like the Property Insurance, Governor Fashola said, “I think we should leave it optional so that people will be able to choose that if they can really predict that their income will not fall into difficulty then, it depends on how they plan their affair”.
“But if you want to secure the ability to pay your mortgage you can take an insurance against that. That is what insurance business is for. It is the level of risk you are ready to take in defaulting that you will consider knowing that if you default you will lose to other people. Our own is to get payment promptly or repossess the house”, he said.
On whether one could increase one’s mortgage payment if one’s income increases within the ten year period, he said Government was trying to do what is global best practice to keep the amount at a level that would enable the mortgagor meet other obligations.
“The whole idea is that we should not spend half or three quarters of your income for keeping shelter over your head because we know you have obligations to your children, to your wife and even to yourself and other dependants so that if people whose income can only afford two bedroom flat go for three bedroom flat you see that the risk becomes higher”.
Describing the choice by owners as “a lifestyle issue”, the Governor declared, “We expect that if you are in here with us you are in here for ten years no matter how rich you may have become. So we expect that you stay with us so that this desperation to acquire money which pushes people to cut corners will go away. As we go on the Board will advise us if we should allow any exit but for now the answer is no”.
