Mortgage banks are financial institutions that specialise in granting loans to individuals and corporate bodies for building purposes. Such loans are repaid by instalments and can be spread over several years.
Mortgage banks accept deposit from the investing public at a rate of interest and use the fund to lend, at a higher rate of interest, to people who wish to purchase their own houses.
The Federal Mortgage Bank was established with headquarters in Lagos to encourage people to save in order to own their houses. This is the apex mortgage bank which works with other state housing corporations and mortgage institutions. The Federal Mortgage Bank supervises other mortgage institutions like Union Homes and Savings Ltd. and AG Homes and Savings Ltd.
Functions of mortgage banks
- Acceptance of deposit: Mortgage banks accept deposit from customers in order to encourage savings towards owning a house.
- Provision of long-term loans: They also provide long-term loans to people or to estate developers to build houses.
- Development of mortgage institutions: They supervise and encourage the development of mortgage institutions.
- Give advice on housing matters: They advise and assist the government on housing matters.
- Provision of houses: Mortgage banks are also involved in the construction of houses and offer them for sales to the people.