PROPOSAL FOR SETTING UP A HOME OWNERSHIP SCHEME
A home ownership Scheme is a Scheme set up to assist the members of an organization, by granting loans to them to enable them own their personal houses.
The Scheme is a welfare package for the benefit of staff, as an additional incentive to boost staff morale and ensure dedication and commitment to the organization.
Most public service establishments provide for housing loans for their staff through such home ownership schemes. The following establishments have set up schemes for their staff:
* Nigeria Deposit Insurance Corporation
* Bureau of Public Enterprises
* Central Bank of Nigeria
* Raw Material Development Council
A home ownership Scheme may be set up under two types of arrangements namely:
* Self Funding Arrangement.
* mortgage bank Funded Arrangement
* Commercial bank Funded Arrangement.
A. SELF FUNDED SCHEME
A self funded Scheme is one where the organization sets aside a bulk sum of money to Fund the Scheme at its inception. This sum is placed under management with a Fund Manager and creates a pool of funds from which loans would be granted, on a revolving basis to staff, as they qualify for the facility.
The Fund will be managed by a Fund Manager who would have the responsibility of investing and growing the funds under management. The funds will be invested in gilt edged securities such as treasury bills to ensure the safety of the funds at all times. The principal fund along with the accrued return on investments would form the pool of funds from which the loans would be disbursed to staff who qualify for the facility.
The Essay on Exam Topics Home Ownership, Neighborhood
Home ownership Home ownership is one of the definitions of success in America. Generally people are judged by the houses they live in. It is not only the size and architecture of the house but also the type of neighborhood and the distance from different amenities. The progress in buying a house of one’s own was steady from the 1930s right up to 2000. By 2000 69,8 million Americans lived in ...
General Conditions Applicable to the Scheme
* Eligibility: To be eligible for a loan under the Scheme, the staff must be a confirmed staff of the organization and must have spent a minimum of five years. The period may however be shortened or increased depending on the preference of the organization.
* Entitlement: The staff would be entitled to between 500% and 1000% of his basic salary as a housing loan.
* Interest rate: The interest rate applicable would be between 2% – 5% depending on the organization.
* Repayment: A maximum of 33.3% of the basic salary is deducted monthly from the staff’s salary to recoup the loan and thereby re-fund the scheme.
* Moratorium: A moratorium period of six months is granted before the deductions commence.
* Amortization: The repayment period would be between 20-25 years.
* Resignation before Amortization: Where the staff resigns before the facility has been fully amortized, his pension and other benefits will be used to reduce his outstanding liability. Any shortfall would then be paid by the individual before the title documents for the property would be released to him.
* Security: The house/property to be acquired will serve as security for the facility being granted and a legal mortgage will be executed by the staff in favour of the organization.
* Management: The Fund managers shall be actively involved in the management of the Scheme. They would guide the organization in screening applications, authenticating certificates of occupancies and monitoring disbursements and repayment of loans.
The Term Paper on The Loan Delinquency
... Loan Delinquency Committee. These officers and staff of the cooperative are sent to relevant training which concern Organization ... government and promotion of cooperative organizations Inadequate marketing facilities Considering the experiences of ... and programs to include a scheme for mobilizing members savings, established ... and Adm. Committee, CBU and Fund Sourcing Committee, Resource and Business ...
ADVANTAGES OF A SELF FUNDED SCHEME
The advantages of a self funded scheme are as follows:
a) The organization sets aside a lump sum once and for all and the fund is managed and maximized by the Fund Managers and disbursed on a revolving basis. The organization’s obligation is therefore limited only to this initial payment.
b) The management and supervision of the Fund rests on the Fund Managers whose responsibility it is to ensure that the Scheme is run professionally and efficiently. Also, the responsibility of investing and securing the Fund would be that of the managers.
c) The Organization will be under no obligation to pay interest to any financial institution. On the contrary the scheme funds would generate a return whenever it is idle and staffs that have been availed facilities would also have to pay interest to the organization for the duration of the facility. Consequently, the organization is not losing any money as the funds at all times would remain their asset.
DISADVANTAGE OF A SELF FUNDED SCHEME
The only disadvantage which a Self-Funded Scheme may have is that the bulk sum which has to be set aside at the inception may impact on the Organization’s cash flow at the initial stage.
