MORTGAGE ARRANGEMENT IN DEPRESSED ECONOMY

(A CASE STUDY OF FEDERAL MORTGAGE BANK AWKA BRANCH)

By

Author

Presented To

Department of Banking and Finance

ABSTRACT

The objective of the study is to find out the causes of unemployment and causes of high rates of business failure. To find out how government policies discourages the emergency of vibrant mortgage bank. To know why mortgagors default and strategies to use to recover unpaid loan. To know the causes of inflation in an economy. To offer suggestion that will help mortgage banks in creating a conducive working environment. The instrument used in data collection is secondary source which comprises textbooks, libraries professional, trade organisation, questionnaire and internet services. Consequently to this analysis a summary of finding was obtained that most of the respondents companied about rate of payment it also discover loan foreclosures and loan disbursement. In the case of the study it recommends that government should provide adequate fund and also create secondary / intermediary mortgage institution. It also recommend that central bank should review the interest rate structure and a review of payment terms. 

CHAPTER ONE

1.0 INTRODUCTION

A prominent feature of real property investment is that it involves the expenditure of money. As a result, investors in real property hardly fund the project alone, instead they borrow part or all their capital requirement from financial institutions.

Leander's usually require collateral securities form their borrower before granting loan to them. This provides an avenue through which loan made to borrower could be recovered in the event of unfavourable business condition or default by the borrower

1.1 BACKGROUND OF THE STUDY

HISTORY OF MORTGAGE

Mortgage is norman french term which originated from the various modes of operation of pledges (walmsely (P.56).

A debtor in the olden days pledges his farm land to a creditor by transferring the physical enjoyment to him, if the revenue were large enough, they repay the loan immediately but if not the money for repayment had to be raised separately.

The former arrangement was called a "phle pledge" (mortgage) while the later a "dead pledged" (mortgage) thus the word "mortgage was formed from dead pledge" mortgage which represent a situation where the proceed from a security could not repay the loan borrowed.

Resulting in a search for alternative loan through which repayment could be made.

As the practice of mortgage developed further, it becomes usual to transfer the debtors lend out-right to creditor on the ground that the debtor could redeem it, if the debtor defaults the land automatically becomes the creditors own.

The principal is still effective till date and maintains that property serves as security only and should therefore be released whenever the loan is repaid.

In Nigeria today there is large-scale default in mortgage repayment due to the adverse economic circumstance. Lenders thus resort to auction their operating cost.

This practice however is usually against the intention of most financial institution in Nigeria because of harsh picture it points such an establishment in the eyes of the society.

1.2 STATEMENT OF PROBLEM

This research is intended to look into problems facing mortgage banks such as:

Development problems like unemployment, low production and high rate of business failure. Governmental policies and economic factors which discourages the emergency of vibrant mortgage bankk.

Default by mortgagor's in paying back the loan they borrowed from mortgage banks. Inflation in economy and high cost of construction.

Problem of uncondusive working environment for the development of mortgage bank.

1.3 OBJECTIVES OF THE STUDY

The objective of this study is to ascertain how to arrange mortgage banks in a depressed economy. Other objectives include:

(i) To find out the causes of unemployment and causes of high rate business failure.

(ii) To find out how government policies discourages the emergency of vibrant mortgage bank.

(iii) To know why mortagagor's defaults in paying back the loan and plot strategies to use to recover unpaid loans.

(iv) To know the causes of inflation in an economy.

(v) Ofter suggestions aimed to help mortgage banks in finding a condusive working environment.

1.4 RESEARCH QUESTIONS

i) What is unemployment and causes of unemployment?

ii) How do government policies effect the emergency of vibrant mortgage bank ?

iii) Why do mortgagor's default?

iv) What is inflation and cause of inflation

v) Give suggestions on how mortgage banks can create a conducive working environment.

1.5 SCOPE OF THE STUDY

The scope of this study is "mortgage arrangement in depressed economy.

This research is carried out at mortgage bank of Nigeria Plc Awka branch. This research tends to highlight the impact of arranged mortgage bank in a depressed economy and to what extent it has contributed to the effectiveness and efficient operation of mortgage bank and to the development of the economy in general as the study covers the year from 2008-2014.

1.6 SIGNIFICANCE OF TAHE STUDY

This research work is carried for the benefit of certain group of people who may need this work. These include housing sectors, financial institutions, researchers, students and any person who may read it.

Housing sectors:- It provides the information like procedures, requirements and implication of default to pay back loans borrowed from mortgage banks.

Financial institutions:- Provides financial institutions on technology methods to use in order to enhance its profitability and create a strong relationship between the bank and their customer's.

Researchers:- Researchers have to read this work so as to make further researches

Students::- Students who are asked to carry out a research work will find this work beneficial because it serves as a guide to carryout a good research work and also make them to acquire knowledge of the banking systems.

Any person who may read it:- Any body who read this work must achieve something from it because it provides banking and advisory services and undertakes activities concerning housing.

Finally, it will contribute to the existing literature by identifying the major barriers to the adoption of arranging mortgage banks in a depressed economy.

1.7 DEFINITION OF TERMS

MORTGAGE: This can be described as the transfer of legal or equitable

interest in property of the borrower to lender as a security for loan with a promise for redemption.

MORTGAGES: Is a person who lends money to another under the condition

stated above.

THE DEBT: In respect of which the property is created is called mortgage

dest.

MORTGAGE TRASACTION: Is a person who borrows money with a property

known as mortgagor. It involves the acquision of a loan with an

interest in property as security.

MORTGAGE TERM: Also empowered the mortgage to reclaim his property after

repaying his debt.

MORTGAGE TRANSFER: His real property to the mortgage to declear his

willingnessto repay a loan and also provide means by which such

loans can be directly recovered.

LEND: It is the process of giving or granting loans or advances by banks to

their customer who wishes to or for his personal investment with his property as security.

REDEMPTION: Is the way of returning back the loan on agreed time to the bank who gives the loan.

LENDER: Is a person who borrowed the loan for his personal project.

MORGAGOR: Is a person who gives a mortgagor on his property.

ECONOMIC DEPRESSION: Refers to a period of general downswing to the business cycle.