B. MORTGAGE BANK FINANCED SCHEME
An organization may as an alternative choose to fund the scheme by sourcing a facility from a financial organization such as a mortgage bank. The mortgage bank will provide the funds for the initial take off of the scheme.
The Scheme Managers would have the responsibility of identifying and liaising with the mortgage bank and working out the modalities for disbursement of loans to staff of the organization.
General conditions applicable to this scheme
* Eligibility: To be eligible for the loan the staff must be confirmed and must have spent a minimum of five years. The period may however be shortened or increased depending on the preference of the organization.
* Entitlement: The staff would be entitled to between 500% and 1000% of his basic salary as loan.
* Interest rate: The interest rate applicable to each facility will be at the prevailing interest rate which will range from 15% – 21% and will also vary from year to year throughout the tenor of the facility.
The Business plan on Report on Janata Bank Limited
... facility can be of two types: funded and non-funded. Funded credit can be expensive for the banks, as the bank has to pay interests. Non-funded ... Scheme Janata Bank Savings Pension Scheme (JBSPS) Janata Bank Deposit Scheme (JBDS) Education Deposit Scheme (EDS) Medical Deposit Scheme (MDS) Janata Bank Monthly Savings Scheme (JBMSS) Janata Bank Special Deposit Scheme ...
* Repayment: The rate of re-payment may exceed the maximum of 33.3% of the basic salary as the bank may want to recoup the loan between 10 – 20 years and not 25years.
* Moratorium: No moratorium period will be allowed. Deductions will commence immediately.
* Amortization: The repayment period will be between 10-20 years.
* Resignation before amortization: Where the staff resigns before the facility has been fully amortized, his pension and other benefits will be used to reduce his outstanding liability. However, any shortfall would be borne by the organization.
* Security: The house/property to be acquired will serve as security for the facility being granted and a legal mortgage will be executed by the staff in favour of the mortgage bank. In addition the organization will give an irrevocable guarantee to the mortgage bank on all facilities granted to its staff under the Scheme. Therefore where there is any failure to repay any loan the organization becomes personally liable.
* Management: The Fund managers shall be actively involved in the management of the Scheme. They would guide the organization in screening applications, authenticating certificates of occupancies and monitoring disbursements of loans.
ADVANTAGES OF MORTGAGE BANK FINANCED SCHEME
1. The main advantage of using this option is that the organization does not have to tie down its funds at the inception of the Scheme.
2. A Mortgage bank facility is also relatively cheaper than that of commercial banks since home ownership is their primary mandate.
3. A mortgage bank will also give a more reasonable tenor for the facilities than commercial banks.
DIS-ADVANTAGES OF MORTGAGE BANK FINANCED SCHEME
1. The facility would be granted at a higher interest rate which would make the facility more expensive for staff.
2. Where the organization is guaranteeing the facility on behalf of staff and there is default in payment by any staff it means the organization becomes primarily liable to the mortgage bank for the facility.
3. Also, the interest rate would vary from year to year during the tenor of the facility based on the prevailing interest rate for each year.
The Business plan on Nbfc Bank
We studied about banks, apart from banks the Indian Financial System has a large number of privately owned, decentralised and small sized financial institutions known as Non-banking financial companies. In recent times, the non-financial companies (NBFCs) have contributed to the Indian economic growth by providing deposit facilities and specialized credit to certain segments of the society such as ...
C COMMERCIAL BANK FINANCED SCHEME
A third option would be to fund the scheme by sourcing a facility from a commercial bank. The same terms and conditions will apply as in the case of a mortgage except that the tenor may be shorter and the interest rate even higher than that of the mortgage bank.
THE ROLE OF APEL CAPITAL & TRUST LIMITED AS FUND MANAGERS.
Depending on the type of scheme approved by the organization, APEL CAPITAL & TRUST LIMITED would act as Scheme Managers.
Their duties would include the following:
* Preparing the necessary forms and documentation required for setting up the Scheme;
* Liaising with the financial organization providing the funds, where applicable.
* Investing of all Scheme Funds under management, where the organization is funding the Scheme.
* Verifying applications, confirming title and ensuring disbursement to staff to enable them purchase or build their houses.
* Monitoring disbursements to ensure they are utilized for the approved purpose.
* Receiving repayment from the organization in respect of principal plus interest due on the facility.
* Handling of any other duties which would ensure the smooth running of the Scheme.
